Introduction to Entrepreneurship (Readings) Final Exam

What is a startup according to Eric Ries?

A human institution designed to create a new product or service under conditions of extreme uncertainty.

Why does traditional management fail in startups?

Because it assumes predictability and stability, while startups operate under extreme uncertainty.

What is “entrepreneurial management”?

A form of management specifically designed for startups that emphasizes learning, experimentation, and adaptation.

What is validated learning?

The process of using experiments and real customer behavior to test assumptions and measure progress.

Why is validated learning considered the unit of progress in startups?

Because learning what customers want reduces uncertainty and prevents waste.

What is the Build–Measure–Learn feedback loop?

A process where startups build a product, measure customer behavior, and learn whether to pivot or persevere.

What does Ries mean by “achieving failure”?

Successfully executing a well-planned strategy that turns out to be based on incorrect assumptions.

How does Lean Startup differ from traditional business planning?

Lean Startup emphasizes experimentation and adaptation, while traditional planning relies on forecasting and long-term predictions

What are the three levels of a startup’s hierarchy?

Vision, strategy, and product

What changes most frequently in a startup: vision, strategy, or product?

Product changes most frequently through optimization

What is a pivot?

A fundamental change in strategy while preserving the original vision.

According to Eric Ries, who is an entrepreneur?

Anyone creating a new product or service under conditions of extreme uncertainty, regardless of company size or role.

What is an intrapreneur?

An entrepreneur who operates inside an established organization rather than a standalone startup

Does Lean Startup apply only to small startups?

No, it applies to startups of any size, including internal ventures within large companies.

Why are traditional forecasts unreliable for startups?

Because startups operate under extreme uncertainty with unknown customers and demand.

What problem did SnapTax aim to solve?

Simplifying tax filing by allowing users to file taxes directly from their smartphones using photos of W-2 forms.

Why is SnapTax considered a Minimum Viable Product (MVP)?

It offered limited functionality to test whether customers wanted to file taxes on their phones before scaling

What assumption did SnapTax test first?

Whether customers would be willing to complete tax filing on a mobile phone.

What does “disrupting yourself” mean in Lean Startup terms?

Creating a new product that may compete with your existing products to stay ahead of market disruption.

Why did SnapTax succeed inside Intuit?

Because it had leadership support, freedom to experiment, a small team, and a Lean Startup process.

According to Ries, can innovation be managed?

Yes, but it requires a new form of management focused on experimentation and learning

How did Intuit measure innovation success?

By tracking customers and revenue from products that did not exist three years earlier.

What is “validated learning”?

A rigorous, evidence-based way to prove a startup is learning what customers really want and what works as a business.

Why is “learning” often a weak excuse in startups?

Because people can claim learning after failure; Lean requires learning to be validated with evidence

In Lean Startup, what is the real “unit of progress”?

Validated learning (not features shipped or effort).

What went wrong with IMVU’s original strategy?

They built an IM add-on based on assumptions (interop/network effects), but customers didn’t want it; behavior showed no adoption.

What did IMVU customers actually want (key insight)?

A standalone IM network/product experience, not an add-on that piggybacked on existing IM clients

What’s the Lean “value vs waste” question in a startup context?

Which work creates customer value or validated learning vs. which work is just activity that doesn’t teach you anything.

What are “vanity metrics”?

Metrics that look impressive but don’t prove real progress/learning (often big totals without showing meaningful customer behavior).

Why is “zero” (tiny early numbers) dangerous?

It tempts teams to delay learning or do “success theater” instead of running real experiments that prove what works.

What kind of evidence best supports validated learning?

Customer behavior data from experiments (e.g., changes in signups/engagement/retention after a tested change).

What’s the big Lean Startup Chapter 3 mindset shift?

Don’t measure progress by “building”; measure by learning proven with data.

What is a leap-of-faith assumption?

A critical assumption that must be true for a startup’s business model to succeed but has not yet been proven.

What are the two most important leap-of-faith assumptions?

The value hypothesis and the growth hypothesis.

What does the value hypothesis test?

Whether customers actually find value in the product and use it.

What does the growth hypothesis test?

How new customers will discover and adopt the product over time.

What is a Minimum Viable Product (MVP)?

The version of a product that enables maximum validated learning with the least effort.

Why is an MVP often uncomfortable to release?

Because it is incomplete by design and prioritizes learning over polish.

What makes an MVP different from a prototype or beta?

An MVP is explicitly designed to test a hypothesis and generate validated learning.

What is a Concierge MVP?

An MVP where the service is delivered manually to customers to test demand before automation

Why are vanity metrics dangerous when evaluating MVPs?

Because they can show growth or activity without proving real learning or customer value.

What should a startup do if an MVP disproves its assumptions?

Pivot by changing strategy while preserving the overall vision.

Which company illustrates a Concierge MVP in Chapter 4 of the Lean Startup?

Zappos, which manually fulfilled shoe orders to test demand before building infrastructure.

What hypothesis did Zappos’ MVP test?

Whether customers would buy shoes online without trying them on.

Which company used a video as an MVP?

Dropbox

Why is Dropbox’s video considered an MVP?

It generated validated learning about customer demand before building the full product.

What is innovation accounting?

A quantitative framework for measuring progress, learning, and decision-making in startups under extreme uncertainty

Why does traditional accounting fail for startups?

Because early-stage startups have little revenue and operate under extreme uncertainty.

What are the three steps of innovation accounting?

Establish the baseline, tune the engine, and pivot or persevere

What is a learning milestone?

A measurable checkpoint that shows whether experiments are improving key assumptions.

What are vanity metrics?

Metrics that look impressive but don’t demonstrate cause-and-effect or real learning.

What is cohort analysis?

An analysis method that groups customers by shared characteristics (such as signup date) to track behavior over time.

Why is cohort analysis superior to gross metrics?

It shows real behavioral change and prevents misleading conclusions from aggregate data.

What is the difference between optimization and learning?

Learning tests whether the business model works; optimization improves efficiency after learning is validated

Which company is used to illustrate innovation accounting and cohort analysis?

IMVU

Why aren’t first products meant to be perfect?

Because early products exist to test hypotheses and generate validated learning, not to satisfy mainstream customers.

Who should an MVP be built for first?

Early adopters, not mainstream customers.

What is the key risk of over-engineering an MVP?

Wasting time and resources before validating assumptions.

Which company used a WordPress blog and PDFs as an MVP?

Groupon

Which company illustrates early adopters tolerating low quality?

IMVU

Which company used a video as its MVP?

Dropbox

What type of MVP did Food on the Table use?

Concierge MVP

What type of MVP did Aardvark use?

Wizard of Oz MVP

What is the Lean Startup rule for MVP features?

Remove anything that does not directly contribute to validated learning.

What is a Wizard of Oz MVP?

A type of minimum viable product where the customer thinks the product is automated/fully built, but humans are doing the work behind the scenes to deliver the result

What is innovation accounting?

A startup measurement system that proves learning and progress when the business model isn’t proven yet.

What are the 3 learning milestones?

Establish baseline → Tune the engine → Pivot or persevere.

What are actionable metrics?

Metrics that show cause-and-effect and guide decisions (often cohort-based, tied to experiments).

Optimization vs learning?

Optimization improves known drivers; learning tests which drivers actually matter (validated learning).

What is the “land of the living dead”?

A state where a startup is not growing fast enough to succeed but not failing fast enough to stop, draining time, money, and morale.

What role does innovation accounting play in pivot decisions?

It provides objective data through learning milestones to determine whether to pivot or persevere.

What question should always trigger a pivot-or-persevere discussion?

“Are we making sufficient progress to justify continuing on our current path?”

Why are pivots emotionally difficult for entrepreneurs?

Because they require admitting that earlier assumptions were wrong after significant time, money, and identity have been invested.

How should startups extend runway according to Lean Startup?

By accelerating validated learning, not by cutting costs that slow experimentation.

Why is optimization alone sometimes misleading?

Because metrics can improve incrementally while the overall business model remains unviable.

What is a zoom-in pivot?

Occurs when one feature becomes the entire product because data shows it is the only thing customers truly value.

What is a zoom-out pivot?

Happens when the product is too narrow and must be expanded into a broader solution, making the original product just one part of a larger offering.

What are customer segment pivots?

Occur when a startup discovers that the product solves the problem well—but for a completely different audience than originally intended

What are customer need pivots?

Occurs when entrepreneurs realize they are solving the wrong problem and customers actually care more about a different, related problem

What is a platform pivot?

Changing between offering a standalone product and offering a platform that others can build on.

What is a business architecture pivot?

Shifting between high-margin/low-volume and low-margin/high-volume business models based on what the data supports.

What is a value capture pivot?

Changing how the startup makes money (e.g., subscriptions, ads, premium features, direct sales) to match customer willingness to pay.

What is an engine of growth pivot?

Changing the core growth strategy, such as moving from viral growth to paid acquisition when viral growth isn’t strong enough.

What is a channel pivot?

Changing how the product reaches customers, such as shifting from enterprise sales to self-serve (or the reverse).

What is a technology pivot?

Using a new or more efficient technology to deliver the same value to customers.

(Drucker) What is the entrepreneurial economy?

An economy driven by new, small, and mid-sized enterprises using systematic innovation.

(Drucker) How many jobs did the U.S. create between 1965–1985?

Approximately 40 million.

(Drucker) What was the conventional wisdom about the 1970s economy?

That it was stagnant, deindustrializing, and in decline.

(Drucker) Why was this conventional wisdom wrong?

Growth shifted to new enterprises rather than large institutions.

(Drucker) What role did women play in job growth?

Increased labor force participation, especially among married women.

(Drucker) What is the Kondratieff cycle?

A theory of 50-year economic waves driven by major technologies

(Drucker) Why does Drucker reject Kondratieff theory for the U.S.?

It cannot explain massive job creation during supposed stagnation.

(Drucker) Did high-tech industries create most new jobs?

No — they created a small share of total jobs.

(Drucker) Where did most job growth come from?

Small and mid-sized enterprises across many industries

(Drucker) What is entrepreneurial management?

The disciplined, systematic practice of innovation.

(Drucker) Is entrepreneurship a personality trait?

No — it is a learnable and teachable discipline.

(Drucker) What is the “new technology” of the entrepreneurial economy?

Management itself

(Acs) What is the Global Entrepreneurship Monitor (GEM)?

A cross-national program measuring entrepreneurial activity and its link to economic growth.

(Acs) Why was GEM created?

To provide comparable entrepreneurship data across countries.

(Acs) Define necessity entrepreneurship.

Entrepreneurship driven by lack of better employment options