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The Entrepreneurial Enterprise
The Entrepreneurial Enterprise by Eric Ries
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The Entrepreneurial Enterprise
By Sarah Milstein on Oct 11, 2013 08:25 am
Guest post by Lisa Regan, writer for The Lean Startup Conference.
How can established companies benefit from implementing Lean Startup? To answer that question, we hosted a webcast conversation earlier this week with EricRies, Brant Cooper, and Patrick Vlaskovits. We’d like to share a few highlights and invite you to join theongoing conversation by posing questions for Eric, Patrick, and Brant in thecomments to this post. They’ll jump in to answer in the coming days. (Ofcourse, you can also continue the conversation by attending The Lean Startup Conference. Our latest batch of discounted tickets is about to sell out, soregister today.)
A lot of people think the “startup” part of “Lean Startup”means the ideas apply only in young companies. But, in fact, they can becrucial in large, established companies that need to find growth in newproducts and new markets. As Eric puts it in the webcast, “I’ve met now theCEOs of some of the biggest companies in the world, and I still spend time withthe CEOs of high-growth Silicon Valley companies from the garage on up, and what all thosepeople have in common is that they are seeking out sources of sustainablegrowth…. What we care about in the innovation community is growth that isdriven by customers and creating value for them. And we just so happen to think that the bestway to create sustainable growth in our highly disruptive world is throughcontinuous innovation…. And that challenge I have seen to be identical nomatter the size of the company.”
Patrick and Brant understand these problems intimately. Theyare the co-authors of The LeanEntrepreneur, and the co-founders of the Moves the Needle Group, whichadvises the innovation practices of Fortune 100 companies. Their webcast conversationwith Eric began with a discussion of the ways that large companies come aroundto realizing they need to implement Lean Startup. Among other themes theycovered: the conditions under which established companies implement LeanStartup; the hindrances and incentives they face; what individual employees cando to implement the methodology; and how to protect a company’s core businessfrom the potential impact of experimentation. Though we’re posting a fewhighlights below, we encourage you to watch the video in its entirety, as Eric,Patrick and Brant dig into technical details and case studies that will behelpful for people engaged with this topic.
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The webcast conversation examined corporate versusstartup structure, and the limitations on innovation that corporations createfor themselves. Problems arise when companies isolate areas of the business inwhat Eric refers to as “functional silos”—independently operating teams (design,engineering, marketing, legal, etc.) that discretely address specific areas ofthe production chain. Each silo may be innovative in itself, but at some pointit considers its work complete and hands off to the next silo, with which ithas had little to no collaboration and for whose tradeoffs it has not accounted.What can Lean Startup do about this?
Eric: I’ve now worked with a number of companieswhere once they adopt Lean Startup, it gives them a common vocabulary for allthe different teams to use the same vocabulary, the same business-oriented,results set of concepts to wrap all these techniques in…. We knock the silosdown and get everybody on a single, cross-functional team to say to everybody,look, you are a startup, you are not a set of different functions, so you,team…go experiment and learn how to make this happen. When teams are organizedthat way they’re so much more productive, so much more energized, the creativityyou unlock is incredible.
Brant: We’re still taught in MBA school is thesesilos, right? And if people can just imagine, if the way we motivate people,the way we do performance reviews, and incentivize people within silos—thosemeasures cannot be drawn in a direct line to corporate objectives. You cannotdraw a direct line to reducing waste or improving revenues or cutting costs…whereasthe cross-functional teams, you can tie it to a performance metric that has adirect result in the corporate objectives.
Patrick, with a bit ofhighly practical advice: One of the things Brant and I counsel largeorganizations, particularly ones that have already embraced Agile, is to extendthe Agile metaphor into the funnel, for example, and show the benefit of LeanStartup for the sales and marketing teams, and then show the benefits of LeanStartup to the HR folks…. With sales and marketing experiments, often you picklow-hanging fruit in the millions of dollars very, very quickly. We’ve seenthis time and time and time again, and that’s how you get other parts of theorganization and other functional roles excited about starting LS methods.
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A variety of audience questions came in effectively askinghow an established company, with an existing product, customer, and brandimage, can make use of a minimum viable product (MVP) for experimentationpurposes without damaging the larger company’s standing.
Brant: The corebusiness has to be protected from the startup. We separate out these startups.They need to exist in a different place for the time being, so that the startupis protected from the questions around return on investment, and the core businessis protected from the startup…. So you’re not launching a minimum viableproduct to all of your core business customers--that’s a no-no. You have tokeep these separate. And then the Lean Startup acts like a new startup. Youhave to go find your own customers to experiment with, you have your own brand,so you have to think like a Lean Startup. You’ve got your validated learning with the customer development you’vebeen doing with your own market segment. But you’re not going to your corebusiness.
Patrick: Thestartup “can’t run to the corebusiness and have all its problems solved for it. Because then you getsomething like the children of helicopter parents, that can’t fend forthemselves. And ultimately if it’s a real innovation, that has real value andcreates real value for customers, it has to fend for itself. It has to be astand-alone business case that makes sense.
Eric, on makinglemonade out of an MVP lemon: The great thing about an MVP is that ifcustomers don’t like it, but they care enough to complain, that’s actuallygreat news. Most of the time when you do an MVP, no one even notices. Zerocustomers show up. You have “launch day” and then nothing happens, because yourvalue proposition is so wrong that no one cares. So that doesn’t harm the brand. If people complain but you kept thescale of the product small--and MVP is about containing the scope of theexperimentation so that the cost of failure is low--then you can make it rightfor those customers that complain. Like, you can send them a hand-engravedletter press apology. Every single one. Personally delivered to their house. Byyou. If that ever happens.
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So how do you start a Lean Startup practice where youactually work? Patrick, Eric, and Brant all talked, in response to audiencequestions, about the importance of individual actors within corporationsdeciding to, as Patrick put it, “be subversive.”
Brant: Changingthe culture is what’s needed and it’s hard and it takes time. And so I think ifyou’re a person inside of an organization that is ready for this type of stuff,the first thing you should do is go find like-minded people, and that’s actuallyhow you start the process…. I’m not saying go do something that’s going to getyou in trouble, but you can’t wait for some magic to happen, for some externalforce that says ok, now this company is prepared for Lean Startup culture. Youactually have to go and make the change yourself.
Patrick: Actually, let me go as far as to say you should go get in trouble, you should actually be subversive. I’mhalf-joking here, but I think we’ve all seen this, that where Lean Startup hasmanaged to take root and flower is where initially you had some aggressiveearly-adopters act a little subversively. If you have a mortgage and a family,I’m not telling you to risk your career on adopting Lean Startup, but if you’repassionate about making change, you can’t wait for permission to do this stuff,you’ve got to start doing it and you’ve got to start doing it intelligently,and part of that is hacking the actual internal political system. That’s verydifficult, obviously, but it’s part of that journey.
Eric: Think of all the managers who worked at Kodak,or Nokia, or Blackberry--pick your favorite company that has had a total collapsein living memory. And say, “How would it feel to be the manager who was there,who saw the disruption coming and did nothing about it?” First of all, is thatactually a good path to having alongterm career? If you have to feed a family and make your mortgage, and yourcompany collapses while you’re there, is that really going to help you? I feellike it’s almost irresponsible to put your head down and say, “Whatever, I workfor a great institution, and I’m going to let it crumble under mystewardship….” The future leaders of companies I think are going to be thepeople who today started learning with these techniques, because what we’retalking about here is nothing less than a full-scale paradigm change in themanagement culture and management philosophy of modern companies. So would yourather be an early adopter of that, or have someone else take that lead?
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Interested in more in-depth discussion of Lean Startup inthe enterprise? We invite you to check out the entire video, including afascinating conversation about why revenue is not a good growth metric. For even more insight, register today to join us at The Lean Startup Conference in December.If you bring eight or more of your employee, we’ll give you a substantial breakon the price. For more info on the benefits of team registration, see ourpost on fostering innovation in established companies. For pricing detailsjust email our executive producer MelissaTinitigan and use the subject header “group discount.”
