Innovation accounting enables startups to prove objectively that they are learning how to grow a sustainable business. Innovation accounting begins by turning the leap-of-faith assumptions discussed in Chapter 5 into a quantitative financial model.Innovation accounting works in three steps: first, use a minimum viable product to establish real data on where the company is right now. Second, startups must attempt to tune the engine from the baseline toward the ideal. That is the third step: pivot or persevere. When a company pivots, it starts the process all over again, reestablishing a new baseline and then tuning the engine from there. | The Lean Startup

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Innovation accounting enables startups to prove objectively that they are learning how to grow a sustainable business. Innovation accounting begins by turning the leap-of-faith assumptions discussed in Chapter 5 into a quantitative financial model.Innovation accounting works in three steps: first, use a minimum viable product to establish real data on where the company is right now. Second, startups must attempt to tune the engine from the baseline toward the ideal. That is the third step: pivot or persevere. When a company pivots, it starts the process all over again, reestablishing a new baseline and then tuning the engine from there.

-- Eric Ries