Source: Harvard Business Review
by Scott Kirsner,
August 16, 2016.
RAMAZAN BALAY
And yet the lean startup methodology, born in Silicon Valley as a way for startups to tune in to customer needs with limited resources, has been gaining major momentum inside big companies like General Electric, Alaska Airlines, Telefonica, 3M, and W.L. Gore. When my publication, Innovation Leader, surveyed 170 executives who work in R&D, strategy, and new product development roles at large public companies, we found that 82% said they’ve already deployed some elements of the lean startup approach.
It turns out that many aspects of lean startup, like showing rough prototypes to customers before you’ve invested lots of time and money, iterating based on their feedback, and letting data prove or disprove your hunches, all have powerful appeal inside big companies, where endless meetings and executive approvals often bog down innovation.
Bennett Blank, an executive at Intuit, the software company that makes Quicken and TurboTax, explained it this way: “If we go back about 5 years, the problem was that it was taking too much time and too much money to launch new ideas, and we were not happy with the number of ideas succeeding in the market… We were spending lots of time on planning and thinking, rather than testing ideas with our customers.”
Lean startup, popularized by writers and entrepreneurs like Eric Ries and Steve Blank, can deliver big benefits inside big companies. But it can also run into two brick walls that an actual startup — the mythical pair of founders working at a kitchen table — would never have to deal with.
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First, the benefits. The five benefits of the lean startup approach that were mentioned most frequently by our corporate respondents, who came from a wide range of industries, were:
1. Making decisions based on evidence and data, rather than executives’ instincts.
2. A faster cycle time for developing ideas.
3. Better-quality feedback from customers and stakeholders, often because you’re asking them to actually buy something, rather than just spout opinions in a focus group.
4. “Getting out of the building” to speak to and observe real customers and stakeholders.
5. More flexibility about making changes to ideas as they progress from concept to “minimum viable product” to finished product.
GE vice chairman Beth Comstock spoke to the issues of speed and continual customer input in a 2014 interview, when she said, “We work in these very complex, deep industrial technologies. You want to get as close to perfection in some of these technologies as possible, but the goal also has to be progress, not just perfection. Lean startup has reminded us that there are things you can get out fast in front of customers…” Comstock also said that some parts of the lean startup methodology “reminds me of some of the things that Peter Drucker used to say, like, ‘Without a customer, there is no business.’ Sometimes you need to be reminded of that.”
But we also heard about some benefits that we didn’t think to include as part of our survey options. One was increased customer loyalty, since customers feel more involved in the development process, and presumably their needs and requests get woven into the product along the way. The other was that lean startup can elevate employee morale by making workers feel “more motivated and empowered,” in the words of one survey respondent, since more employees get involved in cultivating ideas as part of a team, showing them to customers, and presenting the results to senior leadership. Another respondent said that using lean startup had improved her company’s “ability to attract talent.”
It’s a lot easier, though, to read the book “The Lean Startup” or hire a training firm to run workshops than it is to use the approach to deliver real value in an organization with billions in revenue. There are two reasons for that. The first is that lean startup goes against the cultural grain for most companies, and it can threaten the authority of decision-makers. Show customers barely-working products with rough edges? Marketing folks feel that could damage the brand, and the general counsel’s office frets about legal risks. (Our survey found that the biggest concern about lean startup in large organizations is “showing the product too soon.”) Use data to guide decisions and prioritization? Doesn’t that devalue executives’ knowledge of the market and gut feel for what the customer wants?
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Those are the sort of cultural conflicts that require diplomacy and allies in high places. “Anticipate resistance and welcome it,” one survey respondent advised. Thoughtful communication is also important. “Engage others with a simple question — ‘What would a startup do [if they entered our business]?’” said another. At Adobe, the San Jose software company, VP of Creativity Mark Randall asked the legal team to create guidelines that would allow early experiments with customers, as long as employees stayed within certain bounds, like testing in a single country, rather than globally. That gave them productive input into the lean startup initiative, rather than letting them play the role of “Dr. No.”
The second challenge facing lean startup advocates in large companies is all about the hand-over. How long should a successful small-scale market test be nurtured by the original team before it is passed along to a business unit for a broader roll-out? Will it fall victim to “not invented here” syndrome? Will business unit leaders look at a project that has generated thousands of dollars of revenue, not millions, and view it as insignificant and low potential?
Companies like Alaska Airlines have focused on projects with limited scope, like new sign-in technology for frequent flier lounges, that can be rolled out without significant support from other divisions (the airline has just four lounges.) Spanish telecom company Telefónica invites business unit executives in to the lean startup process early, to provide expertise and input, and to help make introductions to customers. And Telefónica and other large companies like Goodyear often transfer employees who have worked on the lean startup project over to a business group for roll-out, even if just temporarily. “It’s like their baby,” says Telefónica innovation manager Susana Jurado Apruzzese. “They want to see their product commercialized.” At Adobe, people working on a lean startup project as part of the company’s “Kickbox” initiative need to find just one executive to continue funding it, rather than persuading an entire committee.
Most large companies are populated more by skilled operators than by innovators hunting for underserved markets or new business opportunities. But some companies are finding that the lean startup approach provides tools that can help employees behave more like innovators and get them talking early and often with customers. The challenge is adapting something built for the entrepreneurial world so that it can work effectively in an environment full of standard operating procedures, immutable policies, and executives who want to leave their mark on everything.
