Guest Post by Misti Yang, Writer for Lean Startup Co.
Editor’s Note: We wrapped up the 2017 Lean Startup Week in San Francisco just a few weeks ago, and we’re excited to share with you some of the best lessons learned in entrepreneurship and corporate innovation. Expect to read a new story each week straight from our keynote and breakout stages.
In an interview with GE’s Culture Transformation Leader Janice Semper during Lean Startup Week, Eric Ries remarked, “Listen, that's our specialty here. We try to talk to real practitioners about actual, real issues.” And the effort was reflected by the 140 speakers and mentors who took the stage and ran workshops over the course of the seven-day conference. We'll share the lessons we learned from these inspired leaders over the next few months, and give you a taste with these seven highlights from Lean Startup Week.
LESSON #1: Equip your business with a portfolio map and a 21st century org chart.
With industries from banking to transportation being transformed and, in some instances, undermined by new business models and technology, executives are smart to wonder, “Are we next?” To confidently answer no, co-founder of Strategyzer Alex Osterwalder told our attendees, “What you really want to do is work more like Amazon. … The reason Amazon [is invincible] is because they've put a system in place that allows them to continuously innovate.”
To do the same, Alex recommends building two things: a business portfolio map that recognizes invention as necessary and an updated organization chart. “You need a pipeline of tested and validated ideas,” Alex said. The pipeline starts by dividing your business into two distinct functions: innovation and execution. The innovation motto is “Fail fast.” The execution motto: “Failure is not an option.” The innovation function is dedicated to iterative search through experimentation. The execution function is dedicated to the day-to-day business.
To successfully support experimentation, Alex explained you must also create an org chart that mirrors the roles overseeing execution. For example, if a chief executive officer manages the daily operation, a chief entrepreneur heads up innovation efforts. “And the chief entrepreneur has a staff of chief portfolio manager, chief venture capitalist, and chief risk officer, right? Because these Lean Startup people, they do crazy stuff,” Alex joked. “So that gives us two different management structures for these two different portfolios.” Two particularly important roles include the chief venture capitalist, because the investment philosophy for invention is different than traditional finance, and the chief internal ambassador “who connects the two [functions] and builds bridges.”
LESSON #2: Forget innovation. Remember your customers, culture, and connections.
ING Group is an exemplar of supporting continual improvement, so it may be surprising that their Chief Innovation Officer Ignacio Julia Vilar told the Lean Startup crowd that “innovation” is “a little bit [of] a buzzword.” So, ING has redefined the I word. “And to be honest,” Ignacio shared, “the first thing that we said is what it's not about. And innovation is really not about gadgets.” Instead, ING has adopted a company-wide focus on three Cs: customers, culture, and connection. It’s “creating something really useful for the customer that is solving the need of the customer.” And to do this, ING has had to create the right culture and sometimes connect with outside fintech companies.
To support the three Cs, ING has also developed their own iterative practice named PACE. Describing the development of this methodology, Ignacio explained, “We just sat down together and said, ‘Well, let's look at what we're doing. … Let's see what works well, what doesn't work well for us, for our organization, for our culture.’ We tried to define the best for us, and then we started practicing.” The result is a combination of design thinking, Lean Startup, and Agile Scrum, and Ignacio’s innovation team includes 25 coaches who train employees in PACE best practices. To “embed this in the organization,” the company has created PACE Everyday, “a simplified version…to force our organization to always start with what is a problem that we are trying to solve and to test it and to test it in a real way.”
LESSON #3: Avoid these three hiring mistakes.
When it comes time to grow your team, Jeff Jordan and Eric pointed out three hiring mistakes to avoid.
First, do not hire someone just because they have the domain expertise. You want to be sure that they can work with the resources you can provide in terms of staff size and budgets. In other words, be sure they are ready to work at a startup. Jeff elaborated, “You want to tee [your hires] to the state of the company.” For example, don’t court public-ready CFOs when your financials aren’t even on QuickBooks yet.
Second, don’t simply hire your buddies. “You’re kind of looking for founders,” not friends, remarked Jeff. “If you know the true story of any [startup], the early employees are every bit as entrepreneurial, every bit as dedicated … as the true founder,” Eric seconded.
Lastly, question any hiring decision based on “culture fit” alone. While Jeff and Eric agreed that company culture can be powerful and effective, it can also result in a homogeneous company with unexplored opportunities and weaknesses. Eric recounted, “I was just in an interview where someone was saying, ‘I don’t want to hire this person. They’re qualified. I liked all their answers, but my Spidey-sense is tingling. I didn’t feel like they’re a fit around here.’ The human brain is really good at producing intuitive leaps, but we know from the research that those leaps can be biased by irrelevant characteristics. Whenever you hear, ‘They’re not a fit,’ you have to look really carefully.”
LESSON #4: Get creative with your MVPs.
In an interview with Eric reflecting on their work together at GE, Viv Goldstein and Janice Semper, co-founders of GE’s FastWorks, demonstrated that even a hundred billion dollar company can learn from creative, low-cost MVPs. When the CEO of GE’s Sustainable Healthcare Solutions business in India called Viv one day and said, “We've got a problem selling our neonatal incubator,” Viv explained: “We started by asking what is the customer problem we're trying to solve for? What is the impact that our customers need? And what are some of the challenges they're facing with the product right now? Not, ‘what's the technology?’ In GE, technology used to be our lead, and instead we reframed that and started with the customer.” The team discovered that medical professionals in rural clinics in India needed a more suitable and convenient way to place the babies in the incubator, and needed incubators that could hold multiple babies while still providing the right amount of heat and light to each baby and withstand the one type of disinfectant clinics could afford. The first MVP was “a shoebox and a doll.”
When confronted with a “safety valve hydraulic thing,” Eric remembered that “all the conversation in the room was about the technology of hydraulics.” But, “the ultimate MVP they had involved sending a team member to go sit on the rig … to find out what the actual safety problems were.” What did the rig-sitter find? The problem “had nothing to do with hydraulics and everything to do with 29 kinds of human error.”
And, in response to employees’ desire for more continuous feedback from their manager and peers, a GE team had built a simple MVP for enabling real time 360 feedback; but when they tested the tool, they found that absolutely nobody used it. “What we discovered is that it had absolutely nothing to do with the tool,” Janice shared. Instead, employees “were like, ‘Well, I don't know how to give my peer feedback. I've never done that before. I can't really give my manager feedback. How is he or she going to take that?’” The team learned that they didn’t need to build a better product. It “was much more [about] training around the behavior.”
LESSON #5: Build-measure-learn with an innovation thesis.
According to Tendayi Viki, 54 percent of companies struggle to bridge the gap between innovation strategy and business strategy. He suggested starting by adopting a build-measure-learn loop for your innovation strategy. Here is the step-by step process that he outlined in his presentation:
First, sit down with your team and develop a point of view on where the world is going. Ask “what are the trends that are impacting our business? And what are the things that are coming up in the future that we think we need to respond to? What products in our portfolio are declining that we need to fix?”
Then, decide how you will use innovation to respond to these challenges; this is your innovation thesis. Tendayi explained, “It's actually based on the venture capital notion of investment thesis. If you're a venture capitalist, the whole time you're getting pitched a lot of ideas by a thousand people. You can't invest in everything, so you have to make a decision about the kind of things you invest in and the kind of things you don't invest in.”
Once you have a thesis, every project you support becomes an experiment testing it, and you should review it on a quarterly or biannual basis and change it as needed. This approach also structures your budget decisions. “Not a single dollar moves from the company's bank account into some project except when it’s a specific expression of [your] strategic intentions. There's no let's-see-what-happens dollar. Every dollar moves as an expression of [your] strategic intentions.”
LESSON #6: Fall in love with your problems, not your solutions.
“I always thought, ‘How are we going to affect this organization whose heritage is world-class innovation?’ reflected David Kidder during his interview of Procter & Gamble CTO Kathy Fish. Reflecting on how Lean Startup methodologies have changed P&G, Kathy shared that “when you fall in love with the problem and not the solution it opens your mind up in a really different way. So we would typically fall in love with the solution, which would always be a product … As you fall in love with the problem, you start seeing business model opportunities; you start seeing marketing and education opportunities in addition to product opportunities, and it's just much, much richer.”
Focusing on the problem first has also proven cost-effective. Before working with Lean experimentation, the company was “spending a lot of money sometimes before we really should have,” Kathy said. “We've now shifted to a more metered funding approach . . . And we're finding on some of our biggest programs that we're learning faster; we're getting to the consumer a lot faster; and we're spending 25 to 50 percent less money along the journey. It's amazing.”
LESSON #7: Create peak moments.
While Kathy encouraged companies to embrace their problems, co-author of The Power of Moments Chip Heath asked the Lean Startup crowd to create peak moments, or moments that evoke an emotional response. To illustrate his point he told the story of the second highest rated hotel in Los Angeles on TripAdvisor, the Magic Castle. Number three is the Four Seasons. The Magic Castle’s secret is not their shoddy bathrooms, but their butler popsicle service, free candy at the front desk, and free laundry—peak moments.
In Chip’s “toolkit for creating a happy face” are four elements. The first one is elevation. “Elevated experiences are experiences that bring us up in sensory experience to something that rises above the day-to-day.” Chip’s examples included fireworks, sunsets, and cupcakes. The second element is insight. Chip shared the story of the executive who displayed the 424 kinds of gloves his company was buying to help his senior leadership team realize they had a procurement problem.
The third peak element is pride, and finally, there is connection. John Deere redesigned their employee orientation day to achieve both. The welcoming process starts with a personal text before your first day and includes a welcome email from the CEO letting you know that “on your desk is a model of the very first patented plow that John Deere manufactured" 175 years ago. “There is not better leverage than an employee orientation day at John Deere,” Chip said. He advised creating peak moments when you are bringing people onto a team, when you need alignment on direction, when you need people to get along, and when you need to show people how to act.
From startup hiring to enterprise alignment, Lean Startup Week offered learnings for a wide range of entrepreneurial thinkers, but as Eric noted in his opening remarks, one theme was clear: “We have to be thinking about how do we sustain our innovation into the next, and the next, and the next generation. In order to do that … we need to adopt the idea of the startup as an atomic unit of work.” We need to keep learning from the startup way.
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This was originally published on Lean Startup Co.'s blog.
