It’s been six years since Eric Ries first posted his thoughts on “the lean startup” in September of 2008. His early pontification of agile methodologies and rapid iteration helped us crystallize our approach to product design. Our CEO, Chuck Longanecker, recalls a time when Digital Telepathy was working intuitively in the lean model. “Build-Measure-Learn” hadn’t been coined but we had been practicing a similar, yet much simpler version of the methodology in our client services and product divisions.
We connected with Eric and found that the Lean Movement needed a central website to call home and he was starting to write a book. We figured mixing lean with UX design was the perfect solution and worked with Eric to create theleanstartup.com.
The Lean Startup has served as a playbook for DT and countless successful companies, including many of our clients. We are lucky enough to call Eric a friend and were super excited to catch up with him to pick his brain about the evolution of lean some 6 years later.
What does a successful business born out of the Lean Startup model look like? What are its defining characteristics that allow it to prosper?
Lean startups have to learn what works and what doesn’t work, and have to do that in an urgent way. There’s a determination to do something big and significant, coupled with the recognition that the change we want to see in the world is really important. We need a sense of urgency to find out which parts of our strategy are accomplishing that change and which ones are not. To do that, the company needs to be organized for cross-functional collaboration; you can’t just have everyone off doing their own thing. You may have a lot of learning going on in each individual function, but if you’re not integrating the learning across all the different parts of the business then it’s easy to get off track.
The other thing that I think is important to understand about lean startups is that they’re designed for growth. Our goal is to learn things that are really valuable so we can see our impact scale across the world. That’s a little bit tricky because our goal isn’t really just growth per se, because you can have growth with a ponzi scheme or a cancer. We want to have the type of sustainable growth that comes from having quality products that make customers’ lives better.
Once lean startups make the successful transition to a business, how do they maintain a lean approach?
That’s a great question, and it’s actually a little bit complicated. A lot of people who were really early adopters of lean startup found many of the concepts exciting and kind of obvious, like the idea of a MVP and testing metrics. At that time I was also talking about the discipline of entrepreneurial management, and the challenges that come with building that organization, even as you scale. I think a lot of people then were more or less really tuning me out. Many of them have come to me recently like, “hey, remember that thing you were talking about 3 years ago…”
Here’s the funny thing about Lean Startup: we can give you the tools to get started quickly and find product market space faster than you would have otherwise. But, if you want to continue to find new sources of growth and stay ahead of competitors, then you need to build an organizational structure and blueprint that allows you to do that over and over again.
How can a successful business adapt the lean principles? DT proudly uses lean practices, but let’s pretend for a second that we didn’t. How would you suggest we take it on post product launch?
You have to have true commitment to change at the highest level; the global CEO and all his direct reports have to really be on board with the way they want to see the company move. Here’s the crazy thing: That up-top commitment is absolutely necessary, but it’s only a prerequisite for action. It’s not going to actually create the change. If you want to create the kind of change of becoming lean, you have to incubate it and test it, experiment it at “small” before it can be large.
One of my very large clients in the industrial space started with just one product team before we rolled out changes across the global product portfolio. Only when we had a critical mass of individual success stories as a startup did the company say, “Ok, now let’s roll it out.” What was crucial was the combination of top – down, bottom – up, executive level evangelism and the accountability structures, coupled with the hands on coaching, and the ground floor actually making sure that these processes can work with the specific company culture.
Forget about all the jargon and the lingo–throw that out. Figure out what really makes sense for your company, and create your own jargon and language if that’s what you need. Test to make sure that the things that we, all the experts, are saying is true. And if it’s not, figure out what actually works for your business. That is the most critical part of organizational change.
There’s been a lot of talk recently about the intersection of Design Thinking and Lean Startup. How do you feel design compliments the lean startup method?
Design is essential to Lean Startup because design is the new basis of competition. Creating a delightful experience for customers is the true basis of value for any business. In those situations, incorporating design into the experimentation process is really important.
The challenge I think is that unfortunately a lot of designers have been trained to work in a silo. It’s like there is an intrinsic waterfall development process in which design happens. Companies take a design problem and hand it to a designer, and the designers go off and they do design thinking, rapid iteration, etc. The best design organizations I know think like a startup: they use MVP as a form of mock up and prototype, whatever it takes to figure out if this is what will actually work for the customer. But what happens is they come back to the company with what they found, and the company says, “Great. Can you please write down everything you learned in the world’s largest binder, and we will try to make that into a specification document that will be handed to the engineering team. Thank you so much for your service designers, you are dismissed.”
What happens is all that dynamic learning gets turned into a document which is totally worthless. It’s much too static and much too slow of a process, at odds with what it should be–a dynamic process to really understand what the customer needs.
How do you feel the Lean process changes from an everyone-in-house product team to a traditional Client/Agency relationship–is it possible to be lean in that relationship?
It is so simple that no one ever does it. I hear this from all kinds of agencies. Anytime there is a client service relationship, you have contradictory impulses. On the one hand the customer is always right. As a service provider, what do you do if the customer’s idea is a bad one? From the client’s point of view, they hired you to do this piece and they don’t want to hear back talk from you.
The solution to this problem is simply to create a cross-functional team across the client and service provider. This is more than the old school programming technique of having a customer representative sit with the engineer. This is actually about creating a cross-functional team that works together with unified budget, goals, deliverables, deadlines, and milestones, and who have joint accountability for the business outcome, including a stake in the outcome (which could be financial or nonfinancial). The team feels a sense of ownership; if this thing works it’s going to benefit all of us. It’s such a simple solution because it doesn’t cost more, it actually ends up costing less, and it creates a much more focused team and elevates the conversation away from specifications to business outcomes. The only problem is that it violates the billing relationship that most service providers are addicted to.
Lean Startup was written a couple years ago now. Do you think your thinking, your understanding of Lean Startup has changed?
I have a much more nuanced and sophisticated understanding of what it means. In the book I feel I rushed through some things that I’ve now realized were critical. I have the curse of every expert that people read the book and because I didn’t do a perfect job in explaining it to them, they come away with a false impression. Every time that happens I always think about how I could have done a better job.
There’s all these paradoxes in it: There’s long term vision that requires short term, immediate action; unlocking this creativity that feels very energetic in a scientific way, but so many people think that science requires a lot of formality; the big vision, small action and short term, long term paradoxes are two that cause big misconceptions.
If you were to write a part 2, are there any specific pieces you would revise?
You know I don’t think I’d want to revise the book. I feel like Lean Startup is a snapshot that shows the best of my thinking at the time. If I had to do it all over again, I’d feel like a lot of it would be lost, the raw impact of the first edition would be missing.
What I think about these days is how do we avoid the problem where founders who want to create a new kind of company wind up recreating an old kind of company. Every time I see that, I find it incredibly depressing because it’s such a waste of energy and it’s so devastating to the people who signed onto the mission to do something new.
Lately I’ve had this idea: I have been through a lot of high-growth startups in the past few years. They’re all very different businesses, very different technology stacks, very different customer segments, very different everything, but they have common problems because they built a common structure. I was thinking, “Why is the structure so similar company after company? If they’re trying to do something new, why do they continue to do the same thing?” And it occurred to me: the structure they are building is an idea in the founders mind of what they think a company is — a siloed organization arranged by function with departments, work flows from department to department, and there’s an accountability to key results by function. That’s all it is — an idea in a handful of people’s minds. If they had a different idea when they began to build the company and the structure, they would have built something different.
The fact that they have uniformity means that there is an opportunity to replace that with the same new process that allows us to build a whole new breed of companies that can unlock a tremendous amount of creativity and productivity. I’m still trying to figure that one out.
So, what is next for you?
So when I’m not doing all this stuff I’m actually trying to build a new stock exchange. I have a project called the long-term stock exchange. I briefly mention it in the book, and I’m trying to build it into a reality – an alternative to our current public market that would foster long-term thinking on the part of investors. So that keeps me busy.