Eric Ries: How to Make Your Culture More Entrepreneurial

hello Happy New Year and welcome to another of our creative confidence series I am thrilled to be here today with Eric Ries thank you for for joining us I'm sure the majority of you know who Eric is you probably wouldn't have joined us today but just to give you a little background so Eric is a an engineer and an entrepreneur but he has become very well known around the globe for a lot of his writing on the Lean Startup so really codifying the process that a lot of startups and entrepreneurs and and creative organizations go through to bring new and innovative offers to the marketplace but he's here today because he has a new book that we just thought was absolutely terrific here at IDEO and i do you have a start-up way and we're gonna talk more about what that is about today so with that we're gonna start off with a question for UI we know we'd love to put people in other people's shoes and today all of you out there are gonna put yourselves in Eric's shoes and I'm gonna have you imagine a moment that happened in his life so imagine you're Eric you've written the Lean Startup it's like a movement out there people are following it people are talking about pivoting and and MVPs Minimum Viable products and build measure learn loops and all of these kinds of things and then all of a sudden one day you get a phone call from the CEO of a major global corporation with like two hundred thousand people in and I want you guys to think through and share in the community chat what are some of the things that would be going through your minds and making you sweat as you think about taking something that's come from a start-up and bringing it into a major corporation so go ahead and share some of the things that would be on your minds some of the challenges some of the exciting things and while we do that we're gonna have you air kick us off by telling us what actually happens sure this is a I mean that really did happen I tell starting the new book about when GE called and said hey you know you come talk to us about about me startup and you know well I get that call a lot from corporations they are you not very serious about it because usually what happens is some executive or CEO they read a book about innovation they get excited about it like 20 minutes and then I get pulled back into the regular job so when we actually talk to them about hey this is gonna require a cultural change or organizational change they're like nevermind just forget it so let's say I take a lot of call I you just say that's you know I'm happy to help you know let me know what you need then that's usually the end of it especially because I have a tendency to tell people that if they want to know why they're having trouble with innovation they have to look in the mirror now they're looking at the problem a lot of corporate executives are like thanks for coming in that's the end of it right they don't want to hear about their own personal behavior right now you know whatever I'm not a professional consultant I don't care it's no problem but anyone but GE called and they said oh we're really serious about this we'd like you to come to the officers meeting they called it in Croton ville like their legendary executive Development Center I didn't know GE especially well except like you know what you see on 30 rock and from the general culture and so you know we're looking up I think they were at the time they were the fourth largest company in the world that's okay it's not like a fortune 500 companies its fortune five and you're like oh my god this is a very large company and I didn't know what the officers meeting was at that time but now I know it is their annual like leadership retreat where they spend three days with the top 250 people in the company so this is all the CEOs direct reports it's plotting strategy for the coming year and I especially didn't understand that this is an open meeting they don't usually have outside people this is an internal meeting so Beth Comstock who was the CMO at the time I actually met at an ideal event originally was got really going out on a limb to have me come in and spend five minutes pitching Lean Startup to this very skeptical crowd I had just five minutes that was scheduled for five minutes we have you took a lot longer but I think they were very much prepared to pull the hook it wasn't going well yeah let me start up so to me 300 pages to explain me to start up they're like no problem just condense it down to five minutes and so I go on and get my little pitch any questions and you know this is a very corporate hire or a couple plays there are no questions until the chairman has a question so everyone's looking at Jeff Jeff and not see him and he's like he calls on one of his VPS by name so-and-so hey your division only makes 500 million dollars a year for GE so how come you're not already doing and then there were a lot of questions I mean all of a sudden be like oh he's serious like Oh better take it seriously and and it was fascinating so I'm like watching like all these like concerns in question people have you can imagine the skepticism in this room people were like why should I listen to you like software dude we make engines a running joke at my for my years at GE was you know well no one wants a Minimum Viable engine these things explode if you don't do it right and like what do you know software was out to do it it still can value 12-person startup to do it's like it was tremendous tremendous skepticism but to their credit they said well this is all about experiments right so let's run an experiment and they asked me to come to a pilot project with them she's like there's a workshop with one of their teams to see how it would apply and remember Jeff was like Chairman's prerogative I get to pick the project so he's like we're not doing an app there's not gonna be any software in this thing we're gonna build a diesel reciprocating platform okay on the series X engine I said no problem happy to do that my only one question was like it was quite the educational experience for me to like learn about their business and the physics of it in the business model of it and to build this program eventually became called fast works that I'm you know doing a lot of transformations on the company yeah yeah I'm gonna pause and just look at what some of the things are that are coming in from people but I can see people are wondering about you know what are the challenges replicating small experiments in creating a culture to accept experiments uh-huh implementation and budget challenge change challenges what happens when you change some of them terrible does this actually work in other domains besides startup Celestion you know apples versus oranges what is risk aversion all the time so I'm curious um I think the majority people probably with us they know about and I'm curious when you started to think about how the lean sort of evolved become the sort of way can something that was not just entrepreneurial but intrapreneurial and inside of large corporation what are some of the things that stayed the same and your thinking and what are some other things that shifted well let me let me illustrate that through the story of this project just a pick up a story when I was you know just be like well let's actually talk about it I feel like so many people yeah my favorite is this guys like big mistake she should have started that way it's like now you tell me a note of it really helpful we've done this webinar 5 that would be terrific yeah yeah and we we did this with Toyota too for the person asking about Toyota was a quite a full-circle moment anyway so so let me just kind of set the scene for you so you can kind of visualize what this was like because this is a very culture clash moment mm-hm was not exactly set up for success the guys like you made a mistake it's not wrong this was not a great way to start or is how we started the picture a like HBS style business school classroom tear and seaming the whole thing I'm at the front at the podium to my right in the first row are three people from the series X team who have been summoned from Texas to Croton Ville to have this workshop with me there's not their choice if it sold to me I'm here how this worked out with me in the back of the room there are 25 corporate vice presidents there just to observe I think he imagined these poor guys from Texas this is the ultimate lose-lose situation for them because in the one hand this dumb software guy from California is supposed to teach them something new if they admit that they learn something from the dumb software guy what does that say about the quality of their pre-existing plan on the other hand if they say that this was a waste of time what does that say about the Chairman who told them to have right so they're just absolutely it's and and the worst part for everybody is I don't know anything I don't know I literally I used the word engine and turbine interchangeably I didn't know they were two different things which drives them crazy that's like not only two different kinds of products but two different fundamentally different technologies with nothing income so so it was a real culture clash and what was interesting about it was I started out and I I just I came into the meeting really with the question you asked on your mind what's gonna be the same one I didn't know I said look let's just a plug I could just pretend that I'm you know in South of Market meeting with a start-up who wants to build but diesel engine and let's treated the same yeah let's see what happens so I asked the team to present for the whole room myself and all these luminaries what is the currently approved business plan for the series accent so this is a this is a product that is used I subsequently learned for fracking for stationary drilling for distributed power for marine electric I met the engines of powered boats it's using locomotive so like it was like doctors to me like by sea by land on a plane and a train right like whatever you need power the series X engine is okay no what have you saying it's for everything it's going to take three hundred million dollars and five years to build this product after which will have a global launch and will be used simultaneously by thousands of people for all these things so make the company a ton of money and they presented a slide that I will never forget as long as I live bar chart is a bar graph by year revenue forecast for series X engine for the next 25 years and it's a beautiful chart we now obviously we got yeah right so the first five bars of this chart blank because of course during the five years we're in stealth R&D there's no customers duh right man and we launched the product and there's this beautiful hockey stick shape you know up this is the fantasy plan right and I remember sitting there look at the slide I mean I don't anything about diesel engines but I know this graph very well like I'd mention I'm from Silicon Valley like step into my office my friends like we make this graph all the time and of course we know we don't live up to it but we promised them well you know and I asked the people in the room okay who believes this forecast raise your hand and I'm not making some every person the room raise your hand like of course wait kid you don't understand the brightest minds of the G corporation yeah prove this is the basis of our three hundred million dollar investment we have to make the billion dollar or why did I did I'm like oh my apologies no offense intended but no really I pointed to a bar random who here honestly believes in the Year 2023 would have exactly you know one point eight seven six - whatever a billion dollars in revenue when you put it that way everyone's hands like well exactly you know I well and they said we should have a conversation okay so what do we know what do we don't know and what are the leap of faith assumptions that underlie this plan what has to be true about the world this product to be a good idea and of course this is an engineering company so all they want to talk about is technical stuff a task time this efficiency rating the materials the blades work like this the you know service or whatever the likes to work when there's a lot of sand and to make sure it doesn't corrupt all the technical gobbledygook I'm like okay but what about the commercial assumption who's the customer yeah what's a we used for how do you know those are the like five use cases how does it get distributed how does it get serviced five years right and the business plan in Appendix B footnote 3 says like Oh fall on that product after five years of development like solve all that problem later and so it was okay let's imagine that there's a significant problem with this plan or the leap of faith assumption is wrong the distribution network plan is not going to work when do you want to find that out now or five years from now right after you spent three hundred thousand dollars three hundred million dollars we should have a conversation about oh gosh we know what could you do to build a Minimum Viable Product to test these different assumptions and at first everyone's very skeptical right Minimum Viable engine and whatever I was like well you know just barely as a thought exercise what if we only did one of the five use cases first huh are some of them easier than others right like stationary drilling is a lot easier than putting it on a boat like I hope for obviously like the above the weight is super important my boat not important all when you're on it's stationary or so so this could we pick would that save some time and of course like the way that these corporate projects that fantasy plans usually work is we make the engineering problem harder for the designers and the engineers in order to produce a better fantasy plan but that's not really a good approach because we've just compounded uncertainty on top of uncertainty by adding all these technical challenges so the way we reduce cycle time is not by cutting corners and violating safety or whatever it's by reducing the scope of the experiment to make it easier so that get it down to three years instead of five years up to you know we're working like hey how long would it take to produce one engine and they're like kid again I don't think you really understand how mass production works once you set up the assembly line and the supply chain and all that stuff that takes the same amount of time no matter how much you produce one engine or tenth that like it's a mass production I'm like okay time out time up again no offense I don't mean one line of engines how long is one prototype and they're like oh we have to produce a prototype for safety testing blah blah blah like and not here and then one of the engineers is like well you know if you just wanted to do stationary drilling and you were willing to make the following three compromises you kind of have an existing engine that's pretty similar to series actually you're just a lot of funding being yeah and I'm like how long would that take and that would only take six months so you imagine we're gonna get it to market with six months from now instead of five years from now full 10x improvement in cycle time and I hate any VP's VP's here let's use them any VPS you have a customer that might want to buy that one of the beams oh sure I like this is we're cooking with grease now we're gonna yeah we're gonna make a sale MVP in the market six months and finally one of the teepees who is just like he's not having it not having a good time in this workshop it's probably like I'm sorry time out what the bleep is the point of selling only one engine because he's like a second ago we were gonna make four billion dollars now what are we gonna make like a thousand dollars on this engine and of course I got engineers and realtor for help they're like oh no sir we're gonna lose money on the first unit because we got to sell it and he's just saying I'm like thanks engineer that's very helpful interjection right right now and I really needed that but like yeah look I think there's no way to recover from that Curt says nothing if you already know what's gonna happen in the future then you're right there's no point in running an experiment just do the plan and he's like okay great problem-solve I'm out of here I you think what I'm gonna have to be in this stupid workshop and that would have been the end of my time at GE except his colleagues who have been listening this whole time said hold on hold on wait a second didn't we just say a minute ago that we don't know what's gonna happen in future and aren't there these commercially but yes I wouldn't we so they themselves started to negotiate and think about what needs to be learned and what are the important things and that was the start we bet that eventually became the first project in this fast words program Wow we did hundreds and hundreds of those projects huh and so it was really breaking apart something from that like fantasy plan figuring out what they didn't know getting them to share what they didn't know the honest about it was very counterculture yeah for a company like GE to admit their things you don't know you're supposed to pretend and so you know and you have to be admit that you might fail the experiment might not be a success and like you have to think like a scientist right experiments hypotheses like the experiment doesn't work the way you that's not a failure yeah that's a necessary part of the learning process so it was a very interesting moment I'll try to get them to think it anyway yeah so I think if we so I love the story I think it's amazing and it's a really great illustration of how you came into thinking about things in this way if you could capture in in a nutshell what what your thinking is about moving to and more entrepreneurial management system yeah how how does that happen in this sort of way and what are some of the elements of it as you're thinking yeah this is really the thing that I became obsessed with over the past five years as more and more people would adopt Lean Startup and they were really two very funny very different use cases for Lean Startup that I would get dragged into that seemed on the surface like they have nothing in common so like I'm with Jeff and Mel and this series like I'm doing these like mad I mean we trained I now routinely meet companies that have fewer employees than the number of managers we trained at GD just in fast words I feel like our company's too big and like too big like oh you only like you know yeah what Lisa's like oh come on you know we did this in the federal government so there's like yeah you know I could be what my my organization's too bureaucratic and political and I compared to Obamacare I'm gonna say no right yeah like see knowing that so right so like there's this massive set of companies and organizations that have adopting these practices I would try to help them do these transformations and at the same time many of the companies who were early adopters of things turn you know who I met them when there's five people in a garage mm-hmm they hit product market fit now they have a hundred five hundred a thousand five thousand employees and all of the sudden the helis management problems the CEO is like wait why is my company bureaucratic why why are we slowed down we're not as innovative as we used to be what's going on how we were starting off we're supposed to be a perpetual startup what's what's happened yeah how do you keep that I've been that's convenient and what I realized was I'm actually in the same conversation hmm across these different domains because we're building these new companies to the same blueprint we'd be using for a hundred years the organizational structures incentives and systems of these companies are relatively unchanged over the over these decades and I'm like wait a second can anyone think of any ways the world has changed the last hundred years this might necessitate some new thinking like surely we could do better so I became obsessed with the question first it was really how do we transform these companies these big companies to prevent them from dying then it was how do we prevent these new companies from being built to this old fashioned blueprint and I eventually realized like the issue is not so much like it seems like an intractable problem you have this bad culture we have this bad it like all this stuff but I was like wait a minute how come every startup is built to the same work time it's because founders have a mental model of our company is supposed to be that is old-fashioned so if we can prove a can change our mental concepts or vocabulary our the diagrams that like the concepts of what does it mean to be a modern company didn't stop making this mistake over over again so that they've been this kind of Odyssey of trying to discover what would the blueprint of a modern company look like in the book is my attempt to do a very nice job look it in just a minute back in there I knew I think we one of the things we did this time we've we've got tons of questions coming in and we also took a bunch of questions from people inside of IDEO and inside of the idou community so I'm gonna start off with a couple of those yeah and I know people are asking about how you can leverage both Design Thinking and they'll be in start-up or startup way at the same time so what are the overlaps yeah and what are the distinction so we get this from from Sal one of our business designers and doing the same thing from people from Malaysia you know what yeah a very common question there's actually a little mini book that just got published it's called lean startup versus design thinking versus agile there's just like a whole whole essay just on this one topic cuz it's a common that's how you a secret okay just between me and my three thousand closest the truth the very truth of this is if I ever I'm giving a talk to a vertical slice of the company where everyone in the room has the same job title it's all designers all engineers all markers or whatever generally speaking somebody will eventually come up to me and say listen isn't Lean Startup just agile but rebranded for business people like if there's a business person that look like isn't this just lean manufacturing but rebranded you know for designers like isn't this just design thinking but rebranded for engineers and I'm always like no matter what it is I was like you're totally right it is but do me a favor don't tell the other functions that the engineers do that I was like tricking them into doing design thinking they might not like it as much so let's keep it between us it is the truth as I went way out of my way when I built lean startup to build it on a foundation of every good idea I could find so design thinking agile lean manufacture DevOps customer development even maneuver warfare that you de loops and john-boy for those that know that like Anna scientific method of course so like I tried to synthesize the parts of those systems that made sense to me but it was very important to me to not create another functionally siloed method yeah because what happens is like if you're a CEO of a company these days like once a month your head of each function will walk into your office and say boss you'll be really great if you could make the other functions do my thing and put me in charge it would be the bomb right so you could just get the engineers to do design thinking that would be sweet but like head of engineering which are yesterday being like could you just teach the designers to do agile and whatever and like we have because of the way we built these companies we have forced people into a very adversarial relationship between functions and like I mean I could have I know all these manufacturing people I don't wanna do a software thing that's not my way everyone wants has their own thing and to be fair every functional method has a unit of progress that is functionally specific so like I mean easiest one to see is agile with like burndown charts and lines of working code and story velocity and stuff like that if you've ever tried to get non software people to care about velocity charts and burn down charts you'll know like it's a very challenging thing to do design thing has its own its own product like similar concepts we're just it's hard to translate across domains so my insight was we need to create a cross cultural cross company learning method with its own vocabulary that is not rooted in any one function and units of progress that can be translated to things that everybody the organization cares about which is always resources and impact I think it has to be translatable for even for the business people even for the CEO can't be about our like provides everything and so that's that's the starting point from understanding what the what the relationship is between these startup and these different approaches I tried as much as I can to import that those concepts but to either rename them or make them so that they would have wide adoption I think you know I can tell you a lot of stories about companies where I won't name the company but I was just in a company where they had a totally segregated agile software division separate from their hardware yeah at least these two groups don't ever talk to each other they have a lot of mutual mistrust and I was sitting in the heart ironically the hardware people had been really embracing Lean Startup and we're really liking it and the software people were like we don't need that we already have a jille yeah and they asked me would I come in and meet with like a hundred agile coaches and their software division I said sure so I come and I have this meeting I'd given the pitch Lean Startup is all around the exact same conversation but for engineers and at some point someone's like yeah but even if we do Lean Startup we can never get the hardware people to do this they'll never do Lean Startup I was like well let me tell you some stories about Hardware people who are already doing Eastern and they looked at me like I had conducted black magic like you got them to care about iteration and come like yeah because I wasn't trying to lord it over them I invited them to connect the things so like that's to me I'm solving for more contemporary ways yeah so so so I think so I mean I so specifically for design I do think Achilles heel of design thinking in not in the way that it is designer that like not intrinsic to the theory it is a consequence of how we structure it in a lot of organizations like imagine I have a God's eye view of the corporation and each of the siloed functions is literally like in a big grain silo like imagine like a big giant God's eyes open okay like and so if i zoom in and like pop the top off one photo oh look at the agile guys like running around doing is highly iterative highly experimental customer centric method oh look the designers are this incredible design thinking hey look at manufacturing the manufacturing custom development everyone's doing their iterative thing and I say well is this an iterative company a learning oriented company a lot of cases the answer is no because how does work get passed from silo to see yeah I have been in too many organizations where they use Design Thinking to produce a specification document which is then handed to the engineers for implementation and five minutes after the handoff the engineers are looking in the spec document it says what says here this thing should be infinitely fast and infinitely cheap but you can only have one of the two so which is it the designers are like my work here is done I just do it this is build this back right and so like we can't keep working on we did all the learning for so one of the things that you've really tried to do is structure something that works across the entire organization and brings this mindset and and a way of thinking being that's that's invited into the corporate when you have engineers and designers in particular because this is one of the most contentious relationships and most companies and you have them working side-by-side as peers you wind up with better learning on both sides so like I mean you wind up where you actually bring engineers into the design process early they can give their input about what's feasible and also they can be learning about not just what the spec is but why yeah why did we make that choice wide and who's the customer what's the use case and that even if you wind up handing off the implementation later you know you still get this learning it's transferable but even better in the sort of way we'd say you know what we don't ever have to do hands-on uh-huh we could just build cross-functional teams from start scratch they had them work like a startup so let's I'm gonna move on to another question we have here is about you what our summit from Ryan what are some of the mistakes that large organizations typically do in the very beginning when they're trying to integrate this entrepreneurial way that sounds like there are definitely challenges with working across very much across silos their problems with the CEO of course yeah this list for me some of the assurance that you've seen in the variety of companies well just like hey that's not designed thinking I'm like I'm with you Jeff the point is that when we bring these good methods into a warped organizational structure we wind up warping the method so yeah of course we shouldn't do what I just described with the binder and that's like yeah but the whole point is we have to figure out how to prevent the CEO and the business executives from structuring the company such that we create this adversarial relationship yeah so working cross-functionally is a very difficult thing for most companies to do I was it like the three like super hard but really obvious things that people do wrong are they don't have proper team structure mm-hmm they don't assign a function they don't right they don't they don't credential teams they don't have people work on their startup full-time right so they have people working 20 things at once if you look at the psychology literature and probe out productivity every study that has ever been done as far as I'm concerned in the history of the world has looked at multitasking has found that is not effective just like it's never good at doing one thing at a time there's no evidence to support it at all and yet I constantly meet teams where everyone's working on something ten percent of their time twenty percent of time and there's like a corporate disease where we just can't admit that we're not doing as many things as we say we're doing so we like pretend that we're doing 20 projects but we're really only doing five it's like 15 of them or just like hanging out yeah so so and you can like can you imagine so imagine I was like hey I got idea for startup I soubise awesome to revolutionary technology I'm gonna get it funded on Center oh it's gonna be great here's my plan I'm gonna pick 20 people and I'm gonna assign them to show up at my office on Monday I'm gonna have them work 20% of their time on this new startup and we're gonna get funding from a VC where I said of raising like a round of funding what I'm gonna do is say hey every quarter give me some more money until I tell you stop yeah like not one startup in history of the world that you've ever heard of could have been done this way you could yeah we were just it's it's totally crazy so yeah so so we there's like three classic mistakes cross-functional like we build cultural silos we don't put people in project full-time and then we don't fund the project's correctly we use in the book I call it entitlement funding rather than metered funding okay great I'm gonna move on to another when I can see just tons of questions I wanna start oh my god so when more from the ideal community and then we'll go in but um at a cord lean startup instead of way this build measure loop has evolved into creative learning yeah but a lot of people were asking us questions as we part for this about how do you know it's the right thing to learn totally how do you know that you have good learning so I'm wondering what some of the things are there yeah learning I I don't know if it was the right word to use because it's a very loaded for a lot of people when you say we're gonna learn something people get nervous about it's an academic exercise or like it's it's a very common excuse if you didn't perform right like when you're scraping the bottom of the barrel of excuses for why you didn't deliver your life but it was it was a great learning experience it's like yeah that corporate settings especially that's like kind of a bad word to use because learning implies failure by addition always but I chose it intentionally I think it's important to reclaim learning and may give it a more rigorous stuff in Italy started I call it validated or scientific learning mm-hmm because like imagine I was like in my scientific lab and I was like guess what I've been playing with my chemistry set and I just invented the elixir of immortality and you're like wow you have any proof and I was like no I learned how to make the elixir but I can't tell you about what I learned I can't prove it to you you'd be like that's not learning that's BS that's not learning that's like why you can't see you can just claim that you did something what's the proof now if I'm like well listen I had one cohort of you know lab mice like fruit flies and you didn't give me the elixir and they lived you know X days but then I gave them like my looks or v1 and they live for 10 days and it looks ravit you live for 15 days yeah like there's a very obvious and clear way in a scientific context you demonstrate that you have achieved some kind of cause and effect and like we work on the scientific method for like what two or three hundred years using on how you count it's like well-established forms for how it works and the fact that it had to be invented means that it's not into it so it's hard a scientific method is not easy I can I get people complaining that if entrepreneurship like that they criticize Lean Startup as trying to turn entrepreneurship into a science but if entrepreneur was a science and everybody could do it therefore that's no good and I'm like dude science is a science and very few people are good at like it's freaking hard so yeah this is not easy but it is clear we understand what it is so we have to apply that same rigor to what we claim to have learned so a very common situation with a Minimum Viable Product yeah think about that the series X engine even you know the plan leap of faith assumption says customers with these attributes are gonna want to buy this product so before we even build it it's not like you walk into amazon.com or Walmart and say hey give me a diesel reciprocating platform this product has bought through a sales process yeah what's the first artifact people encounter in the sales process it's not the engine itself they encounter a brochure a promise about so you take the promise to someone and say hey would you like to buy this and they say so get the hell out of my office no of course I don't - that's terrible now have you learned something yet I would say not quite yet you you've cut the possibility that you're on the right track well let's take it to a second customer second customers the same thing third customers the same thing okay well maybe we've learned this isn't quite but that's not the kinda learning we're talking about learning that you're wrong it's not what we want we want to learn the solution to the problem so then you pivot say okay the first brochure promised this level of performance this price point these features let's try something different take that to ten customers and one and up ten says I'm interested then you do it again now three out of ten customers I so now you're sorry say hey each iteration of the product we seem to be getting a better response from customers that's proof that something is changing from version to version from homework to qohor so that it's very important that we not only ask people what did you learn but we also ask them how do you know what is the evidence that some more said and we have to train people in these more rigorous ways of thinking no matter what function they're well I really love one of the things that I love in the way you talk about learning loops and measurement is that you're you're forcing the pace and a lot of these you're saying don't let a week or two weeks or a month go by without going out and gap and having an opportunity to gather more data gather more abs asteroids because I think that's one of the things that people can always lean back cool their heels oh we're not quite ready no one's ever ready yet and so how do you force the pace to share things and looking at that in the in the book I say that accountability is the foundation of management ultimately what matters is as leadership holding people accountable for patience B mm-hmm if you don't do that then you always get delay is if it's the delay is the most rational thing in the world because you know especially if you operate under entitlement funding if you delay you're still gonna be funded yeah so where's the pressure but where's the pressure in fact it's actually counterproductive to ship like I know a lot of teams that sit there on a Friday and they're like okay we're ready to ship on Monday or should we delay two weeks let's do a little like right like you should oh you should always delay because if you so let's assess for possible outcomes ship or don't ship times it's a success or it's not a success so if you ship and it's a success what will happen to your budget it will continue if you ship and it fails your budget could be canceled if you delay there's two possibilities you either had a good reason or didn't have a good reason just kidding you always have a good reason there's an infinite number of good reasons to delay so you always come up with a reason and then what will happen to your budget if you delay for a good reason in most organizations nothing so logically speaking you should always delay to improve your chances of your one big swing beings that's for if you build your company that way not only do you wind up wasting a lot of money and time call this delay but people eventually realize wait a minute if I'm audacious enough I can play this game over over again and get promoted out of this job before we ever ship anything and then whatever happens is the next guy's fault so you want to ball these middle managers running on these organizations that have never shipped anything in their life but have gotten amazing reviews and that's really toxic to building a creative and so I'm gonna start pulling in some of the questions we can see sorry please don't have questions or form unit around how do you get this inside of a larger organization so from Kim what are the conditions for readiness on innovation occurring that'll lead to impact from ondrea's what are the first organizational habits that need to be broken so when you're getting things started in an organization what is some how do you pick like the project where to start it's hard I mean so so you have to be you can't be picky at first look to me the entrepreneurs mantra is three things like think big start small scale fast that's it so think big so you have to have in mind and organizational transformation that you think could work but just like we did a GE start small one project for projects fight like a small number of pilot programs and do those projects right yeah don't do it half way because if you do it half way and it doesn't succeed people half the people will say it's because we did this at all and have to because we didn't do it all the way new the first projects all the way and then always have a built-in scalability plan so my general rule is double every time when in doubt so when we do this achieve one project we had four projects and then we started to do four projects at a time you know every couple of months and then we would do eight projects at a time and see so it's just like scale it up I have a plan to scale it with pace in terms of choosing the projects at the beginning beggars can't be choosers so we would take anything where does a send us send us you're tired you're hungry you're poor like we'll take whatever and and the truth is that's actually a great strategy because you want low expectations I loved getting though like the orphan project that's like stuck between two divisions and can never get funds and everyone's like this project is a bunch of losers and then you whip it into shape real fast discover the people are perfectly talented is the organization that's the problem and then you seem like you did magic so I like the other though you know I like to unassuming decrepid projects from the the dregs of the organization no problem as you build the transformation you can start to get more rigorous about portfolio building about project selection like I mentioned that you know at some point for the G projects we had we made the project team bring their executive sponsor to the workshop they would learn about fashion again from the fair that was a problem requisite for being we couldn't have imposed that rule at the beginning because I don't want to show up so you know we added rules as we went in the initial cohort of company of project they were there was no dedicated founder/ceo leader of the team you can't get anything done without a dedicated leader but we did so we didn't make that a requirement till we build up some political capital so what's really getting you're pulling whatever you can start wherever we always make sure the teams had proper coaching had executive air cover like we really set it up so that they could succeed and we put them under a lot of pressure we didn't like the initial fast works projects had four months to demonstrate success and they had to they had to pitch their plan to very senior executives at the beginning and they had to demonstrate their progress to senior executives and so with a high stakes high pressure yeah and that allowed us to then say look because you're being held to a high standard ask for what you really yeah what do you what kind of and that's when we uncovered all these organizational mistakes you know it was hard to get teams allocated structured properly they were all this Bloods all this political nonsense we uncovered we had to get people just to learn to speak openly about these things which were a little bit countercultural and like a little bit embarrassing to it mm-hmm well somebody's also asking about the Roman is asking it and when you talked about the serious ax project and there was the fantasy plan maybe worked backwards from and deconstructed is that an approach that you often use is that a natural way where people do what you usually do come in with the typical plan you would oh yeah and then break it down I I actually really like to work that way I feel like I'm the last person in start-up land who's Pro business plan I'm just saying like not the fiction writing part of it yes I scrap we can scrap the word document in the diagram the beautiful picture is like just give me the expell spreadsheet like show me how individual customer behaviors add up to a highly scalable business and from there you can easily identify the leap of faith assumptions because imagine I have a spreadsheet from pick your favorite business plan you've ever yeah like and of course it was an appendix being 2.5 yes I'm sorry I have my magnifying glass with me I got my magnifying glass out I bought your spreadsheet printed out zoom in I'm gonna find some box somewhere that's gonna say 10% Oh what is this 10% it says percentage of customers who sign up who tried to become paying customers after the free trial that's an interesting number is that something that should be in 2 point font and appendix B or should that be in like 100 point font blinking red leap of faith assumption on my wall well I know it's the latter why what happens to your beautiful spreadsheet if I change that 10 to a 0 yeah it's like a nuclear bomb he's zeroes cascading out the whole spreadsheet earns a zero because if nobody will sign up it really doesn't matter what the average lifetime that I doesn't matter the growth of nothing matters because nobody wants to buy our product so we have a like fundamental problem so how do you produce a business and to identify which ones are the leap of faith yeah there's a whole technical aspect of this called innovation accounting which we're obviously not gonna get into too much detail here unless people genuinely want to talk yeah happy to talk about it but basically just like you didn't learn cost accounting from some guy had a webinar or five minutes like if you wanna study this y'all learn the math it's complicated but the idea is to deconstruct a business plan in a rigorous way to identify which of these metrics have high sensitivity to the final outcomes and the way you do it is by looking at the inputs that drive the model not the outputs like even that series X Ludacris hockey-stick that I was teasing them about a second ago there's nothing wrong with a hockey stick what is wrong is pretending that that hockey stick is a prediction about the future it's not it's a deductive consequence of a series of assumptions well the assumptions are where the value is not the outputs so in the chapter innovation accounting I try to show how the fantasy plan actually describes the end zone of where we're trying to get to an innovation accounting gives us a rigorous way to evaluate progress against that goal even when the gross numbers are very small mm-hmm and then what are the questions and metrics need to look at in order to progress from backward from the right now and like I'm running closer to most teams most teams that they run an experiment and nobody wants to buy it or like giving up I think all this is bad I better not tell anybody but I would say finding out that we have bad news that's true is a lot better than having good news that we made up yeah so you ran an experiment nobody wanted it that's a great place to start now we know that we're at zero so we're in the zero yard line we know we need to get to the hundred yard line so let's march down the field let's build measure learn our way to subsequent experiments and see that we're making progress I think we can distinguish at yeah so that it's not such a big deal okay I'm gonna go to a speed round Cinthia silos and hierarchies just blow them up obviously there's a lot more to it than that but yeah like I in the look in the book I lay out the the actual blueprint of how I think these silos and functions would work together and so like there is some rigor to this but like there's nothing sacred about these silos they're not magical they were not given to us by Moses on stone tablets think we can change him mm-hmm and then I went from enjoying as many corporate corporate environments now have innovation departments is this good how should the organization be educated yeah so it's interesting used to term innovation department because that's not necessarily bad but usually what I see is what I would call an Innovation Lab so so general what happens is I go into a company and I ask the CEO who's in charge of innovation in this organization and that usually will tell me everybody is I'm like okay but if this was a different function I was asking you about like marketing would you accept that answer do we need a chief marketing officer now everyone's in charge of marketing the hell we talking about we don't need a chief financial officer we'll just make everyone in charge of Finance I'll put up posters on the wall say everybody think finance good finance that's like I mean we'll be in prison in no time of course we wouldn't do that now imagine I'm like hey you know we should have a finance lab let's have the finance people go work in the finance lab and then that will outsource all the finance to them and the rest of us could just pretend it doesn't like of course that would never work so why is innovation any different I call it the missing function in the corporate org chart I think we should treat entrepreneurship as a first-class corporate discipline just as important as marketing engineering design or supply chain and we should integrate it into the into the org chart in a very specific way which I outline in the book last thing okay I didn't what he finds entrepreneurs inside of a corporation this is a great question it's so counterintuitive to people nobody believes my telling us but but organizations of any size just by the law of large numbers and the normal distribution of talents are loaded absolutely loaded with entrepreneurs you wouldn't believe it I'll just say one last word than with my favorites I was working on a project that came to one of my workshops that was a joint project between finance and IT to do what's called corporate consolidation this is like one of the most boring project you ever hear about most like most creative people when start telling them about what corporate consolidation is that was like I kill me now right like or what and it's like the worst functions right like like IT if I like the most snarling evil like uncreated you know and the project team I came to me was a 25-person committee everybody on at 10% of their time so this is like a nightmare project here was their plan okay here's the plan they were gonna spend his committee 18 months studying the problem and figuring out a new global standard for a new software finance product that would do the consolidation differently they would then print that out into a binder like what ever before hand it off to the CIOs and all the divisions and tell them to spend 18 months implementing this new standard so 36 months from now we're gonna have these amazing productivity improvement come on we all know what's gonna happen these projects are like classic you know black holes zombie projects don't deliver any value and who's gonna be accountable for the screw-up nobody because the see I was gonna say well it was a bad spec and the people who designed it are gonna be long gone so right so how you gonna know kind of so this is a nightmare project so we spent three days together after which the team reorganized into a five person cross-functional team and they went around to different piell's and they said listen we'd like to make you an offer voluntary offer I'll tell you what to do if you say yes our whole team will be on an airplane the next day to your corporate headquarters wherever it is in the world we will sit with you first version of the software will be stood up in 30 days and every quarter we will voluntarily give you the chance to switch to the new software if you want to and we will not leave until we have proven that we can improve productivity for you piano and after which we'll do it for a second and then a fourth of an eighth right like then wolves will scale up and refactor right and refactor the differences and the people that they made that offer to called me on and we're just like what did you do was there something in the water like we did the workshop in San Francisco so they're like did you sound funky and said let's just go you know this is some kind of pharmacological or spiritual miracle I'm like there's no miracle these are the same boring people that worked here before but finally finally finally given the opportunity to act an entrepreneurial way and this is the part nobody believes but I was there I saw this with my own eyes the intensity the creativity and the passion of these five IT finance dudes were every bit as entrepreneurial as anyone you would meet in San Francisco like they were the real deal even though if you looked at their resume and the way they were dressed you know you would never in a million years have been like oh there's an entrepreneur so there are an insane number of these people in organizations that just hidden in plain sight in fact I would go so far as said in most organizations teach them that they have to hide the entrepreneurial side of themselves and leave it at home don't bring it to work yeah because we want you to be a corporate drone and not think creatively and companies swear that they don't want that but if you look at the deep systems of the company how they reward people how they promote people how they allocate resources they do so you say with your mallocing people yeah can you tell people to be innovative they hear with their ears you want me to be innovative but they hear what their wallet you don't want me to be elevated I guess who wins yeah well I think that is a excellent notes leave it on that you know thank you I think that's one of the biggest things we have income and we believe anybody anywhere is capable of doing these more modern working so thank you for coming thank you for sharing thank you all so much thank you

Channel: IDEO U

Views: 1,921

Rating: 5 out of 5

Keywords: Eric Ries, IDEO, IDEO U, The Lean Startup, The Startup Way, Entrepreneurial Culture

Id: EaUtV7P7Xdg

Length: 46min 21sec (2781 seconds)

Published: Wed Feb 14 2018