While Lean Startup methodology is employed most often by high-growth startups, the iterative “build-measure-learn" process that makes it so popular among tech entrepreneurs also makes it a great framework for corporate innovation teams to test concepts. That's why corporations like GE, ING, and Samsung, are adopting the methodology in an effort to operate more like high-growth startups.
If you work in a corporate environment and are seeking ways to improve revenues, the product development cycle, or the culture of innovation in your company, Lean Startup may be an effective way to reach your goals. See how other businesses are using it and when it may not be a fit for your organization.
Save Money in Product Development
Product development is an inherently customer-centric process, since products are developed to solve customer problems. As a company grows, it can start to forget to listen to and talk with customers — when you're zooming along with work, stopping to ask for customer feedback can seem like a waste. But as it turns out, this central activity can save companies millions of dollars in product development — if they stick with it.
GE, founded in 1892 by inventor Thomas Edison and formerly known as General Electric, may know that story better than most. With revenues of $140 billion last year, the company is still known for its industrial prowess, but internally, it's looking to build products faster, cheaper, better, and smarter.
That's why GE is so excited about FastWorks, an initiative "designed to get GE acting more like a 21st century startup," as Bloomberg describes it. Based on the 2011 book "The Lean Startup" by technology entrepreneur Eric Ries, the program is focused on customer validation, building dedicated teams, and iterating upon a minimum viable product.
GE launched FastWorks by training 500 business leaders in the Lean Startup methodology, building a team of 150 coaches who advise managers, and launching hundreds of FastWorks projects using a "pitch" process led by "growth boards" who approve projects and allocate resources. The pitch process is similar to pitching on the TV show SharkTank, some who have experienced it say. A hopeful manager with a project idea pitches the growth board in her business unit, gets feedback on the idea, and either an approval or rejection. Rejection isn't the end of the line, though —many ideas take multiple iterations before they get the green light. This could include reworking the prototype plan, cutting projected costs, or anything the board finds necessary in order to have a winning project.
Since launching FastWorks, GE has been able to save millions of dollars on individual projects, simply by incorporating customer feedback early and often. In the past, it may have taken 5-6 years to get a product out of the door, while sometimes resulting in dismal user feedback. Today, the same product can launch in a year, with a dozen iterations based on user feedback.
GE has succeeded in cutting development costs by 60 percent in one of its divisions and reducing time to customer validation by 80 percent in another. The company is now on its way to fully rolling out the program to 200,000 employees in 175 countries.
Jeff Schnitzer, general manager of GE's Critical Power business, suggests starting your own Lean Startup innovation experiment by partnering with truly innovative customers, those who are "clearly paving the way of the 'new normal." Work together to define a problem, build a quick solution, and iterate from there, he says.
Find Partners and Accelerate Internal Growth
By having internal teams and external startups go through Lean Startup in its accelerator, the Dutch banking and financial services corporation ING is also setting itself up to find product solutions and potential partners faster than it could using traditional product development and business development methods. Based in Amsterdam, the ING Innovation Studio is a six-month FinTech accelerator program that takes startups and internal ING teams from ideation to minimal viable product with customers at the center of the equation using Lean Startup methodologies.
ING sees the accelerator as a way to quickly test new business model ideas from internal teams, while also identifying potential external partners. It is an example of melding corporate intrapreneurs with external entrepreneurs for a whirlwind of collaboration.
"Make sure you know what you want to get out of [a corporate accelerator]," says Daniele Dondi, co-founder of the ING Innovation Studio in a recent interview on the Inside Outside Innovation podcast. "We didn't want a solution at the end of the cycle. We wanted to start a collaboration, and therefore, we scheduled the six months with a lot of interaction between internal business units and startups," At the end of the second cycle, two out of the three external startup teams announced official partnerships with ING and the three internal teams were able to showcase great products or learnings from their validation experiments, Dondi explained in a blog post.
So, What Could Go Wrong?
Success seen around the world with Lean Startup could be why even the most top-down corporations, including electronics juggernaut Samsung, are clamoring to announce new "startup" initiatives. In a recent "Startup Samsung" ceremony, the 300,000-person company vowed to encourage flatter management styles, short-term self-employment breaks, and intrapreneurship projects.
Samsung, GE, ING, and many others are taking risks to boost internal innovation through Lean Startup principles, inspiring everyone else to get started. But when is Lean Startup a mismatch?
It comes down to understanding and willingness to change, writes Hans Balmaekers, director of the Intrapreneurship Conference, an international corporate innovation conference, in a blog post featuring five corporate innovation experts on the struggles of adapting Lean Startup to corporate environments. The corporate innovation experts identified five key pain points corporates encounter when trying to implement Lean Startup, all five are a lack of:
- Eco-system thinking
- Understanding that Lean is a mindset, not just a process
- Willingness to really change
- Saying goodbye to traditional corporate thinking
- Implementation at all levels, especially management
Lean Startup isn't a wholesale change to "acting like a startup," but rather an adaptation of entrepreneurial behaviors. If your corporate may suffer from any of the five issues above, Lean Startup methodology may not be a fit for your company until you are able to address them.
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