This is a transcript of episode 215 of the Troubleshooting Agile podcast with Jeffrey Fredrick and Douglas Squirrel.
We’re joined by Jim Euchner, author of Lean Startup in Large Organizations, and discuss how to overcome the “antibodies” that big companies have against experimentation (and why those antibodies are actually healthy).
- Jim’s website
- Book url
- Lean Startup by Eric Ries
- Four Steps to the Epiphany by Steve Blank
- Alex Osterwalder, creator of the Business Model Canvas
- Clayton Christensen, Innovator’s Dilemma
Squirrel: Welcome back to Troubleshooting Agile. Hi there Jeffrey, and Jim!
Jim: Hey, Squirrel, good to see you again.
Squirrel: Nice to see and hear you again. Listeners of this podcast may not be aware that I had for a long time another podcast with Jim. So we have both Squirrel’s podcast co-hosts together. We’ve got Jim on for a very exciting reason, the topic of our podcast is always, ‘How do you innovate in both large and small companies?’ Jim has written a book coming out later this month on innovation in large companies, which is of interest to lots of our listeners. So congratulations Jim, do you want to tell us just a little bit about this book?
Jim: So the book is called Lean Startup in Large Organizations: Overcoming Resistance to Innovation.
Squirrel: Let me make sure I got that right, it’s about ‘lean startup in large organizations.’ So is this about gigantic startups?
Jim: No, it’s about making the principles of lean startup work in a large organization that tends to have priorities that can make innovation difficult.
Squirrel: I’ve been talking to lots of folks who have that challenge! What would someone having that kind of difficulty find in your book?
Jim: So I’ve done innovation in different contexts for decades now, and I’ve found that the thing that works best for new business innovation is lean startup. It’s been used very successfully in smaller companies and there’s a lot of information, verifiable track records using it for example with the government funded research in the United States, and how people have taken technical successes and move them toward new businesses. So it came out of the startup world, and people in large companies have tried to adopt the same practices because they see startups moving much faster, moving with more agility, getting to customers quicker. This book is to the questions they then end up asking: ‘Why can’t we do that? We’ve got resources, we’ve got people, we’ve got opportunity too.’ And the reason is that the very principles that lead to success with innovation induce antibodies inside the corporation. They create threats and fears and anxieties. Some of these are very legitimate fears. My book is about is trying to help you practice lean startup, understand the resistances that you’ll get, and in a constructive way minimize the fears and make progress.
Shared Observations of Friction
Squirrel: I love the idea of antibodies. That’s fantastic.
Jeffrey: Looking at the book, I found interesting that it looks like it’s the third in a trilogy here, where second was Eric Ries’s Lean Startup, which you seem to carry into large organizations. Of course, Eric’s book was like an application of Steve Blank’s Four Steps to the Epiphany. Is that a fair?
Jim: Yeah, that’s very fair. Also, Alex Osterwalder introduced the ‘business model canvas,’ which became a part of that. But Steve Blank I think, really started it. Eric Ries was actually one of his students. I got to interview all three of those guys on the way to doing this book, so I’m building on top of what they’ve done. They’ve also, I think, run into challenges as they’ve tried to make this work inside large companies. Steve Blank said to me that his first ‘A-ha’ was that a startup isn’t just a little version of a big business, that you need to manage it in an entirely different way. That’s where many of the principles of customer discovery and lean startup came from. Then his second big ‘A-ha’ was doing lean startup in the corporate context isn’t the same at all as doing lean startup as a ‘de novo,’ if you want to call it that. So he and I talked about that and his view as well was we haven’t really figured it out. Now, all I can say is by building on the work of other people, I think I was able to make it work at least in one corporate context, and in consulting with a few other companies carefully taking what works, and understanding what doesn’t. My view is people are resistant not because they’re resistant personalities, but because there’s actually a legitimate concern that they have, and until you listen to that and address it they’re going to be concerned about lean startup.
Jeffrey: Which I think is great and connects to what Squirrel and I talk about all the time: getting other people’s points of view. Both people are seeing real truths and you’re looking to not to dominate one or the other, but to bring what everyone knows together.
Squirrel: Shocking idea that if you jointly design, you might get new ideas and you might actually change your mind. Jim, I’m not sure all our listeners will know the principles of lean startup. Could you give us maybe an example or a picture of what is a lean startup model and then maybe say a bit about how you’ve modified that? How would that work in a large organization?
Jim: Sure, I break it into sort of two and a half groups of principles. The first is how you learn, essentially based on what they call the lean learning loop, other people would just call it a business experiment. You start with a hypothesis about something you don’t know about the business which is vital to its success. You design some sort of prototype to use to learn, you do the experiment, you learn, and you either pivot or persist. So one principle is the lean learning loop, and a paired principle is the pivot or persist decision. You go out in the world and learn something in a very focused way. You listen to what you learned, and then you either change the prototype, change the offering, change the channel, you change some aspect of the business model. It’s a learning process. Essential to that is some sort of prototype, which in the lean startup is a minimum viable product. It’s a product that can be used by some subset of the market to solve a meaningful enough problem to be worth using. In the practice that I’ve done, especially in physical product companies, it’s a minimum viable prototype. It’s something that you use to learn some targeted thing. Whether that’s ‘could we sell this through this channel’ or ‘is there enough supply at the right price of this raw material’ or ‘would the customers be willing to pay at a given price?’ It’s more targeted, but it’s all the same thing. There’s the first three: lean learning loop, pivot or persist, and the minimum viable product. That’s how you learn.
Squirrel: It sounds like large organizations would want to do those things. So what stops them? What are the antibodies?
Jim: With lean learning the main fear is a fear of chaos. I think people have the same fear with agile product development unless you’re used to a world with successive refinement. The orderly way is you do the the high level design, the detailed design, the implementation, the testing, and everywhere along the line you’re taking something you know you want and you’re you’re refining it until you have the final product, and you know where you’re starting and you know where you’re ending and you can measure against that. In lean startup, you have an idea ‘these are the customers we want to meet and this is the need we think we see,’ and then you’re iterating from there, and to people that can seem very chaotic. ‘When do I get to weigh in? Where are you going to end up? Is it somewhere I want to go? Is this going to go on forever?’ So there are fears of chaos, and a way that worked for me and I would advocate is to have a sort of hybrid innovation stage gate. So at each stage you’re doing experiments, it’s chaotic. But between them you have a clear deliverable that can be reviewed by people in a corporate setting, and it gives a sense that this is not uncontrolled. So the first thing you review is the customer value proposition. ‘Did we find something that customers really want? Do we have a need in the marketplace? Is there a willingness to pay? Who is the customer?’ The second is the business model. You look at alternative business models, take the risks out of them, and you end up with a validated business model. You’re not in the market yet. You’re not selling to real customers, but you’re what I call ‘with market.’ You’re doing experiments with real customers, not in your office. Then the final stage is incubation, where you’re learning ‘Does it work in the real world? Does it deliver the profit I expect? Does it deliver what customers expected? Are they buying it? If it’s successful, how do I scale it?’ So those three gates are in fact the next three principles of lean startup: the value hypothesis, the business hypothesis and the growth hypothesis. So you sort of unravel the lean startup hypotheses and you do them in a sequence, and within each one it’s very experimental.
Jeffrey: What I like is how you combine these elements of ‘here’s what we’re trying to do,’ with ‘here’s what our context of the larger organization makes difficult.’ You explain the source of resistance makes sense. The iterative approach you mentioned probably seems quite natural to people in small companies where you don’t yet have product market fit, so exploration and experimentation probably seems pretty normal. But in the context of a company that has established product lines and which is used to saying, ‘we’ve talked to our clients and we know if we build these features, we’re going to get this change in revenue. We have a roadmap for the next 6, 12, 18 months of exactly we’re going to deliver because we’ve essentially contracted with our clients about what they want.’ Delivery is very well planned with a systematic approach, and from there hearing this idea that we’re not sure what the result is going to be of months of work? It would be completely reasonable to respond ‘why? Why would we do this?’
Jim: Right. The reason you would do is because there are limits to what you can do to take your existing product line and just keep making it better. Clay Christensen showed at some point the product is as good as customers want it to be. Yeah, you could still make it better, but they’re just not going to pay you for that. I worked in the tire industry for a while, people keep making better tires, but we’ve gotten to the point that most people are pretty satisfied with a wide range of capabilities that are brought there. And that’s especially true because people are less concerned about breakdowns because they just have cell phones. The world has changed. If you’ve got an organization that’s heavily oriented around getting better and better along traditional vectors of competition, you can do it and you can predict it and you can you can win awards. But you may be winning the battle and missing the opportunity.
Jeffrey: For listeners who might not know, Clay Christensen’s Innovator’s Dilemma describes why innovation is difficult in established organizations, which is exactly the problem here that you’re aiming at.
Jim: Yes, exactly.
Squirrel: So the natural audience here would be executives somewhere in a large organization who want to overcome these antibodies and want to use techniques that shake them out of the linear growth they’re used to and let them experiment. Is that right?
Jim: I think that’s right. It’s also for practitioners, people who are now in organizations and are trying to innovate, and they’re frustrated by their context. Oftentimes that frustration turns into just griping about the politics, or about the resistance of people, or the culture, or whatever. In fact, you can have some influence on that by first understanding the context, and then and then putting in place structures or devices or tools or whatever to overcome them. So what I would say is that the people who are resisting you are probably doing exactly the same things that you would do if you were sitting in their seat. They’ve got their own objectives that they’re trying to meet, and they’ve got their own pressures that come from their management they are trying to to respond to. Many of them would like to help out. But if it undermines their function or makes them miss a key deliverable or something like that, they’re at risk.
Jeffrey: I think that’s great, you have a chapter on graduated engagement which is about this. I think it would be really useful for a lot of our listeners who want to understand the context they’re in and the kind of struggles going on if we pick up with that next time. What do you think about that?
Squirrel: Would you be willing to come back next week, Jim?
Jim: Sure, that sounds wonderful.
Squirrel: Excellent. Thanks, Jim and Jeffrey.
Jeffrey: Thanks, Squirrel.
Jim: Very good. Thank you.