Adopting Lean Start-Up Properties

Wednesday 30th May, 2018

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Key Points:

  • Start-up behaviours are poorly understood in large organisations
  • Lean is subject to misrepresentation thus can be resisted by organisations
  • To succeed you must know the levers to aim for; MVP, A/B testing; test learn and fail fast, standardise, customers
  • Avoid the bear traps; vanity metrics, over-architecting, existing systems, customers, use innovation accounting

 

‘We’re too mature to adopt Lean Start Up’

There is an almost automatic barrier that goes up in most existing organisations when it’s suggested that start-ups have something to offer large organisations. “We’re special! We are too mature an organisation. System XYZ is specially…”

Each one of these rationalised answers is one that should, with a better understanding, actually be a reason to look to lean start-up to begin learning from them, and this stems from a lack of understanding of what defines a start-up and the misinterpretation of how to define lean.

 “We cannot become what we want to be by remaining what we are.” — Max DePree

A start-up by its very nature probably doesn’t know what is going to define their long-term value. They must find this out for themselves— by failing fast a start-up can move on and learn as it goes; if they fail slowly by relying on vanity metrics (such as hits on a website) then they inevitably disappear. The true benefit of a start-up is that it is a scientific experiment; if it succeeds in growing sustainably then the hypothesis in the start-ups business plan has been validated; if not then the hypothesis has been proven wrong. Compounding this is a poor interpretation of lean as a cost saving measure and not a way to align with what your customers value, and the muddied water between lean principles and six sigma.

 

Focus on customer value and testing

To succeed, you needed to be able to define success and you should be willing to change what this means for you in response to customer needs. This may seem contrary, and in a slow-moving legacy organisation this will inevitably be proven to be the case.

The only way to learn what customers value is to get the product in their hands and try to separate your biases from what they tell you. It is much easier to say the customer is wrong, than admit that your product has a defect. If that product takes a year to get into the hands of a customer, your ability to adsorb that mistake becomes emotionally and financially challenging. By taking agile approaches to delivery, be that software, a service or a product you can reduce the financial and emotional impact if you are on the wrong trajectory and change.

Use 5 Whys and Cause and Effect Diagrams to try and understand what is preventing you releasing an MVP and prioritise the things that are blocking you by plotting these on an Eisenhower Matrix.

Now that you have a path to release an MVP and can prove your product has customer value, what about A/B testing? Why? With any form of A/B testing you can set a hypothesis and test it with groups of customers. Organisations like Amazon, Skyscanner, Google and Microsoft can do this at scale, their practices are known as Scientific Engineering. They are testing many hypotheses at once. At Amazon’s current release schedule, updates are made every few seconds. By testing this often that you can focus on customer behaviours and value.

Frequent A/B tests allow you to fail fast. Failure is engrained at a young age as being bad and this is amplified through many working lives where it’s seen on RAID logs, audit reports and company reports. What we forget, is that only by failure do we learn, individually and collectively; the closer in proximity to us that failure occurs, the more we learn from it.

By standardising approaches that succeed we can reinforce the path to success. Standardisation takes many forms, be that training, processes or systems used. You should allow for standards to be challenged and enable innovations to disrupt those standards set out.

Your customer should be at the core through all of this and can take many forms, from stakeholders and users to sponsors and operators. Not all may generate revenue however all can influence the success of the product.

 

Don’t overthink or over-architect

In the pursuit of adopting lean start-up approaches there are many traps that can fool you into declaring success. Check that measures you have in place are critical to success, actionable and sustainable. To understand this, check back with your customer value and business value. You may also attribute growth in use to something you have not factored (a false hypothesis) - true independent A/B testing will be able to root this out.

Organisations can be trapped by over architecting their solution. Having seen this with a previous employer, it’s all too easy to be reluctant to release anything that is not perfect on a range of measures. While for many organisations now, data security is not optional, many other architectural elements can be with early adopters. They may not expect resilience, a slick UI or reliability if they are typical of early adopters.

Often an organisation will look to what they know already, such as dependence on existing procurement channels, processes and systems. This is an institutionalised form of resistance that both gives comfort to decision makers and the system itself. This results in constrained thinking, poor quality uncompetitive solutions and sustains the existing system, further holding back the organisation. Accountants have a good way of dealing with this by not considering sunken costs in making financial decisions. Try adopting Innovation Accounting’ within your team to really understand what innovation is driving and what existing systems are constraining. By turning an existing system into an innovation cost, you can move forward in your lean start-up adoption.

Dependence on early adopters can, in itself, be a trap as they too, can lead to a false sense of security in the quality that can be accepted. As your product matures and changes, you should learn to not to be too reliant on this group and simultaneously recognise the value they offer.

 

Don’t rely on ‘organisational resilience’

“The only way to win is to learn faster than anyone else.” — Eric Reis, author, The lean start-up

In this article I have drawn out key learnings from Lean, Agile and start-up that can be applied. Not all of these are easy to adopt and embed. Organisations are systems, they have resilience that resists change. This is how they have survived and is the same reason they may fail; failing to adopt to changing customer needs and different customer groups; by treating every failure as a reprimand and not using these failures as true lessons to learn from; making expensive long-lasting investments with no way to validate early on that these are built on the right assumptions. Tools such as innovation accounting and 5 Whys re useful in progressing forwards.

By building on these and other principles from lean you can make the work you do in an organisation successful and in turn nudge it to move the systems towards greater agility.

Blog post by Alisdair Menzies.