Wednesday, August 30, 2017

Using The Startup Way to Turn Big Orgs into Lean Startups

Written by Misti Yang, Contributor for Lean Startup Co.

In the opening paragraphs of Eric Ries’s upcoming book The Startup Way, Eric sets the scene: He arrived at GE in the summer of 2012 amidst a multi-hundred-million-dollar, five-year plan to develop a new diesel and natural gas engine. He knew next to nothing about the engine but a good bit about entrepreneurial management, and GE Chairman and CEO Jeffrey Immelt and Vice Chair Beth Comstock thought the insights he’d developed in The Lean Startup could ensure that the plan would succeed.

And the plan did succeed. GE released the test engine, known as Series X, sooner than originally anticipated and immediately received an order for five engines.

It was the start of a partnership that lasted several years and transformed GE’s business practices while also inspiring the company’s FastWorks program. It demonstrated to Eric that Lean Startup methodologies could help organizations of all sizes, and it inspired GE to train every CEO and top manager in what Eric now calls the Startup Way, which he explains in the book “combines the rigor of general management with the highly iterative nature of startups” and incorporates several Lean Startup processes.

The Startup Way includes several learnings from Eric’s work with GE (among other enterprise and high-growth organizations) and Marilyn Gorman was part of the original team at GE that worked with him to build training for senior leaders. Today, she is senior faculty at Lean Startup Co. and travels the world providing businesses with innovation tools and training. As a special treat for our community, Marilyn and Eric will be co-facilitating a limited-capacity workshop focused on The Startup Way during Lean Startup Week (Oct. 30 - Nov. 5) this fall.  

As a teaser for that workshop, below are a few lessons Marilyn has learned about teaching an established corporation to practice the Startup Way, along with additional insights from the book.

You need a leader.
The subtitle of The Startup Way is: How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. Understanding fundamental distinctions between “modern companies” and “old-fashioned companies” is an important first step in refashioning management in a large enterprise. One of the many distinctions Eric points out is that an old-fashioned company “is composed of managers and their subordinates.” But a modern company “is composed of leaders and the entrepreneurs they empower.”

Marilyn knows this truth firsthand. “A lot of people are saying, ‘We’re trying to drive a change to a more entrepreneurial mindset from the bottom up,’ and while it is important to start with small teams, you do need leader support. It is critical,” she says.

Without a commitment to a new approach from higher-ups, teams tasked to work with Lean Startup methodologies are more likely to be blocked by existing procedures and expectations. For example, being told, “There is no budget,” shuts down a project pretty quickly. As Eric recounts in The Startup Way, when working with GE, he asked teams to be honest about what they really needed, and “many of them simply needed senior leadership’s assurance that if they worked in this new way they wouldn’t be eaten alive by middle managers.”

Be ready to change more than your scorecards.
“I had companies call me when I was at GE and say, ‘Tell me about how you changed your performance management approach,’” Marilyn says, “and I couldn’t do it without talking about the Lean Startup mindset of building, measuring and learning. People would sometimes reply, ‘We just want to change how we score people at the end of the year,’ but there is no shortcut for implementing a Lean Startup approach.”

Marilyn recalls that as GE started to implement Lean Startup practices, management began to recognize that there were systems and processes that stood in the way of being successful. “Corporations have lots of policies in place to reduce risk and to put out as perfect a product as possible, but Lean Startup is all about taking risk and putting test products in front of customers,” she explains. “The natural evolution was realizing that we needed to change other things inside of the company.”

GE’s realization reflects two of the five key principles of the Startup Way: continuous innovation and the missing function of entrepreneurship. Leaders often want one key innovation that will unlock unrealized potential, but companies should be focused on developing a method for finding breakthroughs as a sustainable part of their long-term pathway.

However, without embracing entrepreneurship, long-term growth driven by new products is unlikely. In the book, Eric recommends starting by making entrepreneurship a core discipline, which means ensuring that someone is responsible for it on the org chart just as departments are responsible for marketing and finance.  

Start with, “What can we do.”
Of course, a fully functional Startup Way practice will take more than a box on an org chart. Ultimately, every department will be asked to work a little differently, and that requires some tough conversations across an organization. “Often the conversation will start with, ‘Here is what we can’t do,’ and in fact, the focus needs to be on what you can do,” Marilyn advises.

In the book, Eric shares the story of a leader who realized that the legal department was preventing rapid innovation, and he wanted a solution. He facilitated a meeting with everyone in the legal department. The legal team actually lamented having to always tell people no, but felt constrained by rules and regulations. The solution: a one-page document that laid out a series of parameters within which teams would be pre-cleared to experiment with new ideas. By working with the legal team to brainstorm what could be done, the company was able to speed up product development.  

When things get hard, eat chocolate.  
“Making this kind of profound change to an organization’s structure is like founding the company all over again, whether it’s five or a hundred years old,” Eric reflects in The Startup Way. It is what he calls “the second founding,” and founding a company is not easy work.

“It’s hard, and it’s going to take time. But, chocolate helps,” Marilyn jokes. Plus, it is worth the effort. “At GE, we started to work faster and simpler. We were learning more quickly about opportunities for success and what opportunities would fail, so we could stop wasting time on them. It definitely had a positive impact.”

Join us at Lean Startup Week October 30th-November 5th, where Eric Ries and Marilyn Gorman will co-lead a 4-hour workshop focused on "The Startup Way". It will give participants an opportunity to consider some of the challenges of bringing Lean Startup practices into an enterprise and address what it takes to scale and deploy new approaches in their own companies. Participants will also receive a workbook featuring tools that they can use to implement the Startup Way. You can pre-order "The Startup Way" here.