PCATX15: Why companies still get lean wrong
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Protecting your existing business while innovating takes more than applying Lean Startup principles in your organization. Find out about common mistakes when innovating.
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PCATX15: Why companies still get lean wrong
- 1. Why Companies still get Lean Wrong Town Hall Discussion Laura Di Tomasso
- 3. Overview of Lean Startup Leap of Faith Clear definition Build -> Measure -> Learn Based on testable hypothesis Actionable metric for measuring Iterate based on validated learning
- 4. Overview of Lean Startup Pivot or Persevere Value, growth, customer segment, etc. may require pivots Perseverance with small incremental improvements Caution: Lean Startup is a framework, not a blueprint
- 5. Mistake #1 Isolating framework to the development team
- 6. Functional excellence “Efficiency is doing the thing right. Effectiveness is doing the right thing.” - Peter Drucker
- 7. Mistake #2 Lack of organizational adaptability
- 8. Adaptable organization required “Startup teams need complete autonomy to develop and market new products within their limited mandate.” - Eric Ries
- 9. Mistake #3 Inside / Out thinking
- 10. Inside expertise outweighs outside data “Your opinion, while interesting, is irrelevant.” - Pragmatic Marketing
- 13. It has been my pleasure to talk with you today! Please feel free to continue the discussion with me. www.LauraDiTomasso.com
Notas del editor
- Laura Di Tomasso, 15 years in Enterprise software product management. Thank you for joining the discussion today about why companies still get lean wrong.
- Quick refresher of Lean Startup (core) Prinicples Start with a Leap of faith – your big vision for the new product/technology/service Defining your assumptions clearly with the main hypothesis regarding the feasibility, desirability and viability of the solution Understanding of the economic buyer, the user, the problem you are solving are all still critical to articulate early (Personas) Coming together (as a team) to understand as a team before you start developing! The engagement of a cross functional team is one area that is often overlooked and we will discuss shortly. Strong vision supported by fact is your target Build -> Measure -> Learn – small batch work Testable hypothesis Innovation accounting – actionable metrics not vanity Validated learning Iteration – hopefully making the cycle shorter over time Prototyping – designed to find out what’s wrong (what works, what doesn’t, what needs to be done differently) (A friend I worked with now works at Netflix) Companies like Netflix have built this into their culture. They tolerate mistakes as long as something is learned. True failure is the failure to learn!
- Pivot or Persevere Value, Growth, segment, etc. pivot – this is a change in the fundamental assumptions. Tied to leap of faith Perseverance with small incremental improvements – your actionable measures are giving you good feedback to move forward. This means you need new hypothesis and tests for your next cycle. Lean Startup is a framework of principles, not a blueprint / how to guide: Concepts are to reduce waste and put our ideas to rigorous testing to learn and iterate towards success (Based on Toyota Lean Mfg) Separate principles from tactics Meta-process (typically applied in software) – allows for more specific process and practices to be formulated – “no silver bullet” Build process for your culture (business, industry, etc.) My friend describes Netflix culture, as a lean culture. It is a well defined culture, with clear direction, rules of engagement are defined, clear measurements are expected and everyone is supportive of the independence of teams.
- Message isolation PREVENTS innovative measurement Why am I leading this discussion: 5 years for multi-national large software and mid-size software companies trying to bring new innovation to the market from an established successful public company. Both decades old, with well-established cultures. Today I will focus on the mid-size experience. I was hired to take over an innovation project because of my experience at the larger organization. I knew the problems, or at least I thought I understood, in developing something new in an established business. I will relate my story for each problem based on this experience without revealing the company or product. I encourage you to share, even if you need to keep the specifics out of your story. The first mistake, I see, is isolating the principle of lean start-up only to the development of the innovation. The team I joined was in a room while the rest of the company worked in cubicles. The team started out doing everything by the book. 10 beta testers (not customers) resulting in only 1 customer… red flag not seen! Preserved believing 1 customer = on the right path. Problem: only the development team and product manager were looking at the measurements (they had feasibility testing down cold) No other viewpoints to question if they were testing all their assumptions (especially marketing and selling)
- Isolation is necessary to protect the current business model built for efficiency. (Keep the lights on) Functional excellence means ensure each organizational area achieve success in their own area of expertise. This translates to keeping development at full utilization. This tends to put developers and even product managers into a factory worker mind set. Judged on the amount of work produced on time with quality. Team lacked context of and are challenged of learning from customers. When I was brought on board I discovered the team was more than happy to understand the vision. To contribute beyond their job description. If they had been given the chance, would the product have been in the death spiral? Both Steve Blank and Eric Ries talk about this concept. Imagine after initial launch a sales manager reports how the pipeline is filling up, we just need to close. Then proceeds to go back to the team and asks them to just work harder. Of course this doesn’t work if the company doesn’t understand what it is selling is not typical to their mainstream products. Out project had the top of the funnel full and the bottom empty, what was happening? It requires experimentation (effectiveness), to determine who best to sell this new solution. Without the experimentation with measurement, you continue the death spiral, where the head of sales is fired and someone else is brought in while the company continues to burn cash. Using a cross functional team, rather than an isolated team would have given us a productive means to measure our learnings and take small incremental movements towards a better solution. No vanity matrix, focus on measure that provide a path to action. At some point they were forgotten while the engine of being productive took over. The “engine of growth” was not being tested. Who hear has a similar story? Did you correct the problem? How?
- Message: Lack of cross team and organization collaboration prevent innovation success Your business has been successful for years even decades. You intuitively know that you have to keep innovating. You set up a team to look at opportunities in your market or a new market. A good idea is born. Great, now let’s make it work. Ah not exactly; the idea is not enough. How many of you have heard stories of great ideas that never make it to market? What do you think is one of the biggest factors? Gatekeepers protecting their funnel.. Organizational adaptability means the entire organization. Stealth mode or black box development inside established businesses rarely works. Isolating the new innovation to protect your existing business prevents you from scaling and ultimately succeeding.
- So why does Eric Ries state that startup teams need complete autonomy. When you have a cross functional team lead by a senior manager in an established company, you are not cut off from the existing business. You are just providing the support required to go through the cycle quickly. Without the weight of the established processes. In my case, the team was in an isolated room. It was not a cross-functional team. However, any function outside of development and product management was just part of the existing infrastructure of the established business. We had direct sales, however our customer target market for the new product was different from the established business. The same approach used in sales and marketing was used for the new product. The same vanity metric was used to measure the success. Fundamentally the solution was SaaS while the established products were on-premise. The target market was not the only significant difference. What lead the organization to believe the existing processes would work successfully for the new product? What could have been done to correct this situation to give the new solution a chance? Have you encountered this situation? If so, what happened? We asked for 1 person to test marketing and sales processes for the new solution with a compensation plan based on success of the new solution.
- Message: Customer/user validation is critical to innovation success This is one of the most prevalent mistakes because it happens with sustaining and disruptive innovation. I have many stories from multiple projects that I could use to demonstrate just how easy it is to believe you have enough in-house expertise to know what you should do with your innovation. Domain expertise in house is based on established customer base and past sales experiences for existing products. This Is what I think of as the “surprise villain that kills lean principles”. The trap is past success is not an indicator for the future. This trap often leads to build a product/solution to solve an “invented” problem. Only in the movies does “build it and they will come” work. I have found in nearly all the cases, the initial reaction to asking to engage users for validations is extremely positive. Then the amount of effort and potentially the cost of finding and engaging with the potential customer becomes a roadblock. Of course most established software companies want to engage their user experience team. After all they are trained to obtain and evaluate customer feedback. How many of you have UX teams? How many of you have understaffed UX teams? Must balance keeping the lights on and introducing new procedures to ensure success of new solution. (establish a cross functional advisory team at minimum)
- This is problem #1. How do you engage other teams who are also working on the established products to work on something they may have not be engaged with from the start. Hint: an argument for establishing a cross functional team. An alternative, is to engage with product marketing. Here there are often more resources who are skilled at identifying the personas and value proposition. Have they been engaged with the innovation project from the beginning? If not they have to be on-boarded to the team to do this feedback loop. What about the developer? Oh no, I said it! The developer who codes what the PM tells them needs to talk to customers? It has been my experience that a true innovative developer loves to talk to the customer. Incentive? Turf-protection? As a cross-functional team stepping back to work through how you are going to test the hypotheses, actually testing and measuring the results makes the team more effective and ultimately efficient. The small batch method of lean, can help the entire team obtain validated learning and eventually the cycle speeds up. It took only 6 months for me to turn around the approach. We made incredible progress and the customer feedback loop was greatly improved. Problem #2, I call the “highest paid position decides”. A fundamental mistake of not testing is that you have no opportunity to learn until you have invested time and money. We have all at least heard of, if not personal experienced, this situation. Management invested in you as an expert, if they do not believe in the Lean principles (culture required), you are fighting their belief that you have everything they need to be successful. This may have worked in the past, the markets have changed the buyer is more educated and has more options. You must listen to the user to succeed.
- Well, just to let you know, Senior management shut down the innovation project just as we had determine what pivots were required. It was a sad day, however everyone on the team learned valuable lessons. What’s your story? What do you think could help you move to an outside in approach? Signs you may have missed the concepts of Lean Startup: You can’t explain or describe the value you provide You can’t explain or describe the problem you solve You can’t articulate the market you serve Etc. Solutions, the how’s will vary: Gain meaningful user feedback -> how? Test and measure your assumptions -> how? Create a sandbox, not a black box, for innovation in your company -> how? Earlier adopters who pay for your solution = customer -> how? What does a lean culture look like? Idea: Apply design thinking to creating your processes and culture to support innovation
- Post presentation note: I am embarking on a new career path. I am studying to become a certified profession coach. If you visit my website, it may not reflect my current activities. However, there is contact information. I would be happy to discuss the ideas in this presentation if you need someone to bounce ideas off. Thank you again for the active discussion. Perhaps next Product Camp I can propose a session on how experts can benefit from coaching (without pitching )