Category Archives: Lean

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

ExecCamp: Turn Enterprise Executives to Entrepreneurs

The acceleration of change impacts technology, consumer expectations and economic models. The lifespan of companies is tumbling, from a 67 year average in the 1920s to 15 years today.

Are you responding? How? Organization wide transformation programs that lose momentum and slowly die? Innovation Labs that never produce or deliver? Training courses to certify teams in the next great method? Talking a lot of theory, yet showing next to no action. It’s time to stop doing the same things and expecting a different result.

The problem with transformation is never a lack of ideas. It’s lack of behavior change.

The enterprises that will survive embrace the entrepreneurial mindset, culture and approach at all levels of their organization.

In this talk Barry, will share how he is helping Fortune 500 companies rekindle their innovative spirit to tackle uncertainty and win on his executive immersion program ExecCamp.

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/

Think BIG, Learn fast, Start now!

lean-enterprise-book-think-big-start-now (1)

Your competitors have the freedom to see the world different because they’re programmed to THINK BIG,  Learn Fast, Start Now!

They don’t care about your legacy systems and mindset, how you operate your business, or the numbers you need to hit.

Your business is already dead. You just don’t know it yet.

How do you unlearn to relearn the skills you need to keep your business relevant?

In this keynote I share how we helped the largest organizations on the planet reinvent how they approach new product development and innovation in ExecCamp.

We take executives out of the boardroom and back on the streets to learn at light speed, and learn by doing.

You will learn how to:

  • Start new businesses inside a large enterprise
  • Train executives to recapture their entrepreneurial spirit
  • Blow up legacy mindsets and see opportunity through new lenses
  • Establish killer teams to conquer new territory
  • Create a culture of continuous experimentation
  • Test strategy through execution in minutes not months or years.
  • Launch winning products by starting small and acting now to make decisions based on evidence not conjecture

Find out how to turn your 50 year business into an adaptive, resilient entity ready for the fight for survival that lays ahead.

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

[podcast] Lean Enterprise interview with Software Engineering Radio

Johannes Thönes interviewed me recently for SE Radio regarding our book Lean Enterprise: How High Performance Organizations Innovate At Scale.

Interview introduction by Johannes: “A lean enterprise is a large organization that manages to continues innovating while keeping its existing products in the market. O’Reilly talks about the idea of scientific experiments and the build-measure-learn loop popularized by the lean startup method.

He shares his experiment of an online wine seller using Twitter. He further discusses the challenges for enterprises trying to do something similar and introduces the three-horizon model, to manage innovative, growing, and sustaining products.”

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