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View from the Trenches: What Went Wrong with Our Lean Startup Program?

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Ken Durand, Ericsson, @atlideafactory

With all of the success of Lean in the startup community, this should be pretty easy to implement in the Corporate environment, right? After launching with very little to show in the way of success, the team in Ericsson’s Atlanta Idea Factory had to take a step back and evaluate what changes were necessary to implement Enterprise Lean Startup with success. One key principle had to be learned… People are an organization’s greatest asset, AND its greatest barrier to success.

Published in: Business
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View from the Trenches: What Went Wrong with Our Lean Startup Program?

  1. 1. Enterprise Lean Startup Adjusting for Success
  2. 2. I expect this crowd to be much different than normal! Let’s take a test
  3. 3. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 3 A new long term business idea is presented to you. It sounds very promising and the team is certainly very enthusiastic. Additionally, they have a background/history that indicates that they might be right about this. Unfortunately, the outcome is uncertain. What do you do? A. The team should put together a business plan / business model canvas to determine if we could make enough money for this to work. B. Since the idea is interesting, we should commission a market research study to determine if this market is viable. C. Sometimes you just need to get started, so let’s get going. D. We need to understand if this is technically doable or not, so let’s do some R&D work to determine the feasibility. Question #1
  4. 4. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 4 Management Consultants have given us a set of potential new areas in which to develop business opportunities over the next 5 to 10 years. We should… A. Decide which area can be developed with minimum expenditure of resources such as time, effort, and money. B. Analyze the market and choose target segments with the highest potential return on investment. C. Determine the segments that are most closely aligned with our current strategy. D. Develop Proof of Concept ideas for display at trade shows and solicit customer feedback. Question #2
  5. 5. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 5 From our competitive analysis research, we have determined that our current go to market approach (including sales, incentive plans, customers, and technology) will not be acceptable to reach a new and targeted area; even though the potential revenue is very promising. We should… A. Step back and look for other alternatives to get to our targets that take advantage of current strengths. B. Press forward anyway knowing that we can influence this new market due to our history, expertise, and resources. C. Complete a proof of concept with one of our current customers to determine if we can move forward viably. D. Find a go to market partner(s) that can fill our sales, incentive, customer, and technology gaps. Question #3
  6. 6. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 6 A new business concept that we are working on with our customers has discovered an odd situation. In a focus group, the end users have determined that they do not like our product offering. In fact, they said they would not want it in their home. What should we do next… A. It’s only one focus group, so let’s analyze the questions we asked. B. Pause the project. Obviously we missed the mark, so let’s broaden our research to include a better cross section of potential customers. C. Nothing. Surprises are expected. Learn from it and move on. D. Stop. If the end customer does not want this at all, we are wasting our time and money resources to continue working on this. Question #4
  7. 7. We’ll come back to this later Test results
  8. 8. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 8 Understanding the Situation Invention • Over 27K patents • Over 25K employees in R&D Execution • 118K employees doing business in 180+ countries • World class Services organization • High Customer Satisfaction Ratings
  9. 9. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 9 Understanding the Situation Invention • Over 27K patents • Over 25K employees in R&D Execution • 118K employees doing business in 190+ countries • World class Services organization • High Customer Satisfaction Ratings Which Ideas are worth executing??
  10. 10. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 10 Understanding the problem Organizational • Structure • Technology led • Communication • Politics & Bureaucracy Process • Built to Execute • Strategy alignment • Risk aversion • Incentive structure Are these the key issues blocking authentic transformation??
  11. 11. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 11 Real transformative Innovation?
  12. 12. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 12 Let’s get on the same page › Company has adopted the HBR Innovation Matrix philosophy › Lean Equates these to Horizons – Horizon 1 = Core – Horizon 2 = Adjacent – Horizon 3 = Transformational › Innovation can and does happen in ALL horizons, but TRANSFORMATIONAL innovation is in Horizon 3 HBR: The Innovation Ambition Matrix © May 2012
  13. 13. Why do we believe that the same people and processes used to execute Horizon 1 objectives can be used to govern Horizon 3 transformation?
  14. 14. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 14 The first KEY is all about how we think Horizon 3 must be different › 2008 University of Virginia – Darden School of Business – 2014 Copenhagen Business School › Study of Entrepreneurs with >$250M › MBA Graduates control group – Ages 25 to 45
  15. 15. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 15 ›Entrepreneurs THINK differently than most everyone else! ›Their dominant thinking style is Effectual Reasoning The Outcome?
  16. 16. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 16 › Causal - We can predict the future, therefore we can control it. › Effectual - We can control the future, therefore we do not need to predict it. Causal vs. Effectual Reasoning Traditional Thinking (Causal) Distinguishing Characteristic Selecting between given means to achieve a pre-determined goal Entrepreneurial Thinking (Effectual) Distinguishing Characteristic Imagining a possible new end using a given set of means GIVEN MEANS GIVEN GOAL IMAGINED ENDS GIVEN MEANS M1 M2 M3 M4 M5 M1 M2 M3 M4 M5 › 81% of MBA Graduates were Causal Thinking dominant › 89% of Entrepreneurs were Effectual Thinking dominant © 2012 Society for Effectual Action
  17. 17. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 17 Best case - Illustrated Emotions Results Deliver the Goal Causal CAGR Results Emotions Change the World Effectual CAGR?
  18. 18. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 18 › I need a CAT to be successful › Where the picture of the cat is the goal and the puzzle box are the means to achieving that goal Causal Reasoning
  19. 19. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 19 › I need a CAT to be successful › The LEGO box is my means › The end is left up to my imagination Effectual Reasoning © 2015 The LEGO Group
  20. 20. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 20 › Causal Process – Idea – Market research – Financial projections – Form a Team – Business plan – Funding – Prototype – Product Management – Marketing & Business Development – Go to market › 81% of MBA Graduates were Causal Thinking dominant › 89% of Entrepreneurs were Effectual Thinking dominant Effectual Reasoning › Effectual Process – Personal competencies & dreams – Target customer within personal network – Idea – Form a Team – Value Proposition – Partner – Test guesses until you find one that works – Prototype – Funding – Go to market
  21. 21. Let’s score the test!
  22. 22. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 22 Principles of Effectual Thinking Bird in Hand Principle - Start with your means rather than wait for the perfect opportunity. Start taking action, based on what you know now. A new long term business idea is presented to you. It sounds very promising and the team is certainly very enthusiastic. Additionally, they have a background/history that indicates that they might be right about this. Unfortunately, the outcome is uncertain. What do you do? A. The team should put together a business plan / business model canvas to determine if we could make enough money for this to work. B. Since the idea is interesting, we should commission a market research study to determine if this market is viable. C. Sometimes you just need to get started, so let’s get going. D. We need to understand if this is technically doable or not, so let’s do some R&D work to determine the feasibility. +5 +2 -5 -2 © 2012 Society for Effectual Action
  23. 23. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 23 Principles of Effectual Thinking Affordable Loss Principle - Set affordable losses and evaluate opportunities based on whether the downside is acceptable, rather than on the attractiveness of the predicted upside. McKinsey has given us a set of potential new areas in which to develop business opportunities over the next 5 to 10 years. We should… A. Decide which area can be developed with minimum expenditure of resources such as time, effort, and money. B. Analyze the market and choose target segments with the highest potential return on investment. C. Determine the segments that are most closely aligned with our current strategy. D. Develop Proof of Concept ideas for display at trade shows and solicit customer feedback. +5 +2 -5 -2 © 2012 Society for Effectual Action
  24. 24. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 24 Quilt Principle - Form partnerships with people and organizations willing to make a real commitment to jointly creating the future with you. From our competitive analysis research, we have determined that our current go to market approach (including sales, incentive plans, customers, and technology) will not be acceptable to reach a new and targeted area; even though the potential revenue is very promising. We should… A. Step back and look for other alternatives to get to our targets that take advantage of current strengths. B. Press forward anyway knowing that we can influence this new market due to our history, expertise, and resources. C. Complete a proof of concept with one of our current customers to determine if we can move forward viably. D. Find a go to market partner(s) that can fill our sales, incentive, customer, and technology gaps. +5 +2 -5 -2 Principles of Effectual Thinking © 2012 Society for Effectual Action
  25. 25. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 25 Lemonade Principle – Leverage contingencies Embrace surprises that arise from uncertain situations, remaining flexible rather than tethered to existing goals. A new business concept that we are working with our customers has discovered an odd situation. In a focus group, the end users have determined that they do not like our product offering. In fact, they said they would not want it in their home. What should we do next… A. It’s only one focus group, so let’s analyze the questions we asked. B. Pause the project. Obviously we missed the mark, so let’s broaden our research to include a better cross section of potential customers. C. Nothing. Surprises are expected. Learn from it and move on. D. Stop. If the end customer does not want this at all, we are wasting our time and money resources to continue working on this. +5 +2 -5 -2 Principles of Effectual Thinking © 2012 Society for Effectual Action
  26. 26. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 26 -20 Effectual Causal +20 What is your dominant style › 81% of MBA Graduates were Causal Thinking dominant › 89% of Entrepreneurs were Effectual Thinking dominant
  27. 27. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 27 Exploration vs. Administration Effectual thinkers are explorers › Exploration is a mindset imparted to the individual at birth, so explorers are discovered…not created › Explorers are regularly marginalized and “drummed out” of the organization by administrators › Incredible willingness to be comfortable with the phrase “I don’t know” (loves ambiguity; life in the grey areas) › Embrace change every minute…BUT, not stupidly sailing about without a plan › Willing to “burn the ships”…exchange the knowable for the unknowable › A lifetime of uncertainty needs to be incentivized differently
  28. 28. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 28 › Horizon 3 objectives are BEST run by Explorers › If you have Explorers, the idea is LESS important than the team. › Not ONLY Explorers on the team What should we learn? HBR: The Innovation Ambition Matrix © May 2012
  29. 29. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 29 Two years of Projects and Workshops in the Idea Factory › Enterprise Culture is at the center of success 1. The Enterprise struggles with failure 2. The right team is more important than the perfect idea 3. Culture does not support chaos 4. Small victories are easily ignored Enterprise Key Learnings
  30. 30. ATL Idea Factory: Enterprise Lean | Public | © Ericsson AB 2015 | October 2015 | Page 30 Exploration vs. Administration The Key Principles Chaos vs. Process Facts vs. Opinions Minimum Viable Product Smallest Viable Market

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