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08 Dec 2016

Leading Enterprise Innovation at Startup Speed


Insights from the re:Invent session on Lean as a powerful framework for leading enterprise-scale innovation as effectively and fast as a startup.

Philip Smith

This is a subject very close to me, how do we make our businesses and ourselves more efficient and effective.

At an AWS re:Invent session run by Eric Tachibana, he identified one theme behind the questions he is asked by the majority of the clients that engage the AWS Professional Services Team in APAC; 

 

“How can you help me with my innovation”

 

To some it may seem obvious, surely we can just create a product and it’ll be great. But the following points (according to Eric) don’t really support that sentiment;

 

  • 85-90% of new products fail says the Harvard Business Review
  • Trillions of dollars wasted on effort creating products nobody wants
  • If you’re not good at new product development, you have issues
  • Can you innovate as fast as a startup, that can disrupt?

 

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The companies that approach this conundrum are mostly good at incremental innovation. They’re not so good at disruptive innovation. Which is where you make a new product that has never existed in any marketplace, as opposed to improving their current offering. Disruption focuses on an existing market, here are examples;

 

  • Airbnb - disrupted the hotel marketplace
  • Spotify - disrupted the music marketplace
  • Dropbox - disrupted the backup/storage marketplace
  • Instagram - disrupted the picture editing and messaging marketplace
  • Uber - disrupted the taxi marketplace
  • AWS - although they didn’t call it that, disrupted the Data Center/Server marketplace

 

The entities mentioned above were able to use a Lean Startup methodology to get the competitive edge, resulting in disruption. The thing is, ‘Lean’ as a concept didn’t just arrive, it’s actually been prolific in the manufacturing sector since the 80's. Lean has had an evolution and Lean Enterprise (LE) is a framework for how you manage disruptive innovation, but where did it start;

 

  • 80's - ‘The Toyota Way - Jeffrey K. Liker’
  • 90's - ‘Lean Six Sigma’
  • 00's - ‘The Lean Startup - Eric Ries’
  • 10's - ‘The Lean Enterprise - Barry O'Reilly, Joanne Molesky, Jez Humble’

 

The tasks you may carry out to try and predict the future, or what a customer may want, is defined as Waste. Which is a challenging notion, considering how much traditional businesses value market forcasting or risk analysis. If waste could be reduced by 10% revenue could be increased to a greater degree. LE is aimed at being more effective and efficient. Innovation starts with a hypothesis, an idea about how to offer something customers want. Once we have had that idea however, we have a tonne of assumptions. Rather than diving feet first into development, how do we get to a place where we understand why we are building this product, or what the product should look like. To get to that point, where we understand what it is our idea is meant to service, we can look at four principles that Eric believes help explain the journey;

 

  • We Know Nothing - We respond to an idea with a 50 page business plans and 3 month requirements analysis. We end up producing volumes of information that haven’t even answered crucial questions about what customers might actually want. At this point, we know nothing and we should accept that and work out the right questions to ask. That will help us prove, or disprove our hypothesis, rather than crossing fingers and hoping for the best.
  • Test Smart - This method isn’t suggesting a company becomes a failure friendly organisation, failure isn’t more acceptable but experimentation is. Observing the results from these experiments gives businesses the data required to make decisions on whether to continue development of an idea. To quote Eric

    “Experiments confirm or reject hypotheses. Failure is not an option”

 

  • Measure Smart - this is critical to LE, if a metric won’t change how you behave, it’s a bad metric. This brings us back to the difficulty in both human nature and large organisations. It’s hard to let go of your own ideas even when they do not come to fruition, it’s better to measure the idea when it’s in it’s infancy and if it isn’t matching demand, re-think it. Check out Lean Analytics by Eric Ries for more on this.
  • Iterate at speed - Generally, people are quite precious about their own ideas. Leadership need to learn how to mentor staff into knowing when to abandon an idea, when it isn’t viable.

 

People have usually heard of core components from Lean, such as the Minimum Viable Product (MVP), but often misunderstand it's application. An MVP is not the least amount of features that can be launched, that would be a horrible product, why would anyone buy that. That is a dangerous view, that will only contribute to more failures. Simply put it is the fastest and cheapest experiment that will prove (or disprove) a hypothesis, which is the innovative idea you think you have have. MVPs do not increase certainty - they reduce low-hanging uncertainty.

An example of the process shows how it’s not necessary to even develop the product, in some cases. Instagram asked people in central park whether they would like the pictures they were taking to be modified/beautified so they can upload them and share them with their friends via Social Media. Before a line of code was written they did a little market research. It was a hypothesis that people would want this image ‘concierge’ service, and proved a fruitful one, but they didn't know that.

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Eric Ries believes that ‘Cloud is the fertilizer of Innovation’, as you can carry out experiments at such a low cost. This doesn’t mean we should all run out and start coding, unless we have tested our hypothesis about our product. It does mean, however, that when we have carried out our tests and we think we have a product that will disrupt based on our market research, testing and MVPs, we can ‘spin up’ experiments quickly, efficiently and at a very low cost compared to the traditional approaches.

What does all this say;

Enterprise entities are often stuck behind a plethora of methodologies that restrain innovation. Unfortunately adoption of Agile is stifled by the very human quality of holding on to what we know. Resistance to change is a killer. 

Nordcloud have understood this, throughout many of our engagements monumental shifts have been required. Before we start talking about solutions, we investigate our customers current understanding of how to operate a more Lean organisation. We are helping our customers adopt these principles by ensuring the right people are involved in the projects, whether they are executives, middle management or the janitor. We find ourselves carrying out more and more evangelism on how to innovate in these environments, before we begin discussing AWS Cloud solutions that will support the ability to innovate that our customers desire.

 

 

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About Nordcloud

Nordcloud is a European leader of public cloud infrastructure solutions and services. Since 2011 we've completed over 250 deployments to help our enterprise customers gain the maximum benefits of the cloud including security, agility, scalability and overall cost-savings. As an independent cloud-native company, we are representing all globally leading cloud technology providers neutrally for the customers’ benefit. With a strong Nordic heritage, Nordcloud is headquartered in Helsinki with offices in Stockholm, Malmö, Oslo, London, Amsterdam and Munich.

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