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Applying the Lean Startup Approach in Enterprises

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Coming to decisions about which products to build or which features to add to existing products can be difficult. The lean startup approach can help to get insight into the needs of customers, and to build a sustainable business around a set of products and services that serves those needs. How can enterprises adopt the lean startup approach to become more innovative and competitive?

James Donelan wrote a blog post about do lean startup principles have a place in the enterprise? He starts his post with a summary of the lean startup approach: 

But the lean startup model, when you boil it down, simply says that when you launch any new business or product you do so based on validated learning, experimentation and frequent releases which allow you to measure and gain valuable customer feedback. In other words – build fast, release often, measure, learn and repeat.

He explains why it makes sense to apply the lean startup approach in enterprises: 

Lean startup engineering seems to work for consumer products. (…) But what if I’m building an enterprise product or platform? Can I move at the same fast pace? Absolutely. There are lots of product companies out there who have applied the lean startup model successfully including Dropbox, IMVU and Etsy. The engineering philosophy behind it makes total sense – move fast, build quickly, automate testing, validate your decisions through data, leverage open source when you can, build MVPs and get as close to continuous deployment as you can.

Earlier this year HBR published an article by Steve Blank: Why the Lean Start-up Changes Everything. In the article Steve points out that there is a need for enterprises to change the way that they do product innovation:

Corporations have spent the past 20 years increasing their efficiency by driving down costs. But simply focusing on improving existing business models is not enough anymore. Almost every large company understands that it also needs to deal with ever-increasing external threats by continually innovating. To ensure their survival and growth, corporations need to keep inventing new business models. This challenge requires entirely new organizational structures and skills.

Steve explains how applying lean startup can help enterprises to create valuable business opportunities, while using agile software development to iteratively develop new products and learn about their customers:

New ventures of all kinds are attempting to improve their chances of success by following [lean startup] principles of failing fast and continually learning. And despite the methodology’s name, in the long term some of its biggest payoffs may be gained by the large companies that embrace it.

(…) entrepreneurs accept that all they have on day one is a series of untested hypotheses—basically, good guesses. So instead of writing an intricate business plan, founders summarize their hypotheses in a framework called a business model canvas. Essentially, this is a diagram of how a company creates value for itself and its customers.

(…) lean start-ups practice something called agile development, which originated in the software industry. Agile development works hand-in-hand with customer development. Unlike typical yearlong product development cycles that presuppose knowledge of customers’ problems and product needs, agile development eliminates wasted time and resources by developing the product iteratively and incrementally. It’s the process by which start-ups create the minimum viable products they test.

Maxim Wheatley wrote about why large corporations should behave like startups. He states that enterprises need to change to remain competitive: 

As it becomes increasingly more accessible and affordable to start a company, large corporations face a very real risk of losing their advantageous positions. By maintaining their traditional models, companies self-impose slow and inefficient mechanisms to innovate and execute.

Enterprises can use internal incubators and ‘skunk-works’ divisions to generate new ideas and build prototype products to learn about their markets and the needs of their customer. To go from prototypes to products they can use “focused teams and dedicated leadership” as Maxim explains:

To scale this entrepreneurial approach, large corporations need to develop focused teams for all relevant components (i.e. marketing, web-development, public relations, business development, etc.) These teams should only focus on their own particular project, each project having its own “CEO” that would lead the direction and decision making of the project.

Maxim describes how enterprises can benefit from applying the lean startup approach:

By encouraging and systematizing an entrepreneurial environment, large corporations will be more able to unleash the creativity and innovative spirit of their entire work force. Not only would this model improve a corporation’s ability to rapidly and efficiently develop new concepts, it would also make the ability to innovate more equally (instead of the traditional “top-down” approach).

InfoQ did an interview with Brian Murray, Director of Enterprise Strategy at Yammer. He talked about how Yammer uses Minimum Viable Products from lean startup to test their customer hypotheses:

(…) we make small assumptions, we have hypotheses and we are able to test them quickly over weeks instead of months or years, and that way we can steer our ship and make sure that Yammer is directionally meeting the needs of our customers and that we are not working on something or delivering a feature that is ultimately not going to achieve the value that we are trying to create. 

Brian also explained why enterprises should consider adopting the lean startup approach:

Keep in mind that there is no "end date" to a good product. You should always be iterating because the demands of your market and your customers will always be changing. The pace of change is accelerating, so your product (and company) will always need to be evolving to meet that evolving demand. It’s important to keep that in mind and to realize that this is all a journey. It comes down to building a product that your end users really love and helps them do their jobs better.

In the blog post nurturing lean startup in the enterprise Lane Halley talks about how to apply lean startup in an enterprise. The lean startup approach is a different mindset for product development, as Lane explains:

Working in Build-Measure-Learn cycles requires a fundamental change in they way people think and work. Lean Startup changes the way decisions are made in the organization. We value evidence over personal opinion, learning from customers over collecting requirements and build products people actually want.

Lane provides several suggestions that can help you to create an entrepreneurial environment inside enterprises:

  • Small team with cross-functional skills
  • Focus
  • Embrace an experimental approach
  • Fast build-measure-learn cycles
  • Frequent interaction with real/actual end users
  • Many small experiments

Is your enterprise applying the lean startup approach? Which benefits are they getting out of it?

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