The Lean StartUp - 12 Innovate

Innovation in a company, regardless of size, is essential.

This Chapter begins as it ended. The importance of innovation is emphasised, as even established organisations must always find ways to create disruptive innovation. This is aligned with the fact discussed in previous posts that companies fail when they become complacent. According to the author, the structure of this is very important, since an established company should also have a startup team within the organisation that is responsible for innovation.

 

Accordingly, it is notable to say that this should be widely adopted, since the author makes clear that startups are both easier and need less capital to run. However, the company must make sure not to alter that capital. This is predicated on the fact that startup teams should be independent and autonomous in order to have an environment that is suited to experimentation. Additionally, as Ries points out, "I strongly recommend that startup teams be completely cross functional, that is, have full-time representation from every functional department in the company that will be involved in the creation or launch of their early products." This would provide a diverse skill-set to the startup.

Furthermore, the entrepreneurs working in these startup teams should have a personal stake in the innovations that they have created in order to provide them with the proper motivation to complete the task. 

 

This environment of experimentation was embraced by SnapTax, the startup team of Intuit that we looked at in Chapter 2, and they were calling this environment "the island of freedom". Some lessons learned from such an environment, called a "sandbox", include the fact that the innovation trying to be achieved by startup teams should be transparent. As Ries recognises, hiding these startup teams “from the parent organisation can have long-term negative consequences." In addition, in this sandbox, the startup team should not be required to get approval from another department for an experiment. However, it should be reporting to the established organisation whether the numbers we learned from innovation accounting indicate that it is heading for success or failure. This is aligned with the fact that just like a startup we saw in the Chapter on innovation accounting, these sandbox teams should be held accountable with metrics such as innovation accounting. Additionally, other principles in the Lean StartUp methodology apply. For instance, a startup team should always launch a minimum viable product. 

Correspondingly, a startup team within an organisation should function and operate in the following 7 ways:

"1. Any team can create a true split-test experiment that affects only the sandboxed parts of the product or service (for a multipart product) or only certain customer segments or territories (for a new product). However: 

2. One team must see the whole experiment through from end to end. 

3. No experiment can run longer than a specified amount of time (usually a few weeks for simple feature experiments, longer for more disruptive innovations). 

4. No experiment can affect more than a specified number of customers (usually expressed as a percentage of the company’s total mainstream customer base). 

5. Every experiment has to be evaluated on the basis of a single standard report of five to ten (no more) actionable metrics. 

6. Every team that works inside the sandbox and every product that is built must use the same metrics to evaluate success. 

7. Any team that creates an experiment must monitor the metrics and customer reactions (support calls, social media reaction, forum threads, etc.) while the experiment is in progress and abort it if something catastrophic happens."

 

Additionally, it is also advised by the author that the entrepreneurs of the startup team in the organisation should also be responsible for the growth of that product. Furthermore, it is critical that the parent organisation does not neglect the startup team, since a failure to construct appropriate infrastructure could then chase off potential and existing clients. However, if those entrepreneurs are not comfortable with the growth phase, but would rather create new products and disruptive innovations, then they should be allowed to do so and keep on investing in research and development (R&D). This is in line with an interesting discourse that also unfolds when Ries points out that being an Entrepreneur is a job title. In his own words: "In fact, entrepreneurship should be considered a viable career path for innovators inside large organisations."

Lastly, it is very important to state the fact that the Lean StartUp methodology identified in the book, should be followed according to the specific needs of the company. In other words, the principles must not be followed or adapted blindly, but rather with genuine knowledge of the specifications of the particular company and tailor those principles to that organisation.