The Startup Way: How Entrepreneurial Management Transforms Culture and Drives Growth

by Eric Ries

When a company puts itself on the customer’s side of the transaction (we profit only when they profit), we are able t...

contracts that charge per socket rather than per bulb. GE is responsible for

which means that sometimes nontechnical parts of the cycle can be collapsed through business model changes.

Because distributors had to purchase the new product and revamp their showrooms in order to display it.

Why not move showroom costs onto our balance sheet?

Through the use of leading indicators that measure validated learning

LEADING INDICATORS

Their purpose is to track signs that the process is working...

The goal is to show that the probability of something good happ...

He was convinced that just getting to market faster and learning from customers sooner would eventually produce better commercial outcomes.

“Instead of bringing you perfection, how about we bring you something that is still significantly better than what you have now but is just a start? We can bring it to you next year instead of in five years if you would help us by becoming an engaged part of the process.”

They hadn’t done anything yet except have a conversation, but already their relationship with the customer had changed fundamentally. They knew they were on the right track.

Change is hard, but it can also be contagious. Enthusiasm for a new way of working can make a huge impression on other people.

Morale is powerful.

Without this agreement, all the experimentation in the world in Phase One is for naught.

often ROI—with validated learning

Dropbox’s two basic metrics were: 1. Virality. “We did not want Paper to become a single-user tool. If someone was using Paper to replace [to-do list software] Evernote, we weren’t interested in that. We needed it to spread and be collaborative.” 2. Week-two retention. “We invited someone, they tried it. Did they come back in week two?”

Metrics need not be complicated. Jeff Smith was hired into the role of CIO at IBM in 2014 to lead an agile transformation in the IT division. He says, “We used to measure too many damn things that did not have anything to do with the actual business value created.” Now they have a list of four: (1) how fast a team can get a new task done; (2) how many tasks a team can complete in the course of one regular work cycle (however long that is); (3) how long it takes for a task pulled out of the backlog lineup to get into production; and (4) how long a task has been sitting in the backlog, which includes pruning projects that have been made irrelevant by the passage of time.

“The simpler your metrics, the simpler your goals,” Smith says. “If everyone can understand it without a manual, people star...

Metrics are critical, Lefler says, because “when leadership can’t measure results, the common response is to require all decisions to go up to their level. The first-order effect of better measurements is better decision making. The second-order effect is that leadership gives high-performing teams the autonomy to act faster and focus their attention on the right things.”

They can both protect the innovation teams and reassure everyone else that rising to the call in the company’s hour of need is also the right thing to do. It’s one of the ways in which organizations begin to build the capability to do both kinds of work simultaneously. Without this, long-term, sustained growth is impossible.

One of the most important things an organization needs to do in the early stages of a transformation is to make the process its own. That includes talking about it in language that makes sense for each individual company. As Beth Comstock says of FastWorks (a name that drew on GE’s tagline “Imagination at Work”):

‘You can’t replicate. Run your own experiments, apply everything to your own process, and then you’ll discover what works in your organization.’

It

has to be designed by people who truly understand the company culture and the levers that make it work.

outsider pushing the organization to change is do...

“We realized we needed to redefine and re-articulate how we wanted our employees to think and act and lead.”

(“You can’t just train people and expect that everything’s going to be fine”),

“What are the levers for change?”

Every company has levers that make it run.

Review and identify challenges faced by Phase One teams and projects.

executive-level champions

we marshaled our evidence from Phase One to win them over.

“How do I know this is going to work when I’ve had success in my career doing something else?”

Unsurprisingly, I found that putting it in those terms was an effective way to get people to listen. Just saying, “I’m from corporate, and I’m here to help,” wasn’t going to

The executive sponsors mentioned in Chapter 6 were invaluable at this stage for this very reason. Just having someone from each division who participated in the training and could say, “I believe in this,” made

“How are you being held accountable for success by your leaders? What kind of questions are they asking you in your reviews?”

Everyone realized that this change was nonnegotiable and that failure to take it seriously would result in real consequences.

The P&L leaders considered what they would have to do, personally, to effect change within the team, from the top down, to the questions they were asking in reviews.

Because his incentives were properly aligned, he took the process seriously, which allowed him to be not just effective but creative about how to motivate his own people.

“After each session, we would huddle and ask, ‘What worked? What didn’t work? What’s not resonating? What do we need to dial up or dial down?’ ” Janice Semper remembers. “It was tough.”

all the exceptions that had to be made for a team to kick off its project: compliance, hiring, approvals, etc., many of which

What was done ad hoc and by decree in the early stages must now be systematized.

RESISTANCE IS A SPECIFIC KIND OF CHALLENGE

I’m often tasked with giving executives the bad news that they’re paying people to inhibit innovation in their organizations.

Middle managers especially have a tough time with corporate change. They’re the ones who are required to safeguard the company’s “standard work” and also deliver results, often without having the authority to change the standard on a whim. They are under constant pressure from above and below.

Rather than view these managers as villains, we have to take their objections and skepticism seriously—and find ways to help them support the transformation rather than hinder

Executive championship is instrumental in broadcasting the message that this is the way an organization intends to work.

That was when Mahan made a simple decision that dramatically changed his team’s future, as well as his own. Knowing that the head of engineering was literally right down the hall, and bolstered by the support of his executive champion, he decided to ask the question himself. “Do you mind if we don’t follow that procedure, because I’m only giving out these prototypes for sixty days?” he inquired. The head engineer replied, “Of course I don’t mind. You’re just doing a test, right?”

When I give workshops, middle managers often find these stories upsetting, because they fear they represent a breakdown in the company’s processes, employees violating company procedure, and a loss of control.