Lean Startup guru Eric Ries explains how big companies can innovate like entrepreneurs
In 'The Startup Way', Ries argues that big corporates should focus on the rule-breakers
By Victoria Turk
Eric Ries recalls having similar conversations with several startup founders. They'd tell him they hated everything about big companies - the bureaucracy, the politics, the corporate culture. To which Ries would respond: "If you hate big companies so much, why are you trying to create a new one?"
"People have this very fixed idea in their minds that there's such a thing as a startup and then there's such a thing as an established company," he says. "But it's clearly a false dichotomy, because no startup intentionally wants to stay small."
Since Ries's bestselling book The Lean Startup was published in 2011, his principles of iterative development and continuous innovation have largely come to define the startup approach to business. In his new book, The Startup Way, he takes his methodology beyond early-stage ventures to established businesses and even multinational corporations. He argues that an entrepreneurial mindset is necessary for any company working in today's economic environment - whether its employees wear jackets and ties or hoodies and trainers.
In fact, he says, if a company wants to stay innovative, it needs to consider entrepreneurship as a function as vital to its organisation as a finance or marketing department. "Who's in charge, in most companies, of making sure that new research breakthroughs are commercialised?" he says. "Who's responsible for making sure the company is not ultimately disrupted by some startup? Who's in control of developing people who think of themselves as innovators first and foremost? You look at these responsibilities and it's very clear that nobody's in charge."
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One company Ries has tried his approach with is about as far away from a startup as you can get: multinational conglomerate General Electric (GE). Its vice chair Beth Comstock and then-CEO Jeff Immelt asked Ries to run a workshop with one of its teams. "I figured it would be a software thing," he says. "They picked a reciprocating diesel engine."
Initially unsure whether they were designing an engine for a car, boat or power plant, he helped the engineers figure out what a minimum viable product (MVP) - a key tenet of lean-startup strategy - would look like. The group realised it could get a much simpler engine to market in a matter of months, rather than years, which would allow them to learn what its customers really wanted before developing it further. After working on many other pilot projects with GE ("We did a diesel platform, a deep-sea drilling thing, a refrigerator, a neonatal incubator for developing countries and an ultrasound."), Ries helped to develop its FastWorks programme, which offers a framework for small teams within the company to act like startups on specific projects.
In The Startup Way, he calls this kind of internal startup the "atomic unit of work for highly uncertain terrain". Got a project with unknown variables? Recruit a small team and let them experiment. The same tools could be used to take an existing product to a new market or even to develop an internal product such as an IT system or HR policy.
Identifying entrepreneurially minded people within a company to lead these initiatives isn't difficult, Ries says: everyone already knows who they are. They are the ones that managers go to when the CEO asks for something disruptive. They might have a reputation as a rule-breaker, and always seem to be around when breakthroughs happen.
Ries highlights Amazon's "two-pizza team" concept as a good example of internal startups working within a large firm. The company reportedly limits team sizes to as many people as can be fed by two pizzas, in an effort to improve productivity and encourage innovation.
"I don't think it's a coincidence that they've had numerous industry-defining, unrelated products," Ries says. Crucially, the company is also good at tolerating failure: for every Amazon Echo, there's an Amazon Fire Phone.
Ries's advice to those looking to apply a lean-startup approach to their work is to find an experiment they can afford to run and see if it produces the predicted results. He does the same thing: before writing The Startup Way, he created a Kickstarter campaign for a 250-page book called The Leader's Guide - an MVP for the later publication. He's also running his own startup, the Long-Term Stock Exchange, which aims to build a stock exchange that rewards long-term thinking. "Building a stock exchange would normally be a multi-decade process," he says "We think we've found a way to do it faster."
The Startup Way (Penguin) is published on October 17
This article was first published in the November 2017 issue of WIRED magazine
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