📖 Chapter 2: Define

🎯 Who Is an Entrepreneur?

💡 Core Message: Anyone who creates something new under conditions of extreme uncertainty is an entrepreneur — whether in a garage, a corporation, or a government office.

🔍 The Traditional Definition is Wrong

When most people hear “entrepreneur,” they picture:

A young person coding in a garage
Someone raising money from investors
A tech startup in Silicon Valley
Someone who quit their job to “follow their passion”

Ries argues this definition is far too narrow.

The real definition of an entrepreneur has nothing to do with company size, industry, or funding source. It’s about the conditions you’re operating under.

✅ Ries’s Definition:

“An entrepreneur is anyone who creates a new product or service under conditions of extreme uncertainty.”

This means entrepreneurship can happen:

✅ In a small startup
✅ Inside a large corporation (intrapreneurship)
✅ In government agencies
✅ In non-profit organizations
✅ Anywhere new things are being created without knowing if they’ll work

🏢 Case Study: SnapTax (Intuit)

Ries shares the story of SnapTax, a product created inside Intuit — a large, established company worth billions.

The Challenge:

A small team at Intuit noticed that millions of Americans with simple tax situations were still filing on paper or paying for expensive tax software. These people had:

Only one W-2 form from their employer
No complex deductions or investments
Simple tax returns that could be filed in 15 minutes

The opportunity: What if people could file their taxes just by taking a photo of their W-2 with their phone?

The Lean Approach:

Instead of spending a year building the perfect product (the traditional corporate approach), the SnapTax team:

Step 1: Built a simple version in just a few weeks

Step 2: Tested it with real customers immediately

Step 3: Made changes based on actual behavior, not surveys

Step 4: Repeated this cycle every few weeks

Result: SnapTax became one of Intuit’s most successful new products, generating millions in revenue.

🔑 Key Insight: The SnapTax team operated like a startup INSIDE a big company. They didn’t wait for permission or perfect conditions — they experimented, learned, and moved fast.

🎯 What is a Startup?

Ries provides his formal definition:

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

Let’s break down each part of this definition:

1️⃣ “A human institution”

A startup isn’t just a product or an idea. It’s an organization made up of people. This matters because:

You need processes to coordinate work
You need to build a culture
People need clear roles and accountability

Common mistake: Thinking “we’re just a small team, we don’t need structure.” Even three people need some basic organization.

2️⃣ “Designed to create a new product or service”

This is what separates startups from other small businesses. You’re not opening the 500th coffee shop in your city (a known business model). You’re creating something that doesn’t exist yet.

Examples of “new” products/services:

A new way to order food online
A different approach to fitness coaching
A novel solution to a common problem
Serving an underserved market in a new way

3️⃣ “Under conditions of extreme uncertainty”

This is the most important part. Uncertainty means:

❓ You don’t know if customers will want this
❓ You don’t know the right price
❓ You don’t know the best way to reach customers
❓ You don’t know which features matter most
❓ Everything is unproven and risky

💡 This is why startup management is different: Traditional management assumes you know what to build and just need to execute efficiently. Startups need to figure out WHAT to build first.

🏪 Startup vs. Small Business

Many people confuse startups with small businesses. Here’s the critical difference:

Small Business (Known Model):

Example: Opening a pizza restaurant

✅ You know people eat pizza
✅ You know how restaurants work
✅ You know your competition
✅ You can predict costs and revenue with reasonable accuracy
✅ Your main job is to execute well

Startup (Unknown Model):

Example: Creating an app that delivers custom pizza based on your mood

❓ Will people actually use this?
❓ What’s the right way to determine someone’s “mood”?
❓ How much will customers pay?
❓ How do we reach the right customers?
❓ Everything needs to be discovered

The key difference: Small businesses execute a known model. Startups search for a repeatable, scalable business model.

🌍 Entrepreneurship is Everywhere

Ries emphasizes that entrepreneurial management can apply in surprising places:

Government Agencies

When a government launches a new program or service with uncertain outcomes, they’re in startup mode. Example: a city creating a new recycling program — they don’t know if citizens will participate, what the costs will be, or if it will actually reduce waste.

Corporate Innovation Teams

Like the SnapTax example, large companies often create internal teams to develop new products. These teams face the same uncertainty as traditional startups.

Non-Profit Organizations

A charity launching a new program to help homeless people find jobs is operating under uncertainty: Will the program work? Will people participate? What’s the best approach?

Social Enterprises

Organizations that try to solve social problems through business models (like providing affordable healthcare or clean water) face extreme uncertainty about what will work.

🔑 The Universal Truth: Wherever there’s uncertainty about whether something will work, lean startup principles apply.

⚖️ The Seven Deadly Wastes (Applied to Startups)

Ries borrows a concept from lean manufacturing: the idea of eliminating waste. But in startups, waste looks different than in factories.

Traditional Manufacturing Waste:

Excess inventory sitting in warehouses
Defective products that need to be thrown away
Unnecessary movement of materials
Waiting time between production steps

Startup Waste:

The biggest waste in startups: Building something nobody wants

All other wastes pale in comparison to this one. You can have perfect execution, beautiful design, and efficient processes, but if you build the wrong product, all that effort is wasted.

Examples of startup waste:

❌ Building features customers don’t use
❌ Planning for months without customer feedback
❌ Perfecting details before testing core assumptions
❌ Following the original plan when evidence says it’s wrong
❌ Building the entire product before showing it to anyone

✅ Solution: The only way to avoid this waste is through validated learning — testing your assumptions with real customers as early as possible.

🎬 Case Study: The Video That Changed Everything

Ries shares a powerful example from Dropbox’s early days. The founder, Drew Houston, faced a problem:

Building file-syncing software was technically complex
It would take months to build even a basic version
He didn’t know if people would actually use it

Traditional approach: Spend 6-12 months building the product, then launch and hope people sign up.

Drew’s lean approach: Make a 3-minute video showing how Dropbox would work.

The Result: The video went viral in the tech community. Overnight, Dropbox’s waiting list grew from 5,000 to 75,000 people. Drew validated that people wanted the product BEFORE spending months building it.

This simple video saved potentially thousands of hours and hundreds of thousands of dollars that could have been wasted building something nobody wanted.

🧠 Hamed’s Analysis: Chapter 2

Why This Definition Matters to You

When I first read this chapter, I realized I had been making a huge mistake with how I categorized my work.

I used to think:

“I’m just a freelancer building websites” ❌
“I’m not a real entrepreneur because I don’t have funding” ❌
“Entrepreneurship is for people with big tech ideas” ❌

But Ries’s definition changed everything: Every time I help a client create something new (a website for their first online store, an app for a new service they’re launching, a booking system they’ve never used before), we’re BOTH entrepreneurs operating under uncertainty.

Real-World Application: The Restaurant Owner

I had a client who owned a successful Italian restaurant. He wanted to add online ordering, but this was completely new territory for him:

❓ Would his regular customers order online?
❓ Would he get new customers or just shift existing ones?
❓ What menu items should be available online?
❓ How would delivery timing work?

❌ What most developers would do:Build a complete online ordering system with:

Full menu with photos and descriptions
Customer accounts and order history
Complex delivery time calculations
Payment integration
Loyalty rewards program

Time: 2-3 months | Cost: $4,000-$6,000

✅ What we actually did (Lean Startup approach):Week 1: Created one simple page listing the 10 most popular dishes with a “Call to Order” button

Week 2: Tracked which dishes people called about most

Week 3: Added WhatsApp ordering for those specific dishes

Week 4: Tested if people would pay a small delivery fee

Result: Discovered customers actually wanted family meal bundles, not individual dishes. Learned this in 4 weeks instead of finding out after 3 months of development.

Time: 4 weeks | Cost: $800

The lesson: My restaurant client wasn’t “just a small business owner.” He was an entrepreneur testing a new business model under uncertainty. And I wasn’t “just building a website.” I was helping him run lean startup experiments.

The Corporate Example That Shocked Me

The SnapTax story really opened my eyes. Here’s why:

I had assumed that big companies like Intuit must have armies of planners, massive budgets, and year-long development cycles. But the SnapTax team operated exactly like a small startup:

✅ Small team (less than 10 people)
✅ Quick experiments (weeks, not months)
✅ Direct customer feedback
✅ Permission to fail and learn

This taught me: Size doesn’t matter. Budget doesn’t matter. What matters is whether you’re creating something new under uncertainty.

How I Use This Definition in Client Conversations

Now when I meet with potential clients, I help them understand if they’re in “startup mode” or “execution mode”:

Execution Mode Example:Client: “I own a hair salon and want to add an online booking system”

Analysis: This is execution mode. We know people book appointments. We know online booking works. We just need to implement it well.

Approach: Follow best practices, use proven tools, focus on reliability.

Startup Mode Example:Client: “I want to offer mobile hair services where stylists come to customers’ homes”

Analysis: This is startup mode. We don’t know if customers will book this way, what pricing works, how to schedule efficiently, or how to find stylists.

Approach: Start with manual booking (phone/WhatsApp), test with 10 customers, learn what works, then build systems.

This distinction saves clients thousands of dollars and months of time.

The Waste That Haunts Me

Ries’s point about waste hit me hard. I’ve seen so much waste in my career:

Real Example of Waste:A fitness coach hired me to build an app with:

Workout tracking for 50+ exercises
Meal planning with recipe database
Progress photos and measurements
Social features for client community
Video library of exercise demonstrations

Result after 3 months of development: Clients barely used any of it. They just wanted to book sessions and receive quick workout reminders.

Waste: $7,000 and 3 months spent building features nobody wanted

If we had followed lean startup principles:

What We Should Have Done:

Week 1: Simple booking system only
Week 2: Test with 5 clients
Week 3: Add workout reminders
Week 4: See what clients ask for next

Result: Would have discovered clients’ real needs in 4 weeks, not 3 months

Your Action Plan

If you’re starting any new business, product, or service, ask yourself:

Question 1: Am I creating something new, or executing a known model?

Question 2: What are my biggest uncertain assumptions about customers?

Question 3: How can I test those assumptions in 1-2 weeks instead of 2-3 months?

Question 4: What’s the simplest version I can show to real customers?

Remember: Entrepreneurship isn’t about having a tech startup or raising millions. It’s about creating something new when you don’t know if it will work. That could be you tomorrow.

🎯 Key Takeaways from Chapter 2

1. An entrepreneur is anyone creating something new under uncertainty — not just tech founders

2. Startups exist inside big companies, government agencies, and non-profits too

3. The biggest waste in startups is building something nobody wants

4. You can test your biggest assumptions without building the entire product

5. Entrepreneurship requires a different management approach than traditional businesses