Principles of a lean startup – part9: Epilogue and Conclusion

Eric Ries - The Lean StartupI end the recent chapter Innovate with “Cultivating the management portfolio in an established company” and “Entrepreneur is a job title” followed by an epilogue and Eric Ries’ final conclusion.

 

Cultivating the management portfolio in an established company

There are four major kinds of work that companies must manage. As an internal startup grows, the entrepreneurs who created the original concept must tackle the challenge of scale. As new mainstream customers are acquired and new markets are conquered, the product becomes part of the public dace of the company, with important implications for PR, marketing, sales and business development. In most cases, the product will attract competitors: copycats, fast followers, and imitators.

Once the market for the new product is well established, procedures become more routine. Incremental upgrades and new forms of marketing will be essential. In this phase, operational excellence takes on a greater role, as an important way to increase margins is to lower costs.

There is a fourth phase, one dominated by operating costs and legacy products. This is the domain of outsourcing, automation and cost reduction. Nonetheless, infrastructure is still mission-critical. Failures could derail the whole company.

We tend to speak of these four phases of businesses from the perspective of large companies, in which they may represent entire divisions and hundreds of people. That´s logical, as the evolution of the business in these kinds of extreme cases is the easiest to observe. However, all companies engage in all four phases of work all the time. As soon as a product hits the marketplace, teams of people work hard to advance it to the next phase. Every successful product or feature began life in R&D, eventually became a part of the company´s strategy, was subject to optimization, and in time became old news.

The problem for startups and large companies alike is that employees often follow the products they develop as they move from phase to phase. As a result, strong creative managers wind up getting stuck working on the growth and optimization of products rather than creating new ones.

Entrepreneur is a job title

The way out of this dilemma is to manage the four kinds of work differently, allowing strong cross-functional teams to develop around each area. When products move from phase to phase, they are handed off between teams. Employees can choose to move with the product as part of the handoff or stay behind and begin work on something new. Everybody has his special skill and are for example natural inventors or managers.

In fact, entrepreneurship should be considered a viable career path for innovators inside large organizations. They should not leave – they should be held accountable via a system of innovation accounting and promoted and rewarded accordingly.

 

Epilogue: Waste not!

In 1911 Frederick Winslow Taylor, who invented the principles of scientific management and the modern white-collar work that sees companies as systems that must be managed at more than the level of the individual, wrote: “In the past, the man has been first; in the future, the system must be first.”

Taylor´s predictions has come to pass. We are living in the world he imagined. And yet, the revolution that he unleashed has been – in many ways – too successful. Whereas Taylor preached science as a way of thinking, many people confused his message with the rigid techniques he advocated: time and motion studies, the differential piece-rate system and the idea that workers should be treated as a little more than automatons. Critically, lean manufacturing rediscovered the wisdom and initiative hidden in every factory worker and redirected Taylor´s notion of efficiency away from the individual task and toward the corporate organism as a whole.

In the twenty-first century we face a new set of problems that Taylor could not have imagined. In the early twentieth century, most of invention and innovation was devoted to increase the productivity of workers and machines in order to feed, clothe and house the world´s population. Although that project is still incomplete, as the millions who live in poverty can attest, the solution to that problem is now strictly a political one. We have the capacity to build almost anything we can imagine. The big question of our time is not “Can it be built?” but “Should it be build?”

Taylor wrote as well: “We can see our forest vanishing, our water-powers going to waste, our soil being carried by floods into the sea and the end of our coal and our iron is in sight. But our larger wastes of human effort, which go on every day through such of our acts as are blundering, ill-directed, or inefficient…are less visible, less tangible, and are but vaguely appreciated.

We can see and feel the waste of material things. Awkward, inefficient, or ill-directed movements of men, however, leave nothing visible or tangible behind them.

Even though we live in the century of efficiency and productivity, his words are still contemporary. This waste comes not from the inefficient organization of work but rather from working on the wrong things – and on an industrial scale. As Peter Drucker said, there is surely nothing quite so useless as doing with great efficiency what should not be done at all”. In every industry we see endless stories of failed launches, ill-conceived projects and large-batch death spirals. Eric Ries considers the misuse of people´s time a criminally negligent waste of human creativity and potential.

Eric Ries and the Lean Startup method believe that most forms of waste in innovation are preventable once their cases are understood.  It is insufficient to exhort workers to try harder. Our current problems are caused by trying too hard – at the wrong things. By focusing on functional efficiency, we lose sight of the real goal of innovation: to learn that which is currently unknown.

Product Development Pseudoscience

We routinely green-light new projects more on the basis of intuition than facts. As we have seen throughout this book, that is not the root cause of the problem. All innovation begins with vision. It is what happens next that is critical. As we have seen, too many innovation teams engage in success theater, selectively finding data that support their vision rather than  exposing the elements of the vision to true experiments, or even worse, staying in stealth mode to create a data-free zone for unlimited “experimentation” that is devoid of customer feedback or external accountability of any kind. Anytime a team attempts to demonstrate cause and effect by placing highlights on a graph of gross metrics, it is engaging in pseudoscience. How do we know that the proposed cause and effect is true? Anytime a team attempts to justify its failures by resorting to learning as an excuse, it is engaged in pseudoscience as well.

If learning has taken place in one iteration cycle, let us demonstrate it by turning it into validated learning in the next cycle. Only by building a model of customer behavior and then showing our ability to use our product or service to change it over the time can we establish real facts about the validity of our vision.

Eric Ries says that we have to take care of following the Lean Startup in the same (wrong) way than the people followed Taylor and his scientific management. As gratifying as it is for him to see the Lean Startup movement gain fame and recognition, it is far more important that we be right in our prescriptions. What is known so far is just the tip of the iceberg. What is needed is a massive project to discover how to unlock the vast stores of potential that are hidden in plain sight in our modern workforce. If we stopped wasting people´s time, what would they do with it? We have no real concept of what is possible.

 

—— Eric Ries´conclusion ——

As a movement, the Lean Startup must avoid doctrines and rigid ideology. We must avoid the caricature that science means formula or a lack of humanity in work. In fact, science is one of humanity´s most creative pursuits. Eric Ries believes that applying it to entrepreneurship will unlock a vast storehouse of human potential.

What would an organization look like if all of its employees were armed with Lean Startup organizational superpowers?

For one thing, everyone would insist that assumptions be stated explicitly and tested rigorously not as a stalling tactic or a form of make-work but out of a genuine desire to discover the truth that underlies every project´s vision.

We would not waste time on endless arguments between the defenders of quality and the cowboys of reckless advance;instead, we would recognize that speed and quality are allies in the pursuit of the customer´s long-term benefit. We would race to tests our vision but not to abandon it. We would look to eliminate waste not to build quality castles in the sky but in the service of agility and breakthrough business results.

We would respond to failures and setbacks with honesty and learning, not with recriminations and blame. More than that, we would shun the impulse to slow down, increase batch size, and indulge in the curse of prevention. Instead, we would achieve speed by bypassing the excess work that does not lead to learning. We would dedicate ourselves to the creation of new institutions with a long-term mission to build sustainable value and change the world for the better.

Most of all, we would stop wasting people´s time.

 

Thanks for staying tuned for 9 parts of my summary of Eric Ries book “The Lean Startup”. My opinion is that this method is definitely groundbreaking in many ways. I experienced some of his discripted problems and was kind of inspired by his method of using smaller batches and pushing MVPs. I was hoping for a bit more content and substance in the end (Chapter Adapt and Innovate) but all in all the book is definitely worth reading and you´ll learn a lot if you study the book instead of reading rapidly.

——–

Principles of a lean startup:
Part1: Principles

Part2: Learn and Experiment

Part3: Steer and Lead

Part4: Minimum viable product (MVP)

Part5: Measure

Part6: Pivot or Persevere

Part7: Batch and Grow

Part8: Adapt and Innovate

 

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