This article takes it’s inspiration from Eric Ries’ book ‘The Lean Start-Up’, which in turn takes its name and influence from the Lean Manufacturing revolution, which was principally developed by Taiichi Ohno and Shigeo Shingo at Toyota in the 1940’s and 50’s.
I believe we are all involved in a start-up project, which began about 1,000,000 years ago, has absolutely no overriding mandate or programme management and every time you get up for work with a feeling of unease, every time you scroll through your phone rather than concentrate on what you should be doing, it’s because… you… don’t… quite know what you’re supposed to be doing.
I don’t know what I’m supposed to be doing.
None of us completely know what we should be doing.
And breathe…the genie will never squeeze back into the bottle – this is the one universal truth we all have the gift of knowing and without it we would know virtually nothing.
As Eric Ries puts it ‘A StartUp is a human institution designed to create a new product or service under conditions of extreme uncertainty’
And I think it’s fair to say pretty much every sector and organisation is operating within some degree of uncertainty these days, and that the speed of technological advancement is a big part of that uncertainty.
We are both blessed and cursed to live in an age where we have way more production capacity than we have knowledge of what to actually build.
Vanity metrics vs. actionable metrics, seems very obvious doesn’t it ‘actionable metrics’ should win out every time.
But they don’t, because most of us are too proud and afraid not to engage in success theatre, it’s hockey stick graphs all the way, leads are trending up, sales are trending up, profitability is trending up, sign-ups are trending up – early signs are good!
What we’re doing here is measuring the outcomes and assuming they’re confirming our original assumptions.
Wouldn’t it be better to consistently test our assumptions?
What are our assumptions? for example: “this new app feature will shorten the cycle between member sign-up and product purchase”.
Actionable metrics come in the form of measuring our assumptions through real world customer validation and almost always involve some kind of split testing. So, to test the example above we have to release a minimally viable version of the new feature to a group of real-world customers and measure its effectiveness (at validating our assumption) against an equivalent group of real world customers who are using the existing process.
This sounds like a lot of work – but please consider the alternative, implementation without validation, this places product designers in a position where they can neither roll back or move forwards if the new feature is less effective than planned, in this situation people work until they get tired, hasty fixes are applied and development slows to a death spiral in the long run.
To explain validated learning, I’ll use the example of an American company called Grockit, an innovator in the field of online learning, and its founder Farbood Nivi (or Farb for short).
After some initial success, Grockit found themselves with data that demonstrated improvements in some areas, but they had lingering doubts about the company’s overall progress.
Their development approach was agile in nature, Farb would develop a user story which should take no more than one or two days of development time, the product team would build it and they would gauge some feedback from users. But they were not analysing user behaviour in relation to existing processes or alternatives. Farb himself would make decisions about which user stories to prioritise and which to downgrade.
And as Farb admitted ‘I worried that moral would suffer if anyone thought that the person steering the ship was uncertain about which direction to go’.
After some soul searching (and expensive consultation) Farb and his team introduced an additional final bucket to their Kanban board; ‘Validated’, and ran production in the following way – only three user stories or features could sit in any one bucket at any one time and no user story or feature could move to the next bucket (right) until there was a space for it. And nothing could be considered as complete until it had gone through the split test user validation bucket. After this, the short production cycles and split test validation meant that prioritisation became self defining.
Grockit moved from an organisation which was more or less building for building’s sake, to an enterprise focused on minimizing the time it took to get through this feedback loop and only focusing on building products their customers actually wanted.
Let’s talk about project failure (we’ve all been there), and the learning that’s often cited as the positive outcome that somehow makes it worthwhile.
The lean start-up movement defines this definition of learning as an excuse for failure of execution…and I agree.
I have experienced failure both at the project and business level, and if you’ve never experienced a failure like this (where have you been all your life?) it’s fair to say you feel like you’ve been duped – the stories in the magazines are lies; hard work and perseverance don’t lead to success, and the many promises you’ve made to employees, friends and family are not going to come true.
By redefining failure as a progression metric (which happens in our validation bucket), we avoid the type of learning which is ultimately a waste of economic resources and more importantly the time, passion and skill of our people.
Entrepreneurship has to be seen as a kind of management and not as a purely creative or innovative affair.
So what do we expect to gain from all of this validated learning driving our product development?
Well, we hope to build a product or service which customers will be banging down the digital or physical door to acquire before we run out of runway or overhead to continue with our project.
And of course, even with a watertight vision and a well-executed plan there will be times when we need to shift our product offering or target market to exploit opportunities, avoid failure or even just to stay in business.
And the point of this feedback loop is to give us the best chance of knowing when and how to do this.
Is our strategic hypothesis still correct? There is no bigger destroyer of creativity than the misguided decision to persevere – and yet many business owners, myself included, will wear this perseverance as a badge of honour.
Pivoting is of course a reality for organisations, departments and private individuals.
A start-up’s runway could be considered as the number of pivots it can still make before running out of runway, or to put it more bluntly – cash.
So once again we have to hold our strategic assumptions to account, we have to apply numbers and a timeline to our theory and apply innovation accounting to ensure we’re on track – and if we are not, we have to pivot.
A Few Examples of Pivots
The potbelly Sandwich shop story encompasses the last two exemples well…
The Potbelly Sandwich Shop chain, which today has over two hundred stores, began as an antique store in 1977; the owners started to sell sandwiches as a way to bolster traffic to their outlets. Pretty soon they had pivoted their way into an entirely different line of business.
Your start-up or business is likely to be operating primarily using one of the following three engines of growth, you can have more than one engine of growth but it’s smart to understand and focus on your core engine of growth.
Any product or service which is designed to attract and retain customers for the long term.
Examples: IT Services, CRM Platforms (or any product which has a database as the core of its offering). But also websites for collectors of specific rare collectables (sports cards, star wars toys etc.).
Principle: If the rate of new customer acquisition exceeds the churn rate – the product will grow.
Any product or service which relies on person-to-person transmission.
EG: Social Networkss, Tupperware, Ann Summers and their famous house parties would all be seen as Viral.
Principle: If we can think back to the days of the pandemic we remember if we can achieve a viral coefficient greater than 1.0 we have the potential to grow exponentially.
Often companies (esp. digital) with a viral engine of growth will not charge customers to acquire their product or services but will look for monetisation in other ways (advertising etc.) this is to reduce the friction on viral transmission.
Any product or service which grows principally through paid marketing.
Principle: Whatever you’re selling at whatever price – The cost of acquiring and servicing a customer is less than the revenue received from that customer.
There are several (possibly counter-intuitive) advantages of Single Piece Flow, that is focusing on releasing product in a batch size of one…
For a Design/Prototype…
This is fairly obvious as it helps you to identify issues with the minimum expenditure of time and resources.
Ongoing Production…
Less obvious and looking at Toyota as a model – replacement parts are dealt with in the following way…
Pull Technique
You pull into the Toyota dealership for a repair and one part gets used.
This creates a hole in the dealer’s inventory which automatically causes a signal to be sent to the local distribution centre who send the dealer a replacement.
This in turn sends a signal to a regional or national distribution centre which sends the local distribution centre a replacement.
This in turn send a signal to the vending factory which produces one more single part to ship.
Obviously Toyota maintains an optimum inventory of spare parts across its network, but when it comes to production they are working to a batch size of one and they are responding to customer needs individually.
The Five Whys – Root Cause Analysis – This section makes me feel hungry for some reason!
Principally applied to technical development, I believe the five whys technique can be applied to any form of project or organisational problem as well as individual human issues.
This is an exercise we carried out with a client after a less than perfect roll out to a sales team (and when I looked this up for the article I noticed it was six whys so feel free to use some artistic license with the concept).
Why did the Sales Software Adoption Project Fail?
Because the end users rejected it at the point of adoption.
Why did the end users reject it at the point of adoption?
Because they felt it would not enhance their ability to win more business.
Why did they feel it would not enhance their ability to win more business?
Because the system was bogged down in security features which meant adding or retrieving information was a barrier to flow.
Why was the system bogged down in security features which meant adding or retrieving information was a barrier to flow?
Because the project board guiding the project did not want sensitive and variable pricing or account information to be available to all users.
Why did the steering group that guided the project not want sensitive and variable pricing or account information to be available to all users?
Because they felt this would cause issues between competing sales reps and lead to accusations of unfairness and inconsistency.
Why did they feel this would cause issues between competing sales reps and lead to accusations of unfairness and inconsistency?
Because they had an inconsistent pricing system which could be seen as unfair (even if not intentionally).
What’s the root cause: the disconnection between the business and its sales reps, this cultural trust issue has to be repaired first, suspicions of favouritism should be systemised out. Give people a clear and fair career path and they will do what you ask. Give them a culture of everyman for himself and they’ll do whatever it takes to protect their position.
In my opinion the five why’s almost always lead to a cultural issue which requires addressing.
After those two last pictures, I’m off for lunch. If you’d like to discover more about the lean Start-Up movement – check out the following links…
To buy a nice tactile copy of the book: Click Here
For Start-Up Meet-Ups, Training and More: Click Here
Further Reading: The Toyota Way
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