Startups move quickly, capable of disrupting billion-dollar industries with innovative ideas. Your well-established (dare we say entrenched?) company can use the same methods to beat disruption, says author and former Goodyear executive Jim Euchner.
The “lean startup” model, popularized by entrepreneur Eric Ries, helps small teams overcome resistance to innovation along the way to creating new companies. Euchner’s book “Lean Startup in Large Organizations” adapts that method for legacy companies.
“[The book tackles] overcoming resistances to innovation, especially innovation that creates new businesses or new business models inside a corporation,” he says. “The challenge with that is that large organizations can have resistances to that experimental way of learning and working. They’re also just generally resistant to moving off the core business.”
In an exclusive interview with Senior Executive Media, Euchner shares how innovators at large companies can overcome these organizational roadblocks. Read the edited conversation.
“You persist if what you learned is along the lines of what you expected… You pivot if something basic about the business needs to change.”Jim Euchner, Author of “Lean Startup in Large Organizations”
Senior Executive Media: Can you go deeper into what “lean startup” is?
Jim Euchner: I break it down into two pieces: how you learn and what you focus on learning. The “how you learn” is all about doing what [Eric] Ries calls “lean learning loops”; I call them business experiments. It’s identifying assumptions, things that must be true in order for your innovation to move forward, and then validating or invalidating those assumptions…
So you start by framing a hypothesis about the world — it could be about customers, or channels, or costs, or partners, or any aspect of the business… I call these “with market experiments,” because you’re not yet in the market, but you’re working with real people in real settings, simulating a real environment as much as you can. In the terms that Eric Ries uses, you pivot or persist. You persist if what you learned is along the lines of what you expected… You pivot if something basic about the business needs to change.
Then, there’s the question of what to learn. In the “Lean Startup” [book], [Ries] breaks that into three pieces.
- One is the customer value proposition, or it’s the hypothesis about the customer. It’s about product-market fit.
- The second is the business hypothesis, and it’s a question of how we’re going to capture value. It’s the business model question.
- And the third one is the growth hypothesis. What are the ways that you’re going to grow the business, bring it to scale, make it profitable?
Senior Executive Media: What does that look like in big companies?
Jim Euchner: In a startup, these things tend to happen in market from a very early stage, and you’re doing all of them at once. You’re learning about the customer. You’re learning about how to capture value. You’re preparing to scale. You’re doing all the aspects of lean startup at once. In a large company, it often makes sense to do them in sequence to provide some sense of control over the operation. Different antibodies, [the forces that oppose innovative projects and ideas,] are at different stages. When you’re doing the customer insight work, you need permission from a few people. When you’re starting to do business model experiments, often you need permission from marketing or IT or engineering or legal, and that can create certain resistances.
Senior Executive Media: How should innovators at legacy companies implement lean startup?
Jim Euchner: I’ve worked for several years at Goodyear, and we used it successfully to launch new businesses. … In order to do these experiments, you have to assure people that you’re not going to pivot off into oblivion and end up someplace where the company doesn’t care. That’s part of the solution to that: for the corporation to be clear about where it’s willing to innovate, where it’s willing to invest.
[Remember,] the corporation is built to optimize the core business. Every function is built to optimize the core function — whether it’s procurement or sales or marketing… So when you try to do something different, you disrupt their worlds. Oftentimes, you need their support, especially if you want to leverage an asset from inside the corporation… [Ask,] how do you do all this learning without upsetting the applecart of the big corporation?
I found something called graduated engagement to be very effective. That’s where you engage the functions early, but you don’t expect anything of them, and they don’t expect anything of you… You get permission to operate at a small scale experimentally early on, and you keep people informed, and then you commit when you’re in incubation, when you’re actually in marketing. So that’s something we did at Goodyear.
Senior Executive Media: Tell us about setting up one of those services at Goodyear.
Jim Euchner: One of the businesses we started is called Proactive Solutions. Essentially, the business started as monitoring tires of long-haul trucks in real-time in order to alert people when they might have a roadside failure due to a tire issue. We found from our experiments that we could predict failures, usually due to poor inflation management, a few days in advance. The question was, how do you make that work in the real world? How do you make the technology work?
We did experiments. For example, we worked with two fleets of 50 vehicles each, to just monitor the pressures and see and make alerts. What we found was in one fleet that had a lot of discipline, they responded immediately. And another, they didn’t. Why? One, the messages appeared to them like spam. There were just too many of them. And second of all, the fleet did not want drivers to make decisions about changing tires; they wanted that to be made by a central dispatch. We learned from that; we reconfigured the service. We started making alerts that were not “your tire pressure is low,” but rather, “this is urgent, stop immediately. And we’ll dispatch someone to repair it…and we’ll book the appointment.”
In the incubation phase, obviously, the business was very engaged in bringing the sales and other functions on board. … So you leverage assets to create an entirely new business that complements the core business.