Reflections on The Startup Way – Part 2

The Startup Way: How Entrepreneurial Management Transforms Culture and  Drives Growth: Amazon.co.uk: Ries, Eric: 9780241197264: Books
The Startup Way: How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. By Eric Ries

In his The Startup Way book, Eric Ries reveals how entrepreneurial principles can be used by businesses to take advantage of enormous opportunities and overcome challenges resulting from our connected economy.

In this series of posts, I’ll share my key takeaways, and relate those to my own experiences and reflections. In the last article, I explored how organisations corner themselves by becoming over-reliant on their successes. In this article, I’ll introduce and reflect upon the missing organisational capabilities for entrepreneurialism and new growth.

Ries describes these capabilities as:

  • Create space for experiments with appropriate liability constraints
  • Fund projects without knowing the return-on-investment (ROI) in advance
  • Create appropriate milestones for teams that are operating autonomously

In my experience, successful innovation occurs when entrepreneurs’ autonomy is bounded within a governance process which selectively and incrementally invests in strategies that are demonstrating early success. If innovators cannot demonstrate early signs of ROI then they either pivot to a different strategy, or they receive no further funding.

This approach enables appropriate liability constraints, operational autonomy and funding without knowing the ROI upfront. It protects innovations teams from over-committing, and it protects the business from over-investing in strategies which haven’t proven themselves.

The team is liable because they have the responsibility to achieve what’s been agreed. The leaders are also liable in that they must remove organisational impediments and protect the team from the status quo that may hamper the innovation team.

Freedom is constrained to ensure the team and leaders focus on what specifically needs to be learnt at a sustainable pace. The constraints should be both time and funding; for example 4-weeks and $25,000.

Yet, this approach doesn’t mean innovation teams are micromanaged; it’s quite the opposite. Once an innovation team has agreed on the measures of success, gained the support of leaders and received the funding, they have the freedom to explore how to achieve their goals within the agreed constraints.

Couple Buying Meat at a Supermarket
The innovation team relied on the leaders’ support, protection and network to work with store managers who were open to testing the benefits of the Scan and Go app.

Photo by Jack Sparrow from Pexels

An example of where I’ve supported a retail client achieve this is with their Scan and Go service they were developing. The team wanted if store operations could support customers purchasing items by scanning and purchasing them using smartphones, and then immediately leaving the store. This allowed customers to avoid the checkout queues and put less pressure on the checkout staff.

There was natural concern that there would an increase in theft (known as shrink in the retail industry). To contain risk the innovation team had liability constraints of 2-weeks when they could test a prototype in two stores which were closely monitored. The types of items which could be purchased were also limited.

Assorted Bottles and Cans in Commercial Coolers
To create safe-to-learn constraints, types of items were excluded from the Scan and Go experiments. For example beers, wines and spirits which are high-value items.

Photo by junjie xu from Pexels

No one knew the ROI upfront. How much would it cost to build and operate? How would it impact sales and shrink? How would store security respond? To find out the team worked with the leaders to agree on measures of success and thresholds.

Within a limited timebox, budget and range of items, the innovation team chose to develop and conduct experiments in a way they felt appropriate. The leaders were on hand to use their social network to identify the rare store managers who were open to partnering with the team.

Without prompting, tentative signs of success were shared between store managers. The excitement of collaborative discovery created interest from area managers. This buzz created a larger opening for the next scale of experimentation. Changed was never pushed onto store and area managers.

This unprompted exchange of stories between different groups shows that innovation is as much a social phenomenon as a technological one.

This example of experimentation with liability constraints, funding without knowing the ROI upfront and allowing teams to operate with autonomy, became an exemplar of entrepreneurialism for my client.

Remember from the last article, that entrepreneurialism is vital to ensure organisations don’t become over-dependent on past successes.

In my next article, I’ll reflect upon my next takeaway for The Startup Way, which will be on scaling the innovators’ successes with the resources of the parent organisation.

Reflections on The Startup Way – Part 1

The Startup Way: How Entrepreneurial Management Transforms Culture and  Drives Growth: Amazon.co.uk: Ries, Eric: 9780241197264: Books
The Startup Way: How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. By Eric Ries

The Startup Way is a 2017 book by Eric Ries, which is a follow-up to his blockbuster Lean Startup.

In The Startup Way, Ries reveals how entrepreneurial principles can be used by businesses to take advantage of enormous opportunities and overcome challenges resulting from our connected economy.

In this series of posts, I’ll share my key takeaways, and relate those to my own experiences and reflections. Let’s start off by exploring how organisations corner themselves by becoming over-reliant on their successes.

Kodak has become the go-to case study of an organisation that became myopic and over-committed to its past successes.

Ries states that if an organisation is constrained by capacity, they’d typically endeavour to acquire more, in a bid to gain greater market share. New products tend to be variations of existing product lines. Firms compete primarily on price, quality, variety and distribution. Barriers to entry are high, and growth is slow.

In my view, if exploited for too long, what Ries describes can result in dangerous consequences. It can create a difficult-to-reverse dependence on legacy successes. Repeating and scaling an organisation’s previous successes can become its unspoken raison d’etre. In an increasingly fast-moving market, this can be disastrous.

The over-reliance on existing successes also develops an expectation that stifles the emergence of innovation within organisations. Success leads to criteria that promote the fine-tuning of existing products, processes and behaviours. This makes it difficult to accommodate internal disruption, vulnerability and relearning – qualities necessary for innovation.

Organisations scale success by developing a highly tuned operational system. This is often at the detriment to their capacity to innovate.

I believe this ties into Apex Predator Theory developed by Dave Snowden. Organisations will eventually fail as they become competent and too wedded to the current operations and market offerings.

Apex Predator Overlapping S-Curves | AGLX Consulting
Apex Predator Overlapping S-Curves. Illustrated by aglx.consulting

My next article reflects on another takeaway from The Startup Way – the missing capability that enables organisations to overcome their over-dependence on past successes.

Patterns for Strategic Execution

I’m often asked by leaders to support their organisation to execute their strategies. So over the years, I’ve come to recognise common anti-patterns which hamper organisations from delivering upon their strategies.

In my last article, I shared those anti-patterns to strategic execution. In this article, I’ll share the patterns which support the mindset, ways of working and conditions for effective strategic execution.

But first, let’s remind ourselves of what is a strategy and how it relates to organisational transformation?

Strategy and Organisational Transformation

“A strategy is something which gives consistency over time and contains the essence of how you’re going to be different”

Gary Hamel

An organisation is likely to be employing multiple strategies. Each strategy is a vehicle for organisational transformation and value creation. They can fall into these categories:

  • BusinessIn a rapidly changing world, what’s right for the business and the colleagues? Yesterday’s success may not be tomorrow’s.
  • Competitive marketHow should the company differentiate itself? What privileged insights or capabilities does it want to bring to bear?
  • Customers/stakeholders – What new or existing wants, needs and desires does the company want to address? Which ones should it stop serving?

Uncertainty means an organisation should test & learn which strategies will fit the organisation’s vision. A vision describes what the organisation wants to become; it’s an aspirational and motivational indeterminate future goal.

To move with velocity to drive profitable growth and become an even better McDonald’s serving more customers delicious food each day around the world.

McDonald’s Vision Statement

Now, onto the common patterns which I’ve come to recognise as conducive to strategic execution…

Patterns for Strategic Execution

Shared Vision

Co-develop a unifying vision statement which is both aspirational and motivational for leaders, innovators and the wider business. This serves as a North Star which all strategies coherently work towards, judged by a common set of success criteria.

Strategies as hypotheses

Create a safe-to-learn environment. Then rapidly test which strategies fit the organisation’s vision. Use MVPs to test a strategy’s worthiness where the minimum is done to maximise learning. If you haven’t nailed it, don’t scale it.

Protect Innovators

Appoint a leader who is able to create safe space for innovators to test, learn and recover from failure without being impeded by the status quo. Leaders must free-up their own time to remove organisational impediments and understand when they should encourage teams to push on.

Metered Finance

Like venture capital investment, metered finance is the incremental release of funding judged on the evidence of successful outcomes. Such governance helps innovators know when to persevere, pivot or pull-the-plug on their strategies.

High ambiguity

Handpick individuals to form highly supported innovation teams. Such individuals are able to deal with constant change and novelty. They can cope well with failure, experimentation and can rapidly test their gut feelings.

Social Capital

Once they’ve found early success, innovators will need the support of operators. Operators have the access to capital and scale. Support individuals who have, as Mary Uhl-Bien describes, the Social Capital to bring those two worlds together.

Anti-patterns to Strategic Execution

I’m often asked by leaders to support their organisation to execute their strategies. So over the years, I’ve come to recognise common anti-patterns which hamper organisations from delivering upon their strategies.

In this article, I introduce the main anti-patterns I’ve come across. In the next article, I’ll share the patterns which create the mindset, ways of working and conditions for more effective strategic execution.

But first what is a strategy and how does it relate to organisational transformation?

Strategy and Organisational Transformation

“A strategy is something which gives consistency over time and contains the essence of how you’re going to be different”

Gary Hamel

An organisation is likely to be employing multiple strategies. Each strategy is a vehicle for organisational transformation and value creation. They can fall into these categories:

  • BusinessIn a rapidly changing world, what’s right for the business and the colleagues? Yesterday’s success may not be tomorrow’s.
  • Competitive marketHow should the company differentiate itself? What privileged insights or capabilities does it want to bring to bear?
  • Customers/stakeholders – What new or existing wants, needs and desires does the company want to address? Which ones should it stop serving?

Uncertainty means an organisation should test & learn which strategies will fit the organisation’s vision. A vision describes what the organisation wants to become; it’s an aspirational and motivational indeterminate future goal.

To move with velocity to drive profitable growth and become an even better McDonald’s serving more customers delicious food each day around the world.

McDonald’s Vision Statement

Now, onto the common anti-patterns which I’ve come to recognise as preventing strategic execution…

Anti-patterns to Strategic Execution

Seeking complete agreement upfront

Seeking complete agreement upfront delaying validation

Leaders delay strategic execution by seeking consensus that’s further delayed by overplanning. There’s little appetite to test convictions rapidly by starting small and deciding whether to continue based on validated learning.

No appetite and capability

Over investment and comfort in the status quo results in no genuine appetite for disruption, learning and discovery. This can lead an organisation into what Dave Snowden terms Competency Induced Failure.

Innovation teams not protected

Innovation teams are constrained by the success measures, approval processes and sceptics that are vested in maintaining the status quo. Know that the status quo will hinder innovation through bureaucracy and claims about tradition.

Conflicting incentives & mindset

Operators are habituated to maintenance and continuous improve what already exists. Operators are incentivised to deliver outcomes built upon a backbone of existing success. Such a mindset and incentives are the antitheses of those of the innovator’s.

Disjointed strategies

Often as the result of misaligned leaders following a merger or consolidation, separate leaders champion separate and ill-fitting strategies. These disjointed strategies don’t roll-up to a common set of success measures and are not faithful to a shared vision.

Uninvolved leaders

Leaders are unable to free-up time so they manage strategic execution at arms-length. They do not have the capacity to truly support and co-discover the emerging journey of the innovation team. Neither do they have the focus to remove organisational impediments.

Patterns to Strategic Execution

In the next article, I’ll share the patterns which create the mindset, ways of working and conditions for effective strategic execution.

Reflections on The Art of Business Value

The Situation

Often teams and leaders don’t work from a common understanding of business value. Without aligning to what is valuable, individuals will have an impaired ability to make trade-off decisions such as “Where should we focus our finite resources and attention”, and “What does good look like? And for whom?”.

Too often we don’t think in business value terms. We’re simply here to get the job done and move onto the next assignment or project. There’s a keenness to show output – the busy work which demonstrates effort and speed.

However, it’s important to pause and ask “Why is this project more important than these other projects? Who is it for? What’s the source of our confidence that it’ll benefit them?”

Business Value is elusive

The Art of Business Value. A 2016 book by Mark Schwartz

The Art of Business Value, by Mark Schwartz, helps overcome the lack of understanding of what business value is. With refreshing wit and insight, Schwartz challenges the assumptions of many, such as those in leadership, financial accounting and within the agile community. He offers sound guidance that’ll help many determine the elusive meaning of business value that’s contextual to their organisation.

The book explains that when we consider business value we often turn to financial accounting measures such as Return On Investment or Net Present Value. Schwartz states such measures tie poorly to strategies and don’t sufficiently factor-in risk and uncertainty. Neither do these short-term measures do well at accounting for the inherent value locked-up in enterprise infrastructure and the business agility that such assets should enable.

Schwartz says that business value can be hidden in an organisation’s rules and processes. So rather than disregard bureaucracy, we should examine it to discover the values held within an organisation. If we consider bureaucracy as a product of institutional memory, its rules and processes can become a rich source to discover what an organisation values.

If we consider bureaucracy as a product of institutional memory, its rules and processes can become a rich source to discover what an organisation values.

The book also unpicks the thorny issue of who should be charged with establishing business value versus those who execute and deliver that value.

What is Business Value

Schwartz defines business value as a hypothesis held by the organization’s leadership as to what will best accomplish the organization’s ultimate goals or desired outcomes.

This definition recognises firstly that business value is not the same for all organisations, secondly that it cannot be boiled down to one measure, and thirdly determining business value necessitates a journey of discovery, dialogue and collaboration across many business areas.

Introducing Business Value thinking

With my support, many of my clients have taken such a journey. This has often started with a leadership envisioning workshop – an approach which sets out the organisation’s vision and which creates an open debate about the worthiness of strategic initiatives.

With such approaches leaders create a mindset and process which shifts the conversation away from endless horse-trading and towards organisational learning through iterative execution and review.

In a dynamic and uncertain world, the approaches I’ve shared and the thinking conveyed in The Art of Business Value will create a common understanding of business value. Doing so enables teams and leaders to align on what’s valuable and create a responsive organisation.

Conclusion

With The Art of Business Value, in a little over a hundred pages, Mark Schwartz has done a fantastic job to help challenge convention and offer guidance that’ll help our organisations and clients define what it values and achieve success.