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Scaling Lean Startup: Principles over Process

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Large organizations want to be like lean start-ups but they need to rethink how they hire, incentivize and manage their staff to become an agile organization, said Jeff Gothelf. Organizations should reward teams for making low-risk decisions based on what they can learn quickly and build in the value of learning in addition to delivery so that teams know whether or not they’ve built something that makes a meaningful difference to customers, and whether or not they’re even working on the right thing.

Jeff Gothelf, author, coach, workshop leader and public speaker, spoke about Scaling Lean at Craft 2017. InfoQ is covering the conference with Q&As, summaries and articles.

InfoQ interviewed Gothelf about possible challenges for large organizations when they want to be like a start-up, why organizations should value learning over delivery, how to create a culture of true experimentation and learning in large organizations, and how to ensure that humility gets sufficient attention.

InfoQ: What are the challenges when large organizations want to be like a start-up?

Jeff Gothelf: There are many. Here are the top three I come across when working with my clients:

  1. A feeling that "we already know what we’re doing" because of the scale of the company. The loss of what agilists call "the beginner’s mind" is prominent in companies. This is essentially the loss of humility. The belief that we can stop learning about our customers, their needs and how our products/services meet those demands stalls the innovation and progress of an organization.
  2. No appetite for risk. Most companies claim to want to be innovative and cutting edge, but the reality is that those activities are risky. Many innovation projects fail (or they should). Failure (i.e., learning what doesn’t work) is often not rewarded and in some cases penalized. Without an appetite for true experimentation and learning, most innovation labs, internal accelerators and "lean" teams are nothing more than innovation theater.
  3. Not realizing they are in the software business. Legacy orgs grew up in a time where technology enabled manufacturing and perhaps automated their back office work. Some embraced technology in the Web 1.0 timeframe seeing it as a new marketing channel and not much more. Today, if you seek to scale or operate at scale, you are first and foremost in the software business. This means that the way we manage our company must change. IT can no longer be treated as a silo (e.g., "The guys over there who make the website."). Technology has to permeate every way we work. This changes how we staff, assign work and incentivize the success of that work. This realization is rare in most large orgs.

InfoQ: Can you give an example of a large organization that dealt with these challenges effectively and started behaving like a startup? How did they do it?

Gothelf: No organization is executing this perfectly as far as I know, but there are pockets of success with banks like Capital One, ING and Barclays and, of course, digital pioneers like Amazon who embody this spirit even as their ranks swell into the thousands. At the root of their success was a leadership mindset that realized the world is changing around their legacy industries and that without rethinking not only how they delivery services in this digital reality, but how they do business, they’d slowly decline into irrelevancy. ING is a great example as they took their HQ-based employees and made all of them (3500 people!) re-interview for their jobs to see how well they’d fit into a software-first, agile organization. 40% of those people found new jobs either within or outside of the company. This kind of top-down show of commitment to change and new values is critical to success.

InfoQ: You stated that organizations should value learning over delivery. Why is that?

Gothelf: Learning informs teams, with evidence, what they should be working on and whether or not they’ve built something that makes a meaningful difference to customers. Our medium for growth and scale today is software. Software teams are not feature factories -- nor should they be managed like one. Their goal is not make an increasing amount of software at a reduced cost. Their goal is to continue to evolve and optimize a complex system. Learning informs teams on how to best optimize these systems -- which features to add, which features to redesign, which features to remove, how to best link them all together into a workflow that makes customers successful. Optimizing for delivery, without learning, leads to bloat, confusion and a reduction in customer value.

InfoQ: What can be done to create a culture of true experimentation and learning in large organizations?

Gothelf: Incentivize high-velocity decision making. This means that teams are rewarded for making quick decisions based on what they can learn quickly. They make smaller investments, take smaller risks and adjust course more easily because of this. In other words, we’re incentivizing learning more so than delivery. That’s the key.

In a Q&A on his new book Scaling Lean, Ash Maurya suggested that to enable true learning from experimentation we should remove "failure" from our vocabulary:

Breakthrough insights are often hidden within failed experiments. Most entrepreneurs, however, run away from failure. At the first sign of failure, they rush to course correct without taking the requisite time to dig deeper and get to the root cause of the failure. (...) The key to breakthrough isn’t running away from failure but (...) digging in your heels and asking why. The "fail fast" meme is commonly used to reinforce this sentiment. But I’ve found that the taboo of failure runs so deep (everywhere except maybe in Silicon Valley), that "failing fast" is not enough to get people to accept failure as a prerequisite to achieving breakthrough. You need to completely remove the word "failure" from your vocabulary.

InfoQ: How can organizations ensure that humility gets sufficient attention?

Gothelf: This has to come from the top. Leaders have to show that it’s ok to be wrong, to learn from your mistakes, to admit that in public and to be clear about how change will happen and how we’ll know it’s been effective. The more this happens, the more teams will feel empowered to seek increasingly more innovative solutions. More importantly, when this comes from the top it becomes part of the company’s culture. As employees see their leaders not afraid to admit they don’t have all the answers or that they made a mistake, they’ll be emboldened to do the same. This encourages greater exploration, experimentation and learning.

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