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(ISM207) How the Principles of Lean Transform Innovation

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Cloud computing coupled with the emergence of lean principles in the field of innovation has transformed the corporate landscape. In this session, we will explore how corporates can respond to the emerging threat of startups and develop an innovation capability. This session will focus on real-world examples and address how organizations need to re-think traditional processes and governance practices if they are to thrive in the digital age. Conor McNamara, AWS Enterprise Strategy Lead for APAC & Joanne Molesky, co-author of the best-selling Lean Enterprise book will share their experiences from working with corporates who have embarked on this journey.  

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(ISM207) How the Principles of Lean Transform Innovation

  1. 1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Joanne Molesky, ThoughtWorks jmolesky@thoughtworks.com Conor McNamara, AWS Enterprise Strategy Lead APAC mcnconor@amazon.com October 2015 ISM207 The Lean Enterprise How the Principles of Lean are Transforming Corporate Innovation
  2. 2. What to expect from the session Learn how: • The application of lean principles has evolved from the field of manufacturing to corporate innovation • To challenge traditional thinking on management processes and governance practices • Leading corporates across the globe have leveraged lean principles to innovate • To get started
  3. 3. Organizational effectiveness – which one are you? http://www.slideshare.net/npflaeging/betacodex11-the-3-structures-of-an-organization?qid=0a86fca0-6294-45a1-b489-bbbe1bc34c09&v=qf1&b=&from_search=1
  4. 4. Conventional Business Models are under attack EMPOWERMENT ADAPTIVE VARIABLE CONSUMPTION ZERO MARGINAL COST LOCK IN EFFICIENT OWNERSHIP LOWER COST CUSTOMER PROCESSES RESOURCES COST BASE …..all enabled by the emergence of Cloud Computing
  5. 5. What is Lean?
  6. 6. The Principles of Lean 1. Focus on Customer Value 2. Map the Value Stream 4. Create Flow 5. Continuous Cycle & Iteration 3. Reduce Batch Size & Waste
  7. 7. https://www.flickr.com/photos/130321091@N06/ Origins of Lean
  8. 8. The Lean Startup: Why Products Fail You CustomerAssume you know what the customer wants A lot of the time doesn’t actually know what they want
  9. 9. Technology is no longer the bottleneck! Customer CloudenabledInnovationPlatform Traditional Management Processes Ideas/ Business Opportunities
  10. 10. The Lean Enterprise: Innovating at Scale
  11. 11. In the enterprise, there are many bricks in the wall… YOU CUSTOMER
  12. 12. Gary Hamel, American Management Expert “Right now, your company has 21st century Internet enabled business processes, mid 20th century management processes, all built atop 19th century management principles"
  13. 13. Key Findings of 2014/15 State of DevOps Reports •IT performance = Business performance •Culture matters. •30X more frequent, 200X shorter lead time, 60X fewer failures. •Greenfield, brownfield or legacy - it all works Puppet Labs, IT Revolution Press, PWC, 2015 State of DevOps Puppet Labs, ThoughtWorks, IT Revolution Press, 2014 State of DevOps
  14. 14. BUSINESS CEO, COO, CFO, CMO TECHNOLOGY CIO, CTO, CDO (Digtial and/or Data) …but the age old gap is inhibiting value creation
  15. 15. Bridge the gap
  16. 16. Lean Finance
  17. 17. Traditional budget process view BUSINESS Many good ideas, we need money! PROJECTS We’re working, give us money! OPERATIONS That doesn’t work – need more money!
  18. 18. Stop thinking projects… business projects operations Humble, Molesky, O’Reilly, Lean Enterprise: How High Performance Organizations Innovate At Scale = No Visibility into actual value of products/services
  19. 19. Continuous Deployment Think end-to-end products Customers Service Desk Operations Management Multiple Cross-Functional Product Teams Cloud Competency Center Cloud Humble, Molesky, O’Reilly, Lean Enterprise: How High Performance Organizations Innovate At Scale = Visibility into total value of products/services
  20. 20. Implementing Beyond Budgeting (Bogsnes 2009, John Wiley & Sons) http://bbrt.org/
  21. 21. Lean Procurement
  22. 22. The pendulum has swung
  23. 23. Consumption Economics Creates Value Contract Tenure Value WASTE Lost Opportunity CostWhat you traditionally pay for What you now pay for
  24. 24. The Cloud provides real-time commercial levers Elasticity Right-sizing Reserved Capacity …but you need to invest in skills and capabilities to pull these levers
  25. 25. Case Study – Incentive alignment between IT & the business
  26. 26. Case Study http://www.computerweekly.com/news/4500251688/GDS-saves-the-government-17bn-through-digital-and-technology-transformation
  27. 27. Consumption Economics: The New Rules of Tech Book by J. B. Wood, Thomas Lah, and Todd Hewlin
  28. 28. Lean Governance, Risk & Compliance (GRC)
  29. 29. Manage THIS: What’s the biggest risk you face today? You build the wrong thing
  30. 30. Stop the process madness Lean Enterprise Loop Enterprise Loop Humble, Molesky, O’Reilly, Lean Enterprise: How High Performance Organizations Innovate At Scale
  31. 31. The Problem with GRC Large teams + lots of waiting + lots of box ticking $$$ + Ineffective risk management = …many GRC processes are the antithesis of Lean principles
  32. 32. There is an alternative approach …at a fraction of the cost and with a much heightened risk effectiveness Manage own risk position Ongoing monitoring and reporting Fine tune and evolve processes in real-time High control effectiveness (Design & Operate) AWS Common Goals Ongoing Collaboration Define boundaries Product team GRC team
  33. 33. Lean Corporate Governance
  34. 34. Horizon 1 Execute, Sustain, Retire Seeds of today, planted for tomorrow Time %ofportfolio DISRUPTION POINT DISRUPTION POINT Horizon 3 Envision, Explore, Disrupt Horizon 2 Demonstrate, Exploit, Scale Enterprise Portfolio – The Three Horizon Model Humble, Molesky, O’Reilly, Lean Enterprise: How High Performance Organizations Innovate At Scale
  35. 35. Remember the wall – ask yourself?
  36. 36. Corporate Governance: What do you need to change to develop horizon 2 and 3 in your organization’s portfolio of work? Finance: What is the first step you can take to increase visibility into the total cost of products in your organization? GRC: How do you need to change the relationship between your teams and GRC teams to manage risks more effectively? Procurement: How would you change your organization's procurement practices to allow better use of technology? Organizational Alignment: What common measures could you use to determine the contribution of your teams to customer value?
  37. 37. Although undoubtedly tough, this is all completely doable
  38. 38. Suncorp’s 2014 annual report “simplification has enabled the Group to operate a more variable cost base with the ability to scale resources and services according to the market demand. Simplification activity is anticipated to achieve savings of $225m in 2015 and $265m in 2016”
  39. 39. £2.3Bn budget Actual £10bn Outcomes? Technology simplification £105m savings (+ve) citizen experience Flagship 2011 2015
  40. 40. http://www.computerweekly.com/news/4500251688/GDS-saves-the-government-17bn-through-digital-and-technology-transformation
  41. 41. So how did they do it? • Formed the “right” multi-disciplined team • Limited initial scope • Delivered value early & often • Strangled the old world • Pursued principles over rules • Fostered a culture of continuous improvement
  42. 42. AWS helps you become a Lean Enterprise 1. Focus on Customer Value 2. Map the Value Stream 4. Create Flow 5. Continuous Cycle & Iteration 3. Reduce Batch Size & Waste Eliminate the undifferentiated heavy lifting Reduced cost of support & maintenance Common platforms, modularization PAYG Eliminate the innovation bottleneck Automation Process Uniformity A/B testing Real-time customer data
  43. 43. So what should I do next?
  44. 44. Establish a Cloud Competency Centre (CCC)
  45. 45. Start Small,Think Big, Learn Fast
  46. 46. Lean Enterprise: How High Performance Organizations Innovate at scale Additional Reading www.lean.org
  47. 47. Thank you! Joanne Molesky jmolesky@thoughtworks.com Conor McNamara mcnconor@amazon.com

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