Humans Cannot Predict the Future.
We would all love to be able to predict which ideas are going to be the big ones. You just got done with an incredibly powerful brainstorming session and you look over to see one of your senior leaders with a scowl on his/her face. They are annoyed because they don’t feel like there are any “big” ideas the team came up with. The problem with this perspective is that, at from this early vantage point, it is impossible to predict which ideas will be big and which ones will be flops.
You have no idea which idea will work best until you are able to get the ideas in front of real customers and begin running behavioral experiments to see what sticks for them. But — If you can’t predict which ideas will be the biggest and the baddest, how do you decide which ideas to start with?
Since the path to a successful new venture is never linear, I would recommend that you start with the idea that you BELIEVE will have the biggest impact on your customer and that the team is most passionate about.
I recommend these two criteria assuming that the team understands that they cannot predict the future, and that it will be very likely that they will be exploring MANY of the ideas they just came up with. They are merely tying to choose a place to start.
The diagram to the right shows a small portion of a typical search for a business. You start with a single idea, run some experiments with customers, conduct some customer development, etc. You stand back and look at all of the data and try to generate some insights. Next, you apply these insights to your original business idea. This process ends up leading you down an entirely new path.
Since my background is in software development, I like to think of this like branches in a code repository. Since you have no idea which ones the customer is going to love, you build a few and let the customer’s behavior tell you which branches to merge and which ones to prune. The great thing about this is that you get to drop the code, but keep the insights you gleaned about your customers in the process.
I plan to write on this topic at length, but I thought it was important to showcase some of the milestones in the search. As you communicate with leadership it will be extremely important for you to be able to showcase where you are. Otherwise, from their perspective, it will look like they have a schizophrenic team with a complete lack of focus.
Prove that your solution will solve the customer’s problem – (MVP) – Using rapid experimentation and prototyping you must now prove that your Minimum Viable Product (MVP) will actually solve the customer’s problem. This typically only requires 1-2 features in a product to do so. I would recommend using the Lean Entrepreneur Value Stream exercise to design your MVP based on customer needs.
Prove that customers will pay for it – Now that you have proven that you can solve the customer’s problem with your MVP, you should move to testing your pricing model and strategy. If you can’t get customers (that you’ve already spent significant time learning about and working with) to pay for your product, how will you get customers that don’t know you to pay?
Prove that you can acquire customers – Next, you need to test your possible marketing channels. Which channels work best for your customer? Which ones are least expensive? Most expensive? Can you consistently acquire customers through your marketing channels?
Prove that you can deliver the solution for less than the customer will pay (ROI) – Now that you’re able to acquire paying customers you need to start looking at your costs to market and deliver the solution. What can you optimize to deliver positive ROI? Are your margins large enough to warrant moving forward with this business model?
Prove that you can scale this into a business worth running – The final milestone is to test your business model to ensure that it can scale up. As you add more customers do you maintain similar margins or do they increase as you leverage economies of scale? Is this still work pursuing?
I hope that this perspective is valuable for other intrapreneurs out there. In the comments below; please let me know how you’re able to apply it and what you get hung up on in your enterprises.read more
I Know How to Run Experiments, Now What (Part 3)
It has always excited me to see so many great opportunities for intrapreneurs to change the culture inside their enterprises! But with any new skill you need to develop the ability to see patterns and understand the best areas to apply those new skills. I’m doing my best to provide some shortcuts for you. Here we are at part 3 of those shortcuts, but here are part 1 and part 2 in case you missed them.
Our employees could use a morale boost
Whether it comes up as a result of your annual employee survey, skip level sessions or some other interaction, there are always situations where morale gets a bit low. Often times this is because we feel powerless as employees. Things move, shift and get ripped out from under us. Other times we need a pick me up because we are drinking from the fire-hose and not feeling like we’re making great progress at understanding a new situation.
Regardless of what this looks like in your area you can usually find opportunities to get that boost through rapid experimentation. I would recommend that you get some customer empathy and a rough understanding of the reasons your team / organization is down in the dumps.
Once you have some ideas as to what problems exist (based on what employees say), you can then pull the team together for a quick brainstorming session. Ask the team something like “In what ways might we fix this problem ______ we identified?”. Come up with at least 50 possible solutions for the problem and then prioritize the list based on whatever criteria are most important to your organization.
Now that you have a list of possible solutions to the problem, you can begin experimenting. You will quickly start seeing gaps between what employees said was important to them and how they behave. This will help you continue to tweak and re-prioritize your ideas list until you find a few different solutions for the different segments of employees that have the problem(s) you identified.
Coincidentally, this process is almost exactly the same as the process you follow to identify and build a new product based on customer needs.
Our customers keep asking for features that they don’t use
You’ve never had this issue with your customers, right? Customers always use what they ask for! Right….. (heavy sarcasm here). Anyway, the best way to deal with this situation is to utilize your rapid experimentation skills. Instead of building the feature the customers ask for you should come up with some creative experiments to make it appear that the feature exists and see how many of the customers attempt to use it.
For example: You are part of the HR Learning and Development team. You hear from senior leaders in multiple businesses that they would like a class about ethics. Rather than building the entire class or purchasing it from an external vendor, you add the course and description to your internal learning management system (LMS) with a class date a few months out and a decent price tag. You begin to market the class back to the business units and ask them to register for the class.
This demand test should QUICKLY show you whether there is real demand for the course inside your organization and how important the class really is (high price). You can follow up with everyone afterward to determine why they did or did not sign up for the course. These insights will quickly tell you exactly what the requirements for the class should be, how you should price it and what pieces are most important to your employees (customers).
This same scenario happens very frequently in product teams as well, so be on the look-out!
We’re getting ready to acquire a competitor
This is one of my favorite scenarios to apply lean startup principles and rapid experimentation skills. As enterprises we tend to be GREAT and doing due diligence for M & A. We verify financials, evaluate employees for cultural fit, evaluate technology and integration requirements, etc. In many cases acquisitions are done to acquire technology, customers and talent. There are MANY assumptions baked into this process, but one of the biggest ones that doesn’t get tested much is the customers.
We make assumptions that our existing customers are likely to purchase the new product or vice versa. We believe we will be able to cross-sell and up-sell both sets of customers. We believe it will be a 1+1=3 situation. If there wasn’t an ROI in this area, why even consider the acquisition?
You need to PROVE that the two customer bases are complimentary. Run some experiments that show this to be true during your due diligence process. It’s not that difficult to get some of the people from your sales team to jump in and try to conduct some of this selling, right? Will your existing customers pay the same prices or will they expect some sort of bundling discount? Does it improve or diminish their experience and lifetime value?
You need to have the answers to as many of these questions as possible before you pull the trigger.
What situations have you uncovered where you were able to experiment quickly to reduce risk? Please share in the comments below.read more
Enterprise Lean Startup vs. Startup Lean Startup
Why is it so difficult for large enterprises to apply innovation techniques and practices? Those giant battleships should be able to squash any competitor in moments. Unfortunately, it is not that simple. These enterprises are successful because they execute incredibly well. They hire and reward employees for their ability to execute.
True innovation is about searching and learning, about converting guesses into facts. This search requires employees to possess a distinctly different skills and capabilities. They need to be open to the unknown, understand how to learn from failure quickly, and move extremely fast. Additionally, leaders and employees in the organization need to make decisions informed by customer data. Command and control simply does not work in this environment.
Many large organizations today are beginning to embrace the tenets of Lean Startup. In doing so they are learning that the ways in which you apply these techniques in a large organization are very different from the ways they are applied in a startup.
What is different about applying lean startup in the enterprise vs. a startup?
Legal / Branding – Existing enterprises incur significant risk by running experiments with their paying customers. There are existing legal policies in place, as well as the desire to keep from tarnishing the company brand. These facts require that leaders inside the organizations behave differently to be able to innovate effectively within these constraints.
To generate some initial data for these conversations, you will need to run some experiments without approval. Under the cover of night. You don’t need to gather much data, but just enough to influence your legal and branding teams. You’ll need to be able to show them that you can be faster and more effective if you were allowed to run small experiments with customers. The need to get approval from them EVERY time you run an experiment just won’t work.
What Intuit and other companies are doing is to create a set of experimentation guidelines. These guidelines basically give an upper boundary for the number of customers an innovation team an interact with. As long as the team stays within these guidelines the legal team will support their efforts. If the innovation team needs to go outside these boundaries then there is a streamlined approval process in place.
The end goal is to eventually help the legal & branding teams move from frequent “no” answers to frequent “yes” answers so the innovation teams can move ultra-fast.
Human Resources – Behaving like an intrapreneur requires skills that are different from those of a typical enterprise employee. We tend to hire employees for their existing knowledge, tools and processes. We hire them because they have significant domain knowledge that is valuable to the organization.
As you apply Lean Startup and the organization behaves more like a startup, you need to be able to search for a business model that will work. You need natural curiosity, lots of patience, passion and the ability to influence others (without the benefit of positional power).
The ways that you evaluate your employees will be different as well. They will need to be rewarded for taking risks, failing and continuing to move forward. As an organization you’ll also need to determine how you will reward successful new business launches. Will the intrapreneur get to move forward with their business idea or will they have to continue to work in their existing position?
The answers to these questions will be different for every organization. You’ll need to use your new customer empathy skills to determine how your intrapreneurs feel.
Leadership – Your employees are not the only people in the organization that will need to behave differently. This new way of working will significantly impact your leaders as well. Rather than making decisions about the product(s) and keeping the team moving, your leaders will wear the hat of a coach or mentor. They will help to set a product vision, clear the path for their team, ensure the team is running effective experiments and not overlooking key insights.
These new rules of engagement apply whether you are a functional team or a product team. Because they don’t need to focus on making mundane decisions anymore, the leader can now focus on growing the skills of their team members. The are freed up to focus on what is truly important.
Central Sales / Marketing – As your product teams embrace this new way of working, they will handle their own sales & marketing. Remember, they are trying to figure out what works and your existing sales & marketing teams are here to execute something that already works. This creates a clear tension between innovative teams and the teams that support them.
Understanding how to create effective partnerships and touch-points with these supporting teams will make or break your ability to get new products and services into the market quickly.
I’ve seen a few enterprises that have created “catch” teams in their sales & marketing organizations. These teams catch the incoming sales / marketing requests and determine whether the processes have been proven by the requesting team or not. If they have been proven then they can be treated one way, if they have not, then the catch team can help them understand how to search for a working model and even support the innovation team in doing so.
If your sales / marketing organizations keep getting new business ideas that don’t work, the lack of this mindset is likely to blame.
This is by no means an exhaustive list of differences you’ll encounter in the enterprise, but hopefully gets your wheels turning and saves you some time and heartache. Those of us that are implementing this across our enterprises are on the cutting edge and are literally writing history.
Keep the faith!read more
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