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Lean Startup in the Enterprise


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My invited talk at TCS AgileCafe, Bangalore on Sep 29. In this talk, I explore how large #enterprises are creating #innovative products using #leanstartups

Published in: Business

Lean Startup in the Enterprise

  1. 1. Lean Startup in the EnterpriseTathagat Varma Knowledgepreneur
  2. 2. Let’s hear some stories! How some organisations solved problems differently • Services: Google, 2001 • Software: Intuit, 2009 • US Gov: CFPB, 2010 • Systems: GE, 2013
  3. 3. Google Gmail, circa 2001 Does the world need another free webmail? • First version of Gmail was literally written in a day! “It wasn't very impressive -- all I did was take the Google Groups (Usenet search) code (my previous project) and stuff my email into it -- but it was live and people could use it (to search my mail…)" • Code was live from day one! • “I would just write the code, release the feature, and watch the response.” • Re-wrote the frontend about six times and backend three times by launch (Apr 1, 2004) • Code for content-targeted ads was written in a few hours and tested on ~100 unsuspecting Googlers! • It was a “Googlette”!
  4. 4. Googlette? “The startup within the startup” • “What is a Googlette? It’s a new business inside of Google that is just getting started as “the start-up within the start-up”. We’re looking for an experienced, entrepreneurial manager capable of offering direction to a team of PMs working on a wide array of Googlettes. You will define Google’s innovation engine and grow the leaders of our next generation of businesses.” • Georges Harik, one of Google’s first 10 employees, held the roles of director of Googlettes and distinguished engineer. As director of Googlettes, his team was responsible for the product management and strategy efforts surrounding many nascent Google initiatives including Gmail, Google Talk, Google Video, Picasa, Orkut, Google Groups and Google Mobile.
  5. 5. Intuit, circa 2009 Automate information collection from W-2 forms Two-decade-old dream: “10-minute tax return”
  6. 6. The solution emerges… Based on conversations with potential customers…
  7. 7. Intuit SnapTax Built incrementally incorporating continuous feedback • Assembled internal team of 5 • Exec sponsors created “island of freedom” where they could experiment • 2010: Pilots in California. Iterated eight times in eight weeks. • 2011: Replaced Angry Birds as the #1 App on iTunes within two weeks of launch; 350,000 downloads in first three weeks of launch • Reached $50m in first 12months when it earlier took 5.5years! • For TurboTax, they test up to ~500 changes in a 2.5 months tax season. In comparison, they ran just 1 experiment in 2006.
  8. 8. US Government Consumer Financial Protection Bureau (CFPB) • 2010: Obama signs Dodd-Frank Wall Street Reform and Consumer Protection Act into law. Among other things, it mandated creating a new federal agency. CTO Aneesh Chopra reached out to Eric Ries. • CFPB was viewed as a “startup”. Treat the new endeavours as “experiments”, identify part of plan that were “assumptions” rather than facts, and figure out way to test them. • Idea was to build an MVP and have the agency up and running on a minor scale before running it with $500m budget and a large staff.
  9. 9. “Know before you owe” The government will hear you now…? “This week, The Consumer Financial Protection Bureau (CFPB) launched an initiative to engage every American in the design of a simpler mortgage disclosure form. By visiting Know Before You Owe, your voice will be heard on what information lenders and brokers should share when any American applies for a mortgage. It is the latest “startup” of the Obama Administration and embodies three important principles: • A More Open, Participatory Government • Customer Service at Private Sector Standards • A “Lean Government Startup” Culture
  10. 10. A “Lean Gov Startup” Culture? Is it even possible for a gov to behave as a lean startup… “I’ve spent a good deal of time recently with Eric Ries, a leader in a movement to define a set of principles to guide successful new companies. He’s written about the possibility of translating the “Lean Startup” concept into the government. By establishing a clearly defined problem, recruiting a small, nimble team of innovators and financial experts to design an innovative product, and then rapidly learning from public feedback, the CFPB team might be the right case study to demonstrate the merits of such an approach.”
  11. 11. How they did it? Kept refining based on 25,000 user comments from multiple rounds of qualitative and quantitative testing over 10 months User-Centered Design Process
  12. 12. GE: World’s Largest Startup! 130yo, $150B company: From Six-Sigma to Lean Startup… • Based on Eric Ries work, FastWorks aims to speed new product development, reduce costs, and increase customer engagement • The group constantly takes its ideas to customers throughout the development process to learn what will sell and what won’t, redesigning it before devoting the time and money to creating a final product. • 100 projects in 2013 to 300+ in 2014; 40,000 employees trained • Examples: • Monogram-series refrigerator went through 18 iterations • High-output 7HA Gas Turbine: developed 40% more cheaply and 2 years faster • Lightbulb with a built-in wire-dimming chip • Oil well flow meter
  13. 13. GE “Monogram” Refrigerators How do you design new refrigerators on shoestring resources? • GE Appliance’s first attempt to apply FastWorks has been to create a refrigerator with French doors for their high end “Monogram” line. • In January 2013, Chip Blankenship, CEO of GE Appliances issued a challenge to the newly formed team: “You’re going to change every part the customer sees. You won’t have a lot of money. There will be a very small team. There will be a working product in 3 months. And you will have a production product in 11 or 12 months.”
  14. 14. GE FastWorks “FastWorks means getting to market now with something that may not be a 100% solution but that allows your customer to provide real feedback"
  15. 15. So, what’s common here? The more they’re different, the more they’re same! • Think of a “big idea” (as opposed to making small incremental optimization) • Built a small cross-functional team (instead of traditional bloated functional silos) • Teams had creative autonomy to experiment (instead of following rigid diktats) • Formulate riskiest hypotheses (instead of detailing out all the requirements) • Develop rapid prototypes (instead of building out the entire product) • Validate key assumptions early by talking to potential customers (instead of developing without testing them, and testing them only post-launch) • Fail fast, fail cheap and fall forward (instead of “achieving failure” or making costly mistakes too late in the day) • Incorporate customer feedback periodically (instead of handling them as changes after the big launch) • Learn quickly from the real-world and actionable data, and correct mid-course as needed (instead of proceeding with unvalidated assumptions which might lead to huge costs of failures) • Get new ideas to market sooner with core set of features (instead of waiting till all 100% features were ready) • …
  16. 16. Hey, that’s not usual!!! Large enterprises don’t usually behave like… That’s right…that’s more like how startups work…
  17. 17. So, what’s a “Startup”? Isn’t a startup the proverbial “garage” where new and crazy ideas are born and baked? • A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty. • Size of company, the industry, sector of the economy — none of it matters! • The goal of a startup is to figure out the right thing to build - the thing customers want and will pay for - as quickly as possible. • Startup success can be engineered by following the process, which means it can be learned, which means it can be taught. The Lean Startup - Eric Ries
  18. 18. OK, a “Lean Startup”? Startups are meant to be “lean”, so what’s that? • Lean Startup is a new way of looking at the development of innovative new products that emphasises fast iteration and customer insight, a huge vision, and great ambition, all at the same time. • It is a set of practices for helping entrepreneurs increase their odds of building a successful business The Lean Startup - Eric Ries
  19. 19. Lean Startup Principles How do we manage lean startups better? The Lean Startup - Eric Ries • Entrepreneurs are everywhere • Entrepreneurship is management • Validated learning • Innovation accounting • Build-measure-learn
  20. 20. So, who’s an “Entrepreneur”? Aren’t these the young and restless techies who live in garages? • A person who sets up a business or businesses, taking on financial risks in the hope of profit. • Entrepreneurs who operate inside an established organisation sometimes are called “intrapreneurs” because of the special circumstances that attend building a startup within a larger company. • Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled. Lean Startup - Eric Ries
  21. 21. Validated Learning You mean learning isn’t often “validated” • Learning is the essential unit of progress for startups. • The process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. It is more concrete, more accurate, and faster than market forecasting or classical business planning. • I call this validated learning because it is always demonstrated by positive improvements in the startup’s core metrics. • It is not after-the-fact rationalisation or a good story designed to hide a failure. • It is the principle antidote to the lethal problem of “achieving failure”: successfully executing a plan that leads nowhere. Traditional Learning Validated Learning Lean Startup - Eric Ries
  22. 22. Innovation Accounting How do you determine “health” of a startup? The Lean Startup - Eric Ries To improve entrepreneurial outcomes, and to hold entrepreneurs accountable, we need to focus on the boring stuff: how to measure progress, how to setup milestones, how to prioritize work. This requires a new kind of accounting, specific to startups. Dave McClure’s Pirate Metrics
  23. 23. Build-Measure-Learn Accelerate the feedback loop and learn faster The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. The Lean Startup - Eric Ries
  24. 24. Minimum Viable Product No, we are not going to ship a poor-quality product! The minimum viable product (MVP) is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort. It is that 20% of the product that allows 80% of riskiest assumptions to be validated.
  25. 25. Pivot or Persevere? How do we continue, especially when goals aren’t met? Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question…When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not. If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.
  26. 26. Recap • A startup is not a physical space or garage-style startups. It is a mindset for solving hard problems creatively. • Lean Startup offers a set of principles and toolkit to manage extreme uncertainty in a methodical and “frugal” manner. • The core idea is to identify riskiest assumptions, build a smaller version of the product to validate them in shortest time, and incorporate the learnings before continuing. • Lean Startups offers a framework to innovate with lower risks inside large enterprises that are otherwise optimised for efficiencies and economics of scale. • More than any specific process, methods or tools, it needs the culture that promotes experimenting and learning with speed and agility before scaling and further growth.
  27. 27. References • The Lean Startup - Eric Ries, 2011 • The Lean Startup Case Studies, • Governments Take a Lean Startup Approach, Startup-Approach.html • Lean Startup: Changing Government Services and Agencies to Better Serve the Citizens, https:// the-citizens/ • How Small Group of Entrepreneurs transformed Government Services, 2014/05/how-small-group-entrepreneurs-transformed-government-services/83872/ • Governments Take a Lean Startup Approach, Startup-Approach.html • The Lean Startup Goes to Washington, • Intuit’s CEO on Building a Design-Driven Company, driven-company • Eric Ries: How to Bring Lean Thinking to Big Companies, bring-lean-thinking-to-big-companies.html • Bringing the Lean Process to Big Finance Corporations, big-finance-corporations/
  28. 28. References • The Innovation Catalysts, • How Intuit Innovated by Challenging Itself, • General Electric Wants to Act Like a Startup, lean-startup-ideas-for-faster-cheaper-product-rollout • GE Panel, The Biggest Implementation of Lean Startup on Earth, • The Service Startup, • Enterprise Lean Startup Experiment Examples, experiment-examples/ • How GE Applied Lean Startup Principles, • A New Kind of Startup, • The Biggest Startup, up-to/ • Large Companies Innovating Parts of Their Company with Startup Mentality, drewhendricks/2014/11/05/large-companies-innovating-parts-of-their-company-with-startup-mentality/ #18dfcf6e7749 • How to Implement the Lean Startup Method at Large Organizations, 2015/12/11/how-to-implement-the-lean-startup-at-large-organizations/