Category Archives: Agile

Leading Culture Change Means Changing Yourself Before Others

Leaders today are inundated with reasons to transform their organizations in search of better outcomes. New market entrants erode profit, competitors seem to be always moving ahead, all while customers seek higher quality and cheaper sources of service.

The pace and appetite for change is exhausting. Yet comparatively, it feels like your organization is sinking deeper into the mud. “We want to change but the culture here is too difficult to change”. It’s a frequent remark we have all heard and said but what does it mean?

Culture is the original business meme. Its meaning and usage are as abstract and intangible as the word itself. “If we just fix the culture we will be successful”. A statement full of positive intent yet lacking a clear directive or step to take.

A new culture is not a browser plugin. Leaders cannot simply select an extension, download and install it from the Web. Nor should, leaders expect the update to be applied only to others and not to themselves.

The prevailing thinking is the need to change people’s mindset. The belief being if we tell people to think differently, they will act differently. All hands meetings are called, PowerPoint decks are prepped and an executive tour is scheduled to rally the troops for the mission ahead. A one, maybe two day training session is delivered and the metamorphosis begins. But it does not.

Culture is our behaviors. It is the actions we perform. The way we talk, and treat one another. The way we behave reflects the values and expectations we have of ourselves, and of one another.

The single most important action of any leader is to role model the behaviors they wish to see others exhibit in the organization.

Actions are what matter. Not talk

Culture change does not lead with words, it leads with action. By changing the way we behave, our actions begin to change the way we observe, experience and eventually see the world. By seeing and experiencing the world differently, it changes the way we think about the world. People do not change their mental model of the world by speaking about it, they need to experience the change to believe and feel it.

John Shook: NUMMI

John Shook’s Change Model, http://www.lean.org

John Shook was the first American manager to be hired by Toyota. He moved to Japan without knowing a word of Japanese, just a desire to immerse himself in the organization for a prolonged period of time to learn the Toyota Production System by doing it.

What he observed was not a group of managers telling people what to think, or how to perform their work. Instead he experienced the deliberate practice of experimentation, reflection and improvement by all employees in the entire organization. Toyota had developed a set of behaviours that advocated continuous learning and adaptation to new circumstances.

What Toyota understood is that culture and circumstance is always unique and changing, and to manage change one has to be ready to learn, adapt, and apply new changes as they are happening.

A Journey for Leadership and Behavior.

Shook’s model highlighted that transformation starts from our behavior. Therefore, to start changing culture we need to change how people do their work.

In our experience a very effective first step for a major transformation is to start with a set of hand-picked initiatives that do things differently. We did this together with the engine manufacturing company Wärtsilä. Wärtsilä is over a century old manufacturing company that serves roughly half the ships in the world and has five billion dollar revenues – not a typical Silicon Valley startup.

To kickstart the transformation, leadership provided sponsorship and support to four cross-function teams to explore new ideas and ways of working. The purpose of these teams was to bump into and make visible the cultural glass walls that so often had stalled and hindered other initiatives.

Rather than have the four teams take courses or workshop ideas, the underlying idea was to have four teams experience a new way of working for real. This was ensured by selecting the top strategic innovation initiatives for the teams focus on.

The second step was to create an environment to cultivate the new ways of working. In other words, we made the workspace inspiring, different, and importantly, we let the team personalize it to make it their own. We provided guidance, tools and innovation frameworks for the people to leverage.

By embracing Shook’s philosophy, it was extremely important that the teams had a mandate to work differently and to really experiment with new ways of working, new behaviour. The mandate created a psychological safety net for them. Failure is expected when working creatively and trying out new ideas, and therefore, it was critical to enable safe failure and learning opportunities.

To further facilitate the cultural transformation, the teams broadcasted their intermediate results in demo sessions to the whole company. This turned out to be both popular and effective in further spreading the transformation by showing concrete results rather than talk of trying things differently.

blog-culture

In the demo sessions the audience gave scores to the teams, and the winning team always won quality craft beer. The happy winners of demo #1 from left: Shelley, Henri, Jan, and Martti of Wärtsilä.

Throughout the eight week program the teams fully experienced working in new, interesting and unforeseen ways. Rather than just reading a book or taking a course on lean, agile and design thinking the teams had to apply the new methods and mindset while creating meaningful outcomes for the business. For the individuals participating in the program it was an extremely effective way to safely learn new ways of working, and perhaps more importantly, to learn the limitations of the former company culture.

Jump-starting the transformation today

What did we learn from running this, and similar programs?

First, jump-starting the cultural transformation with a couple of spearhead projects, the right people and leadership support is very effective. The projects will demonstrate that the company’s own people can achieve the desired results and business outcomes with new ways of working.

Second, the people who have experienced new ways of doing are transformed. Applying the new behavior into real projects transforms their thinking about innovation and the whole company, which makes them the key people in spreading the new culture.

Finally, choosing the people to the spearhead projects is critical as those people will become the ambassadors for a bigger cultural change in the organization. They will tell the stories others will listen. They will introduce the new ways of working to others, as they are the people who know best how the new thinking applies to your company. They are the first penguins to dive into the cold water, swim and survive.

However, none of this matters if you, the leader of change, don’t change as well. As the leader of this change you are penguin number zero: the very first person who has to change your behavior. You need to be transparent about your vision, words, and actions. You need to work according to the new culture you wish to see.

This post was co-authored by Risto Sarvas and I.

I’m partnering with Futurice to host executive roundtable sessions in London and Berlin, as well as an event in Helsinki, ‘Lean Rocks’, all during February. Futurice and I will be offering bespoke training and workshops with clients in Helsinki during February, if you’re interested in learning more about this please contact me or Timo Hyvaoja

Stop Typing. Start Testing.

dsc04714“If I knew where all the good songs came from, I’d go there more often”, so said Leonard Cohen when asked how he wrote classic hits like Suzanne and Hallelujah. Formulating the ideas behind timeless hits is not an easy task – serendipity, stimulation and skill all equally play their part.

Yet in large organizations, a lack of ideas is rarely the problem. Business leaders and executives are inundated with suppositions, proposals and pitches on how to increase, invent and imagine new revenue streams for their organization. Most often, the biggest challenge is not conjuring up the concept… it’s killing it as quickly and cheaply as possible.

In The Principles of Product Development Flow, Don Reinertsen’s research concluded that ~50% of total product development time is spent on the ‘fuzzy front end’ i.e. the pitching, planning and funding activities before an initiative starts formal development. In today’s fast paced digital economy the thought of spending half of the total time to market on meetings and executive lobbying with no working product to show isn’t just counterproductive and wasteful – it’s ludicrous.

lean_enterprise_master_workshop-002

 

Furthermore, the result of all this investment is often an externally-researched, expensive and beautifully illustrated 100-page document to endorse claims of certain success. The punch-line presented through slick slide transitions is “All we need is $10 million, two years, one hundred people and we’ll save the business!” Science fiction, theatre and fantasy rolled into one.

What is really needed is a systematic, evidence-based approach to managing the uncertainty that is inherent at the beginning of any innovation process. Our purpose when commencing new initiatives is to collect information to help us make better decisions while seeking to identify unmet customer needs and respond to them.

New business possibilities are explored by quickly testing and refining business hypotheses through rapid experimentation with real customers. Our goal is to perform this activity as early, quickly and cheaply as possible. Lengthy stakeholder consensus building, convoluted funding processes and hundreds of senior management sign off sessions is not.

Decisions to stop, continue or change course must be based on the ‘real world’ findings from the experiments we run, not subjective HiPPO (Highest Paid Person’s Opinions) statements supported of how they’ve “been in the business for thirty years and know better”.

Imagine a world without costly executive innovation retreats, and where the practice of pitching business cases at annual planning and/or budgeting cycle meetings is extinct. Instead, a similarly sized investment is assigned to small cross-functional teams to explore given problems, obstacles or opportunities throughout the course of a year. Over a short fixed time periods a team creates a prototyped solution to be tested with real customers to see if they find it valuable or not.

We are investing to reduce uncertainty and make better decisions. You are paying for information. The question is really how much do you want to invest to find out?

In his book, How To Measure Anything, Douglas Hubbard studied the variables that hold the most information value when making investment decision is software projects. The results showed two important insights, how much a project cost and how long a project is going to take held little significance in terms of understanding if a project would be successful or not. What really matter was (1) will the project be cancelled, and (2) will anyone actually use it.

Now, let’s compare how investment decisions are made in the traditional and experimental worlds.

A traditional business case is a set of untested hypotheses and assumptions, backed up by subject matter experts, case studies and market research. In an experimental approach to innovation, real data is collected from working product prototypes that have been tested and informed by feedback from real customers. Which of these strategies do you believe will most effectively provide answers to Hubbard’s most valuable variables?

Similarly, what happens next? In a traditional world once a business case is signed off, detailed requirements are created and a project initiated to build, integrate, test and hopefully, release the entire recorded product requirement backlog – only once all the requirements have been captured, built and release will we find out if our customer will use any of it. With an experimental strategy, we already have validated or invalidated our early working product prototype upon which we can stop, pivot and/or immediately build new features and enhancements based on the customer feedback we collected through our early testing cycles.

Finally, and the most telling and critical piece, the most expensive way to find out if a product works is to build the entire product and then release it. The key to rapid experimentation is not to prove that all our ideas are winners, but to kill losing ideas early to cut out wasted effort, time and further poor investment.

Summary

Not all our ideas will have a positive impact on the business. By testing early and often with the real people we are designing for – our customers – we can use their feedback to make more informed and evidence-based investment decisions for the future success of our business.

Like Cohen said, “I think you work out something. I wouldn’t call them ideas. I think ideas are what you want to get rid of… [they].. dissolve into deeper convictions”.

Next time you have a new initiative in your organization remember these six principles:

  1. Stop typing documents. Start testing with real customers as soon as possible.
  2. Our mission is to discover as quickly and cheaply as possible the most valuable information to base further investment decisions on i.e. will the project get cancelled or will anyone use it. Optimize for this.
  3. Define success before you start experiments. You need to hold yourself accountable to the results of your experiments to make decisions to stop, change course or continue with your activities. Doing that after the fact isn’t an experiment. It’s “Experiment Theatre“.
  4. Form small cross-functional teams and equip them to explore problem domains at speed.
  5. When uncertainty is high favour shorter, faster feedback cycles to generate information to make the next decision.
  6. Remember true progress is as more about killing bad ideas early than proving you’ve discovered the next unicorn idea.

References

Leonard Cohen: ‘All I’ve got to put in a song is my own experience’

How To Measure Anything, Douglas Hubbard

The Principles of Product Development Flow, Don Reinertsen

10 Principles Of Business Transformation

Transforming organizations, teams or even yourself is challenging. There’s no one-size fits all method to achieve success. It’s a combination of hard work, persistence and patience.

The most successful enterprises are continually experimenting to learn what works and what doesn’t. They focus on meeting customer needs by clarifying goals, shortening feedback loops and measuring performance based on outcomes, rather than outputs.

To become a high performance organization you must develop the capability to continually adapt, adjust and innovate. This requires a deliberate practice of experimentation and learning.

But experimentation alone is not the answer. To enable and empower decision-making at scale, team members need a framework of reference to align their actions to the organization’s mission. The mission is the statement of purpose for what your organization stands for. The principles help individuals and teams to make independent decisions at speed that are aligned to the organization’s mission, valued behaviours and desired culture. It is not a set of explicit rules or command-and-control statements of how people should operate.  

Based on my own experiences I’ve distilled a set of 10 Principles Of Business Transformation to help businesses on their journey to become high performance organizations.

Think BIG, learn fast, start now

Every great mission needs a compelling and aspirational vision. The clarity with which you communicate the vision gives people purpose, direction and constraints as to why the initiative they are taking part in matters. Thinking BIG means challenging assumptions of we believe may even be possible.

For example thinking BIG at SpaceX is, “SpaceX designs, manufactures and launches advanced rockets and spacecraft. The company was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to live on other planets.

However a vision is a theory, a set of beliefs and untested hypotheses that must rumble with reality.

In the information-age the organization that can most effectively accumulate new knowledge, and leverage that insight to make better decisions wins. Organizations with the highest quality information make the best quality decisions. To accumulate new knowledge we must experiment. By experimenting we learn. Whoever learns the fastest wins.

Be uncompromising with the BIG vision, but develop methods to learn fast what works and what doesn’t. Start testing the BIG idea with real customers and users as quickly as possible – even when it’s feels early and uncomfortable.  

Secure mandate, sponsorship and support

You will only be as successful as the level of leadership in your organization that gets behind the initiative. If there’s no support in the team, the leadership or executive group, then forget it. That said, making innovation only the CEO’s job isn’t going to cut it either.

If you want to be a leader of change it’s your responsibility to create the space, support and sponsorship to enable experimentation to happen.

Do this by focus on outcomes not outputs. Define constraints, limit investment, or risk thresholds to create safe-to-fail experiments. This creates a sandbox for learning and will result in demonstrable evidence of progress. It allows teams to explore uncertainty within the bounds of recoverable situations, reducing learning anxiety and paralysis from the fear of failure.

“If the highest aim of a captain were to preserve the ship, they would keep it in port forever.” – Thomas Aquinas

Right people in the right place

Putting change-averse people into a high change environment won’t break the system, it will break the people.

Similar to Geoffrey Moore’s model for technology adoption, there are all types of mindset in an organization towards change, from innovators to laggards.

Geoffrey Moore: Crossing The Chasm

Geoffrey Moore: Crossing The Chasm

Be aware of people’s natural bias when it comes to building teams capable of dealing with extreme uncertainty and frequent iteration. High performance teams start small with a cross-functional representation of business, technology and design. This is the nucleus to build a team around.  Be deliberate about how you form the team and the type of work – be it highly exploratory or otherwise – they focus on.

Act your way to a new culture

John Shook was the first American to be hired by Toyota. He moved to Japan in the mid-70s without knowing a single word of Japanese, only a curiosity to learn about the Toyota Production System. What he observed contradicted everything he had seen and heard in Western organizations. The Western belief was if you told people to think differently they would suddenly act differently.

What Shook actually experienced at Toyota was that changing the system of work is what led to a change in the way people behaved. People didn’t think their way to a new culture, they acted their way to a new culture. This is what SCRUM, XP and many other agile methodologies actually try to enforce – a change in the system of work using iteration, ceremonies, reflection and cross-functional teams to change how people interact and ultimately behave.

John Shook: NUMMI

Sadly many organizations still believe that sending staff on a one or two day certification course can suddenly make them agile, adaptive and aware. Often the result is people blindly following a methodology of what to do without ever understanding why they are doing actually it.  

Build the right thing, then build it the right way

Working software is an experiment, just a really expensive one.  

Unfortunately building the entire solution and only then testing it with customers is still the prevailing model of operation for most organizations.

One of the key components of the Lean Startup movement championed by Eric Ries is to encourage teams to test their business hypothesis as quickly and cheaply as possible. This is achieved by creating a Minimum Viable Product (MVP) – a basic early working example, prototype or experiment to test the area of greatest uncertainty related to the hypothesis.

lean-enterprise-mvp

Diagram inspired by Jussi Pasanen, with acknowledgments to Aarron Walter, Ben Tollady, Ben Rowe, Lexi Thorn, and Senthil Kugalur

A MVP approach enables you to fail fast and cheaply, while also gathering valuable data from the experiment. As you prove or reject different hypotheses, you build confidence that the problem/solution fit is on the desired path. You can then invest more to improve the fidelity of the solution, widen the marketing reach and/or enhancing the solution based on the data gathered — essentially increasing your exposure to risk in a controlled manner.

Deliver small, fast and frequently to build momentum

One of the most important aspects of agile and lean methodologies is working in small batches. Reducing the size of work batches enables us to optimize for end-to-end throughput of our system of work. This allows use to gather data against the outcomes we achieve and compare them to our initial expectations of success.

Secondly, the data we collect becomes inputs for reflection, decision-making and adapting strategies. How are we moving toward the desired outcome? Should we adapt the objective of our original mission? It’s how doing and learning enables better top-level decision making, not just in the execution of a given solution. The longer we wait to collect data to inform our next steps – especially when operating in extreme uncertainty – the higher the level of risk we are exposed to.

The best way to build trust with stakeholders is with frequent demonstrable progress. Showcasing small, completed pieces of work fast and frequently creates feedback mechanisms, trust and belief that team members can deliver.

Build in feedback loops with customers and users

Customer testing should be for breakfast, not dessert. If you’re not testing with customers as soon as possible to understand if their problem really exists and that your solution addresses it, then you’re wasting valuable time, effort and resources.

The best people to provide feedback on your hypothesis are real customers – not your boss, or colleagues, or even team members. Regular and direct customer feedback is your  guide towards fit, purpose and success. Make sure you design a system of work that gives the team frequent opportunities to test and incorporate customer and user feedback.

Following a recent ExecCamp, one of the participating executives sent me the following note:

“One of the team came to me today to ask to review the new designs for a system we’ve been developing. After ExecCamp the response was obvious to me… “I’m not the person you need to be testing with. The real people you need to talk to is our customers. Go find a few of them and get their feedback for what works and what doesn’t.”

Adapt your approach based on validated learning

Lean and agile aren’t just about experiments to create new knowledge, they’re about using that knowledge to make better and more informed decisions on what to do next.

Many experiments will ‘fail’, but even these will result in validated learning. Validated learning means that we test — to the necessary degree of precision and no further — the key assumptions behind the hypothesis to understand whether or not it will succeed, and then make the decision to persevere, pivot, or stop.

lean-enterprise-learning-loop

By defining and communicating what success looks like before we start we create an accountability loops to decide  if and when our initiatives are getting traction based the outcomes achieved.

Organizations that fail to define success before experimenting get caught in Plan->Do cycles, only validating outputs. Their success is on time, on budget, on scope without any learning mechanism to ask the questions; Did we achieve the outcome we expected? Are we getting better?

Demonstrate evidence for future investment decisions

Writing a well-crafted business case may secure initial funding, but it has little impact on whether your initiative actually succeeds or fails. As Douglas Hubbard documented in his book How to Measure Anything, the two biggest risks to any new initiative are not how much it costs and when will we deliver it but reducing the concern that the initiative will get cancelled and will our customers or anyone use it?

What’s important when making investment decisions is to take an evidence-based approach to ongoing funding by creating an evaluation framework to manage and prioritise future investments.

The cadence of iteration and review should match the level of uncertainty. For example, in financial markets traders get continuous and virtually real-time feedback on how the market is adapting in order to make further investment decisions and improve their probability of success. In contrast, an organization with an annual planning cycle and quarterly review process has only four iterations or feedback loops a year. In my experience, when working in a highly complex and adaptive environment four learning cycles per year is rarely sufficient.

You can minimize risk, uncover options, and get the best return on your efforts by using techniques such as customer testing, pre-defining measures of success and setting investment boundaries around time, effort and scope. This builds in regular feedback loops for course correction or close.

As I’ve said previously in blogs and talks on agility in financial management – It’s time to blow up the business case.

Scale lessons learnt to cross the chasm

Scaling agile practices or frameworks doesn’t work – scaling learning does.

Teams learn best from the lessons of their peers. What challenges did they face? How did they address them? What would they do differently?

showcase-lastminute

People remember stories and take inspiration from the experiences of others. Start by encouraging teams to showcase their experiments, discoveries and next steps. Make it easier for everyone to learn from one another, build momentum and drive change.

As a leader, your responsibility is to enable organizational learning by reducing collaboration friction between teams and designing systems of work with in-built learning mechanisms. The purpose of a learning organization is to help others make better mistakes, not the same mistakes.

Thanks to Qiu Yi Khut and Jonny Schneider for their feedback on initial drafts.

For more on these topics and theme read my book, Lean Enterprise: How High Performance Organizations Innovate At Scale, or follow my blog or Twitter

References

Lean Enterprise: closing the loop with Japan

I’m delighted to announce the release the Japanese translation of my book, Lean Enterprise: How High Performance Organizations Innovate At Scale.

lean-enterprise-japan-book-cover

Firstly, I wanted to thank Masanori Kado for his commitment, desire and willingness to spend late nights and long days translating the entire book. It is a selfless task and highlights his passion to bring the ideas captured in the book to his local community and native language. Thank you Masanori.

Secondly, thanks to O’Reilly Media Japan for their supporting in publishing the book in the Japanese market.

The book has now been translated into Japanese, Chinese and Portuguese (Brasilian). I’m continually amazed by the international interest and impact the book has had.Thanks to all that have read it, shared it and encouraged others to pick it up across the world.

Finally, I’m excited to announce that I will be in Tokyo on October 27th to speak at an event to officially launch of the book in Japan.

I will be spending the majority on October in Japan visiting Toyota and other businesses in the country.

Get in touch if you would like me to speak with your leadership team or company.

Lessons from deploying Lean Enterprise At Scale

How can you accelerate your journey in becoming a Lean Enterprise?

In this talk I share my lessons learnt from client engagements. I showcase how I’ve helped enterprises rekindle their capability to explore, experiment and embrace continuous improvement.

What are the key aspects to consider when you start? What are the tools and techniques to use? How do you organize to make a meaningful business impact?

I highlight the key issues holding organizations back from unleashing innovation, and demonstrating the countermeasures to achieve high performance at scale.

Email info at execcamp.com for the slides and 3 free chapters of my book, Lean Enterprise: How High Performance Organizations Innovate At Scale

Why It’s Time to Experiment with Lean Enterprise

The use of software and digital services has exploded. It is now possible to build, evolve, and scale new products and services rapidly with little capital investment using technology and software. Startups target lucrative high-margin services, slowly eroding the profits of large enterprises that are unable to keep pace with the rate of change demanded by customers. This is driving established enterprises to re-examine their relationship and interactions with their customers and how they manage their people, products and processes so they can stay relevant and in business. Their search for continuous improvement has lead the market leaders to Lean.

20130311_145211

Simply put, Lean means creating more value for customers using fewer resources[1]. It focuses on the concepts of scientific experimentation, rapid learning cycles and adjustments that were pioneered by Toyota on their manufacturing floor. Today, more enterprises are using it in the context of information technology. Some have managed to improve value delivered through technology by applying the principles and concepts of Agile and Continuous Delivery. However, we find that there is still a gap in thinking about how to use technology as a strategic capability that prevents them from maximizing that value.

Too often we find IT is still viewed as an order-taking function or cost center to the business with no knowledge or relationship with the rest of the organization or customers. This lack of cross-functional collaboration and end-to-end thinking of processes and decision-making becomes a recipe for failure.

The most successful enterprises are those whose leaders focus on meeting customer needs by clarifying goals, shortening feedback cycles and measuring performance based on outcomes, rather than outputs.

We’re all in the technology business today. Even if our main business is tied to physical assets and people, it is technology the enables the delivery of our services to customers. Business leaders must have a good understanding of the capabilities of technology and create an environment that fosters learning and innovation to stay in the game. This requires fundamental changes in the way we manage and direct knowledge workers throughout our organization.

The most successful enterprises are those whose leaders focus on meeting customer needs by clarifying goals, shortening feedback cycles and measuring performance based on outcomes, rather than outputs. Failure to take an end-to-end view of business processes and how they affect all parties along the value stream results in an inability to adjust to customer needs in a timely manner, no matter how well your IT department performs. Rigid processes and structures designed to optimize functional silos such as finance, risk and compliance inhibit the ability of all teams to experiment and learn or prevent them from taking responsibility and accountability for the outcome of their work.

Lean thinking is a proven strategy that allows businesses to thrive in uncertainty by embracing change in a scientific and deliberate manner. The very heart of Lean thinking is to allow people to experiment to solve problems within the organization and improve the value delivered to customers. Set the direction you aim to go. Understand where you are and define a target condition to get to. We create an experiment to move towards that target condition. Finally, take the knowledge you learn to update your vision and inform your next step. It is an ongoing feedback loop and never stops, because change is always constant … as should be our evolution.

References

[1] http://www.lean.org/WhatsLean

[2] Originally posted for IBM Book Club#socbizbookclub #NewWayToWork  https://www.ibm.com/blogs/social-business/2016/05/09/why-its-time-to-experiment-with-lean-enterprise/

Lean PMO: Managing The Innovation Portfolio

One of the first exercises I run with executive teams is mapping their business portfolio to visualize current work in progress and how it aligns to the overall business strategy. Without exception, every time I run this exercise the gap between current state and desired state is far wider than every executive believed, hoped or even imagined.
lean portfolio mapping

Portfolio mapping requires taking an end-to-end view of the lifecycle of initiatives in your organization. Lean Enterprises’ consider four main domains:

  • Explore early stage initiatives that are bets for the future with high degrees of uncertainty
  • Exploit initiatives that have achieved product-market fit and the organization wants to grow and scale
  • Sustain initiatives that have become repeatable and scalable business models, products or services that drive the majority of revenue for the organization
  • Retire initiatives that are long lived, no longer beneficial (even limiting) to the organization future success or strategy and should be sunset from the portfolio

Lean Enterprise

Initiatives that do not achieve desired outcomes in any domain should be killed, and their investment transferred to other initiatives.

High performance organizations focus on building capability to continuously move initiatives through the model from Explore to Retire. They understand that using the same strategy, practices and processes across the entire portfolio will result in negative outcomes and results.

Poorly managed organizations tend of use the same standardized approach for all domains. They fail to recognize the need to adapt their analysis, evaluation and control mechanisms to design a system that will provide the correct amount of governance and measurement to enable business leaders make high quality decisions based on learning outcomes and data derived from executing the work in each domain.

Typically these companies portfolios are orientated solely toward high revenue generating initiatives. Valuable cash cows that become prized assets, protected and milked dry. Lean Enterprises’ however know that one day the milk will run dry.

Explore

New initiatives are inherently risky. When aiming to explore a new business model or product it is imperative investment is limited by setting boundaries around time, scope, financial investment and risk. We do this not because we are cheap. We do this to create ‘safe to fail’ experiments and build in quick feedback loops to understand if we are achieving the desired outcomes.

Lean Enterprise portfolio

In the Explore domain our goal is to test the business or product hypothesis at speed using a cross-functional team to experiment with the customers the solution is targeted at. By designing fast and frequent feedback loops into the team’s exploration we can limit investment, maximize learning and avoid creating ‘bet the business’ scenarios that are too big to fail.

Also, by limiting investment into smaller bets allows us to make more bets, enabling us to test many ideas to discover what works and what doesn’t. This is the principle of optionality applied to business model innovation and product development.

Lean Enterprise Book

Most of the ideas that we believe are great aren’t actually that great at all. By creating optionality in how we design our testing process we can create many opportunities to learn, not just one.

Yammer used a concept of 10×2 to design feedback loops and limit investment in early stage ideas. Their approach constrained teams to no more than 10 and no fewer than 2 people when exploring ideas. Also their iterations could be no longer than 10 no shorter than 2 weeks before teams had to demonstrate their achievements designing feedback loops directly into the development system.

Principles and capabilities of Explore

  • Cross-functional multidisciplinary teams
  • Make lots of small bets
  • Boundaries of time, scope, financial investment and risk
  • Design experiments are safe to fail (the only true failure is the failure to learn)
  • Create a sense of urgency
  • Demonstrable evidence of value to proceed

Exploit

For those few initiatives that achieve escape velocity and exit the Explore domain, teams can continue with a sufficient level of confidence that they are building the right thing, now they must embrace building it the right way.

Lean Enterprises understand the project paradigm is broken only further propagating organizational silos, conflicting priorities and measures of success. They understand the importance enabling cross-functional teams to experiment directly with their customers and users. Effort and measures of success are tied to business outcomes not output.  

As the team collects data from experimenting with real customers and users it improves its understanding of how the business model, product or service is performing. The team can then develop more targeted and sophisticated hypotheses based on the knowledge created from genuine user feedback.

Lean Enterprise pmo

Amazon designed the concept of Two Pizza teams – independent, long lived customer facing teams that were small enough to be fed by two pizzas. This enables context to be held within the group as the business model, product or service grows, while also allowing the team to become autonomous and learn together at speed. Leadership can then continuously evaluate how the initiative is performing based on frequent feedback loops, and can help to make further investment decisions on how to scale it up, down or to kill it based on the outcomes achieved.

Principles and capabilities of Exploit

  • Create end-to-end customer facing teams, not project teams
  • Continuous evaluation funding model
  • Target condition is to achieve break-even point
  • Data-driven, fact-based decisions based on accumulated knowledge
  • Maintain a sense of urgency
  • Set a vision, trust the team to get there, clear blockers and support as they proceed
  • Make knowledge sharing and organisational learning easy

Sustain

The majority of large organizations have built their entire business on a single business model and/or supporting products that achieved product-market fit and continued to grow beyond early expectations. They have extended their market, region, and/or sector to achieve exceptional financial success and achieve wide customer adoption and reach.  

Lean Enterprise program

The challenge they meet is how to avoid ‘feature fallacy’ – the fallacy that simply adding new features will add more value. This manifests itself as overloaded products with features, tools and customizations that customers often never use or are even aware of.

Think of a product you have used for a number of years. Are you aware of all the new useful additions to it? Adding new features does not equal adding more value to customers and users. The feature fallacy often represents wasted effort and investment that could be spent elsewhere.

Etsy design for continuous experimentation. Teams at Etsy work closely with product, marketing, and engineering to scout, build, instrument and improve Etsy’s product portfolio to make sure that they are improving business outcomes for all their stakeholders – customers and users included.

The goal is to use data-driven decisions based on usage and profitability to enhance what customers desire – not just copy what competitors release or what HIPPOs (HIghest Paid Person’s Opinion) want to have.

By continually adding more and more features to existing products, organizations end up with huge monolith applications that are difficult, slow and costly to change or build upon.

The trick is to break out new ideas,  implement them as an Explore initiative and drive them through the end-to-end lifecycle flow again. This provides all the benefits and rigor of each stage while building the capability to continually create new business opportunities for future on-going success.

Principles and capabilities of Sustain

  • Beware of the feature fallacy
  • Focus on what is valuable – where can we win?
  • Don’t get lazy. Success hides suboptimal issues
  • Keep discipline with fact and evidence-based decisions
  • What is being used, improved or removed?
  • How could we disrupt or get disrupted?

Retire

All good things must come to an end. The difficulty for most organizations is that many systems in their portfolio are not well understood. Often the people that built the original system long ago on a ‘project’ have left the company. No one knows how to change, adapt or turn off the system or what impact it may have. Fear runs through the organization because the entire company’s business model is dependent on a COBAL program running on a 486. It may sound like a joke, but this is the reality for most organizations.

High performance organizations continuously seek to reduce the complexity of their systems to free up people and investment to Explore new opportunities. By simplifying their systems they are able to innovate faster, cheaper and more frequently.

Ask yourself the question “When was the last time we sunset a system, product or feature in our team?” If you can’t remember then it is a smell. Over time the weight to legacy systems and technical debt will grind your innovation capability to a halt. Keep it within control. Remember that effort not spent on keeping legacy systems alive frees up opportunity to focus on new initiatives.

Principles and capabilities of Retire

  • Has it served its purpose? Can we sunset it?
  • It is providing value? Kill it if it is not.
  • Are there better opportunities to invest in?
  • Continually look to reduce product and system complexity
  • Simplifying helps to support further innovation
  • Free up funds and capability

Conclusion

Business models are transient and prone to disruption. If your organization is reliant on a single business model, product or service to guarantee its on-going survival then safe to say it is in a precarious state. You’re only one technology innovation, customer loyalty switch or economic decision from irrelevance.

Lean Enterprise Disrupt

To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously.

Lean Enterprises know that building the capability to continuously seek out new business models, products and services is the key to ensuring their future business relevance, growth and evolution.

If your executive team is unclear on how your portfolio is performing and what initiatives you are exploring, exploiting, sustaining and retiring, get a cross-functional group together and map out your portfolio to visualize your work in progress. Ask if it is achieving the desired outcomes and aligned to your business strategy and objectives.
Share the results of the exercises with your teams and business leaders. Then starting getting deliberate about investment of time, effort and people in becoming the business you want to be.

References

What is ‘Lean Enterprise’ and Why it Matters

The acceleration of change impacts technology, consumer expectations, and economic models. Nowhere has this been so profound as in the decease in the lifespan of companies​ on the S&P 500​, from 67 years average in 1920 to 15 years today.

In order to survive​,​ organizations need to ​innovate at scale. Technology is now core to business​,​ but business is not only technology. Transformation in organizational structure​and governance​, financial ​management, product development and culture must accompany technical excellence to optimize innovation and ensure ongoing business relevance.

Will your organization be able to keep up with the pace of change?  Will you be a disruptor or disrupted? Lean Enterprise: How High Performance Organizations Innovate at Scale proposes a roadmap for competitive survival. In our new book, we share how leaders can create thriving ​organizational ​cultures​ required to build an adaptive, resilient Lean Enterprise ​that can survive the future.

lean enterprise

My new book ‘Lean Enterprise’ is now released

Lean Enterprise on Amazon

I’m delighted to announce that my new book, Lean Enterprise, is out. It’s been a fantastic journey and could not have been completed without the support of my family, friends, and co-authors.

I also want to thank everyone in the community who encouraged us, gave feedback, shared stories and provided guidance along the way. The final product is a collaboration of all our efforts, which hopefully will help move our industry forward to further innovation and excellence.

Gene Kim is calling Lean Enterprise “the classic, authoritative reference for how organizations plan, organize, implement, and measure their work.” Stephen Foreshew-Cain, COO of the UK Government Digital Service, says “it should be required reading for every executive who understands that we’re all in the technology business now.” Mary Poppendieck says its “the best current thinking about how to create great software-intensive products and services.”

You can click here to download a free sample of Lean Enterprise including  the preface and four chapters. You can purchase the ebook today or order the hardback (available for shipping from January 4th), at O’Reilly’s website.

If you are inspired by what you read, please write a review on Amazon or O’Reilly. Thank you so much.

In the spirit of continuous improvement, I look forward to hearing your stories of experimenting with these ideas.

Best wishes for the holiday season and hopefully see you in 2015.

Barry

Overview of Lean Enterprise: How High Performance Organizations Innovate at Scale

How well does your organization respond to changing market conditions, customer needs, and emerging technologies when building software-based products? This practical guide presents Lean and Agile principles and patterns to help you move fast at scale—and demonstrates why and how to apply these methodologies throughout your organization, rather than with just one department or team.

Through case studies, you’ll learn how successful enterprises have rethought everything from governance and financial management to systems architecture and organizational culture in the pursuit of radically improved performance. Adopting Lean will take time and commitment, but it’s vital for harnessing the cultural and technical forces that are accelerating the rate of innovation.

  • Discover how Lean focuses on people and teamwork at every level, in contrast to traditional management practices;
  • Approach problem-solving experimentally, by exploring solutions, testing assumptions, and getting feedback from real users
  • Lead and manage large-scale programs in a way that empowers employees, increases the speed and quality of delivery, and lowers costs
  • Learn how to implement ideas from the DevOps and Lean Startup movements even in complex, regulated environments

Praise for Lean Enterprise

“This book is Reengineering the Corporation for the digital age. It is destined to be the classic, authoritative reference for how organizations plan, organize, implement, and measure their work. Lean Enterprise describes how organizations can win in the marketplace while harnessing and developing the capabilities of employees. Any business leader who cares about creating competitive advantage through technology and building a culture of innovation needs to read this book.”

Gene Kim, co-author of The Phoenix Project: A Novel About IT, DevOps, and Helping Your Business Win, founder and former CTO of Tripwire, Inc.

“This book is a godsend for anyone who’s tried to change their organization and heard: ‘It’s OK for the little guy, but we’re too big/regulated/complex to work like that here.’ Humble, Molesky, and O’Reilly have written an easy-to-read guide that demystifies the success of Lean organizations in a way that everyone can understand and apply. Lean Enterprise provides a pragmatic toolkit of strategies and practices for establishing high performing organizations. It should be required reading for every executive who understands that we’re all in the technology business now.”

Stephen Foreshew-Cain, COO, UK Government Digital Service

“To thrive in the digital world, transformation must be more than technology driven—everyone within the organization must collectively work together to adapt. This book provides an essential guide for all leaders to change the way they deliver value to customers.”

Matt Pancino, CEO, Suncorp Business Services

“This is the book I’ve been waiting for—one that takes on the hardest questions in bringing Lean approaches to the enterprise. The authors provide solutions that are valuable even in low trust environments.”

Mark A. Schwartz (@schwartz_cio)

“This book integrates into a compelling narrative the best current thinking about how to create great software-intensive products and services. The approach in this book is both challenging and disciplined, and some organizations will be unable to imagine following this path. But those who make the journey will find it impossible to imagine ever going back—and if they happen to be a competitor, they are well positioned to steal both your market and your people. Ignore this book at your own risk.”

Mary Poppendieck, co-author of The Lean Mindset and the Lean Software Development series

“My job is to support people in practicing a scientific pattern, to help reshape thinking and working habits in business, politics, education, and daily life. The 21st century is increasingly demanding a way of working that’s cognitively complex, interpersonal, iterative, and even entrepreneurial. With Lean Enterprise, Jez Humble, Joanne Molesky, and Barry O’Reilly explain how software can and is leading the way to transforming our ways of working, which can change our ways of thinking and help us adapt to the emerging world around us.”

Mike Rother, author of Toyota Kata

“Nearly all industries and institutions are being disrupted through the rapid advance of technology, guided by the inspired vision of individuals and teams. This book clearly explains how the disciplines of Lean, Agile, Kata, Lean Startup, and Design Thinking are converging through the unifying principles of an adaptive learning organization.”

Steve Bell, Lean Enterprise Institute faculty, author of Lean IT and Run Grow Transform

“Building software the right way is a challenging task in and of itself, but Lean Enterprise goes beyond the technology considerations to guide organizations on how to quickly build the right software to deliver expected business results in a low risk fashion. This is a must read for any organization that provides software based services to its customers.”

Gary Gruver, VP of Release, QE, and Operations for Macys.com

“To compete in the future businesses need to be skilled at understanding their customers and taking the validated learnings to market as quickly as possible. This requires a new kind of adaptive and learning organization—the lean enterprise. The journey starts here in this book!”

John Crosby, Chief Product and Technology Officer, lastminute.com

“Rapid advancements in technology are creating unparalleled rates of disruption. The rules of the disruption game have changed, and many organizations wonder how to compete as new giants emerge with a different approach to serving their customers. This book provides an essential guide to those that have come to the realization that they have to change to regain an innovative competitive advantage but are unsure where to start.”

Jora Gill, Chief Digital Officer, The Economist

“Lean Enterprise was the book I gave my leadership team to get everyone on the same page about how we can challenge the status quo, remove roadblocks, and out-innovate our competition. By leveraging the continual insights we get from co-creating with customers, our people, and data, we now have so many additional new ways to grow our business.”

Don Meij, CEO, Domino’s Pizza Enterprises Ltd.

“While agile and lean methods have had a big impact on software delivery, their true potential only comes as they have a broader impact on enterprises of all sizes. In this book, Jez, Joanne, and Barry have set out what those changes look like—a realistic vision of how future companies will make today’s look like cassette tape players.”

Martin Fowler, Chief Scientist, ThoughtWorks

“This is an important book. It takes an informed and informative look at the fundamentals that need to shift to start building organizations capable of continuous learning and improvement. It moves well beyond the technical to the organizational. Lean Enterprise is a must-read for existing and emerging leaders seeking to ensure their company’s ongoing success.”

Jeff Gothelf, author of Lean UX, and Principal of Neo Innovation

“I was telling everyone to get this book for a year before it was finished. It documents the path being taken by the leading lean enterprises and the fat ones will be wiped out by the lean ones in the years to come.”

Adrian Cockcroft (@adrianco)

Why we carry watermelons?

I was working with a client recently that had decided to start a program of work involving 15 independent project teams, all working together to deliver a few key business objectives. 15 project teams comprised of roughly 140 people, all co-ordinating and collaborating together from different departments, locations and functions across a global organization with a few external vendors thrown in to add a little spice.

A challenging mission at best, I was keen to understand how the Program Management Office would measure progress towards the identified outcomes, while ensuring that individual teams shared information across the program of work.

I carried a watermelon?

I carried a watermelon?

“We’ve a program dashboard that each team populates with project status, progress, risks and issues each week”. I looked at the dashboard. “Everything is on track, and has been since we started a few weeks ago. We’re confident we’ll deliver everything within the program time line and constraints”, said the Program Lead. All the initiatives were green. “I think you’re carrying watermelons”, was my response.

What is a watermelon?

Green on the outside but with orange or red cores, watermelons are a nice analogy for healthy looking project reports served to PMOs on a weekly basis. In an environment of mistrust, fear or bureaucracy watermelon serving is rife. Teams tend to suppress or hide information that may highlight that everything isn’t executing as defined in ‘the plan’ – especially when everyone else in the program is serving up fresh green goodness too!

No one wants to be the focus of management never mind the PMO, they paint the happy, healthy and wholesome picture, avoid discovery and convince themselves everything will work out before the next checkpoint. The Eye of Sauron moves onto the next green blip and the team hopes to pull back the difference by the next time the dark lords glare comes around.

HealthCare.gov was a $93.7 million investment that turn into a $292 million failure for the US Government. People and teams within the program were aware that the initiative was not in a good state, yet they continued to report that everything was running to schedule, on track and green — even though inside the projects people knew the reporting was a fallacy and the status was red.

They lived their days hoping that everything would turn around, that they would reach the dates, and deliver the system. No one wanted to be the bearer of bad news. No team wanted to highlight that they had an issue, they were waiting for someone else to blink – why, so everyone could blame someone else for the failure that was about to happen?

Breaking open the watermelon culture

Visibility, transparency and the appropriate level of decision making lead to better choices. But yet, there are prerequisites that must be in place to get there.

To calibrate openness and safety teams monitor the response of leadership to difficult situations and emergent circumstances. Teams adapt the quality and detail of information they share in relation to the actions, not the words, in response to the information.

Encourage teams to cut the watermelon open and have a conversation about what you find inside. Then by working together to eat up what you find it encourages others to do the same.

Team will always encounter problems on any delivery initiative. Our mission is to create willingness to take accountability for the challenges faced and find the best solutions together.

Decisions on how teams work towards solving the challenges should be made by the teams doing the work, not someone in management located on the other side of the world.

However, these teams are then responsible for the outcomes of their decisions thus empowered to be accountable to do the right thing. The job of leadership is to provide support, space and remove blockers in their way.

In my experience programs based on cultures of fear tend to follow the pattern below

Transparent, trusting and teamwork based programs tend to be this pattern

We need to change the way our people think and work together towards a common goal. To do this, we need to address a few aspects;

  • Clarity of Purpose – clear direction from leadership and the team on the outcome (or target condition) to achieve
  • Alignment – collaboration and agreement on the tactics to achieve the target condition
  • Engagement – regular feedback loops with everyone involved in achieving the target condition. Then adjust and adapt based on the information we are learning from performing the work to address the issue at hand

When working with teams, I favour a “Go to Green” strategy by reviewing all aspects of the current situation including data presented by other team leaders in the program. By creating visual artifacts (not paper reports) where teams can meet, share and collaborate on current state and circumstances we can make better decisions that will improve outcomes for the entire initiative. It also serves to foster transparency and trust between all parties as they work together to solve problems and win.

Plan, assign and execute those decisions in an agreed time frame, then set a frequency to review outcomes, share successes or revise activities based on what we’ve learnt from doing the work.

Conclusion

If you have a culture based on fear, you will never have true information flowing through your organizations network. People will share the right information, not the correct information.

The role of leadership is encourage transparency and recognize that their actions in response to negative news is what will create an environment of safety. When people feel secure to share real information on the situation, knowing that leadership will work together with them to identify strategies directed to solutions not blame, the system improves for everyone.

Encourage teams to work together to solve problems, thus building relationships and trust with one another to achieve successful outcomes for all by eating up those watermelons together!

melon-shark

References

The first time I heard the term ‘Watermelon Reporting’ was from Marc Loffler when he got on the stage at ALE 2011 with a meat cleaver and a bag of watermelons. I’ve kept it with me since then.

All watermelons from http://www.whataboutwatermelon.com