Machine Learning Meets the Lean Startup

We just finished our Lean LaunchPad class at UC Berkeley’s engineering school where many of the teams embedded machine learning technology into their products.

It struck me as I watched the teams try to find how their technology would solve real customer problems, is that machine learning is following a similar pattern of previous technical infrastructure innovations. Early entrants get sold to corporate acquirers at inflated prices for their teams, their technology, and their tools. Later entrants who miss that wave have to build real products that people want to buy.

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I’ve lived through several technology infrastructure waves; the Unix business, the first AI and VR waves in the 1980’s, the workstation wave, multimedia wave, the first internet wave. Each of those had a set of common characteristics that the Gartner Group characterizes as the Hype Cycle .

hype-cycle-gartner

The five stages of the hype cycle are:

Stage 1: The Technology Trigger: A potential technology breakthrough kicks things off. Early proof-of-concept stories and media interest trigger significant publicity. Often no usable products exist and commercial viability is unproven.

Stage 2: Peak of Inflated Expectations: Early publicity produces a number of success stories—often accompanied by scores of failures. Some companies take action; most don’t.

Stage 3: Trough of Disillusionment: Interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investments continue only if the surviving providers improve their products to the satisfaction of early adopters.

Stage 4: Slope of Enlightenment: More instances of how the technology can benefit the enterprise start to crystallize and become more widely understood. Second- and third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious.

Stage 5: Plateau of Productivity: Mainstream adoption starts to take off. Criteria for assessing provider viability are more clearly defined. The technology’s broad market applicability and relevance are clearly paying off.

Shiny Object meets First Mover Advantage
What’s become apparent in the last few technology hype cycles is that for startups and their investors there is a short multi-year window of opportunity (at the Peak of Inflated Expectations) to sell a startup at an inflated price. This occurs because large technology companies (Google, Facebook, IBM, Microsoft, Twitter, Apple, Salesforce, Intel, et al,) and increasingly other non-tech firms, are in an arms race to stay relevant. For example, according to CBInsights nearly 140 machine intelligence have been acquired since 2011, with over 40 being bought so far in 2016.

untitled-2

Most often the first acquisitions in a hype cycle are for the “shiny objects” – the technology, the team and the tools. The acquired technical teams usually start up or complement the company’s research group in a specific new technology area.hype-cycle

If you’re a startup (or their investors) getting acquired at this point in the hype cycle is exactly where you want to be – short time in business, large acquisition price, value based on a frenzy, perceived scarcity of expertise, and fear of a competitor getting the key talent.

History shows that the acquirers often overpay buying this expertise early. While these acquisitions have teams of great researchers, they rarely contribute actual revenue generating products (because most never reached that stage when they were acquired.)  The irony is that the acquisitions made later in the hype cycle – when companies have built real products that customers want, are the ones that generate revenue and profit for the acquirer.

I had all that in mind as we watched our teams present.

Machine Learning Meets Lean – Berkeley Lean LaunchPad Class

Each of our teams in this class followed the canonical Lean model:

  1. Articulate your hypotheses using the business model canvas
  2. Get of the building and test those hypotheses using customer development
  3. Validate learning by building minimal viable products and getting them in front of customers

Each week the teams got out of the classroom and talked to 10-15 customers, testing a new part of the business model canvas.  And after week two, they had to build and then update their minimal viable product weekly. And present what they learned each week in an 8-minute presentations.

The presentations below are their final Lessons Learned presentations, along with a 2-minute video summary.

SalesStash
Three Berkeley PhD computer science students and an MBA working on machine learning. How can you not hit out of the park on day one?

This team epitomized rapid learning. Once their initial assumptions ran into the wall of actual customer feedback they rapidly built multiple minimum viable products (MVPs) and kept pivoting until they found product/market fit (i.e. a customer segment that was grabbing the product out of their hands.)

If you can’t see the video click here

If you can’t see the presentation click here

Delphi
Before this class this team had spent three months in an incubator building the product after talking to only one customer. After  week two of the class they realized they had wasted three months building something no one actually wanted. What they next learned was pretty amazing.

If you can’t see the video click here

If you can’t see the presentation click here

Homeslice
Homeslice had a great journey. They came together over a personal pain – the inability to afford a house in Silicon Valley. Their initial plan was to provide fractional ownership to solve that problem. But they found that first serving an adjacent market – slices of investment properties – could serve as a launchpad for their initial idea of fractional home ownership.

If you can’t see the video click here

If you can’t see the presentation click here

Exit Strategy
Exit Strategy was building the penultimate planning tool. This teams learning that this wasn’t a business was as important as finding one that is. Really impressive process.

If you can’t see the video click here

If you can’t see the presentation click here



This class this was a team effort. Professor Kurt Keutzer and Errol Arkilic (former program director for the National Science Foundation Innovation Corps (NSF I-Corps), now founder of M34 Capital) were the lead instructors. Steve Weinstein (CEO of MovieLabs) and I assisted. Thanks to our TA Kathryn Crimmins and all the team mentors: Lev Mass, Kanu Gulati, Ewald Detjens, James Cham, Kanu Gulati, Patrick Chung, Rick Lazansky, Ashmeet Sidhana, Mike Olson, Michael Borrus, Fabrizo De Pasquale, Amit Kumar, Rob Rodick, Mar Hershenson.

There are 145 Entrepreneurship Courses at Stanford

Stanford is an incubator with dorms

Download the full text file with links to the courses here.
http://www.slideshare.net/sblank/stanford-entreprenuership-classes

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Hacking for Diplomacy – Solving Foreign Policy Challenges with the Lean LaunchPad

Hacking for Diplomacy is a new course from the Management Science and Engineering department in Stanford’s Engineering school and Stanford’s International Policy Studies program that will be first offered in the Fall of 2016.

Join a select cross-disciplinary class that takes real problems from the U.S. State Department and asks students to use Lean Methods to test their understanding of the problem and deliver rapid-fire innovative solutions to pressing diplomacy, development and foreign policy challenges.

H4Dip home page


Syrian Refugees, Human Trafficking, Zika Virus, Illegal Fishing, Weapons of Mass Destruction Detection, ISIS on-line propaganda, Anti-Corruption…
What do all these problems have in common? The U.S. Department of State is working on all of them.

The U.S. Department of State manages America’s relationships with 180 foreign governments, international organizations, and the people of other countries with 270 embassies, consulates, and other posts. The management of all these relationships is called diplomacy. 70,000 State Department employees (46,000 Foreign Service Nationals, 14,000 Foreign Service Employees and 11,000 in the Civil Service) carry out the President’s foreign policy and help build a freer, more prosperous, and secure world.

The State Department has four main foreign policy goals:

  • Protect the United States and Americans
  • Advance democracy, human rights, and other global interests
  • Promote international understanding of American values and policies
  • Support U.S. diplomats, government officials, and all other personnel at home and abroad.

At a time of significant global uncertainty, diplomats are grappling with a set of transnational and cross-cutting challenges that defy easy solution. These include the continued pursuit of weapons of mass destruction by states and non-state groups, the outbreak of internal conflict across the Middle East and in parts of Africa, the most significant flow of refugees since World War II, and a changing climate that is beginning to affect both developed and developing countries.  And that’s just on Monday.  The rest of the week is equally busy.

State dept org chart

Hacking for Diplomacy
In a world of complex threats, dynamic opportunities, and diffuse power, effective diplomacy and development require institutions that adapt, embrace technology, and allow for experimentation to ensure continuous learning. This means developing new and innovative ways to think about, organize and build diplomatic strategies and solutions.  Stanford’s new Hacking for Diplomacy class is a part of this effort.

Hacking for Diplomacy is designed to provide students the opportunity to learn how to work with the Department of State to address urgent foreign policy challenges. While the traditional tools of statecraft remain relevant, policymakers are looking to harness the power of new technologies to rethink how the U.S. government approaches and responds to  the problems outlined above and other long-standing challenges. In this class, student teams will take actual foreign policy challenges and a hands-on approach that will require close engagement with officials in the U.S. State Department and other civilian agencies. They’ll learn how to apply “lean startup” principles, (“mission model canvas,” “customer development,” and “agile engineering”) to discover and validate agency and user needs and to continually build iterative prototypes to test whether they understood the problem and solution.

Each week, teams will use the Mission Model Canvas (a variant of the Business Model Canvas used for government agencies and non-profits) to develop a set of initial hypotheses about a solution to the problem and will get out of the building and talk to relevant stakeholders and users. As they learn, they’ll iterate and pivot on these hypotheses through customer discovery and build minimal viable prototypes (MVPs). Each team will be guided by a sponsor from the State Department bureau that proposed the problem and a second mentor from the local community.

Real Problems
In this class, student teams select from an existing set of problems provided by the Department of State. Hacking for Diplomacy is not a product incubator for a specific technology solution. Instead, as teams follow the Mission Model Canvas, they’ll discover a deeper understanding of the selected problem, the challenges of deploying the solutions, and the host of potential technological solutions that might be arrayed to solve them. Using the Lean LaunchPad Methodology the class focuses teams to:

  • Deeply understand the problems/needs of State Department beneficiaries and stakeholders
  • Rapidly iterate technology solutions while searching for product-market fit
  • Understand all the stakeholders, deployment issues, costs, resources, and ultimate mission value
  • Produce a repeatable model that can be used to launch other potential technology solutions

National Service
Today if college students want to give back to their country they think of Teach for America, the Peace Corps, or AmeriCorps. Few consider opportunities to make the world safer with the State Department and other government agencies. Hacking for Diplomacy will promote engagement between students and the Department of State and provide a hands-on opportunity to solve real diplomacy, foreign policy and national security problems.

Like its sister class, Hacking for Defense, our goal is to open-source this class to other universities. By creating a national network of colleges and universities, Hacking for Diplomacy can scale to provide hundreds of solutions to critical diplomacy, policy, and national security problems every year.

We’re going to create a network of entrepreneurial students who understand the diplomatic, policy, and national security problems facing the country and get them engaged in partnership with islands of innovation in the Department of State. This is a first step to a more agile, responsive and resilient, approach to diplomacy and national security in the 21st century.

Lessons Learned

  • Hacking for Diplomacy is a new class that teaches students how to:
    • Use the Lean LaunchPad methodology to deeply understand the problems/needs of State Department customers
    • Deliver minimum viable products that match State Department needs in an extremely short time
  • The class will also teach the islands of innovation in the Department of State:
    • how the innovation culture and mindset operate at speed
    • how to identify potential dual-use technologies that exist outside their agencies and contractors (and are in university labs, or are commercial off-the-shelf solutions)
    • how to use an entrepreneurial mindset and Lean Methodologies to solve foreign policy problems
  • Register for the inaugural class at Stanford starting September 29th now

Learning Through Reflection

“Sometimes, you have to look back in order to understand the things that lie ahead.”

We just finished the 6th annual Lean LaunchPad class. This year we made a small but substantive addition to way we teach the class, adding a week for reflection. The results have made the class massively better.


For the last 6 years I’ve taught the Lean LaunchPad class at Stanford and Berkeley. To be honest I built the class out of frustration watching schools teach aspiring entrepreneurs that all they need to know is how to write a business plan or how to sit in an incubator building a product.

If you’ve read any of my previous posts, you know I believe that:

  1. a product is just a part of a startup, but understanding customers, channel, pricing, – the business model – is what turns a product into a business
  2. business plans are fine for large companies where there is an existing market, existing product and existing customers, but they are useless in a startup where most often none of these are known
  3. entrepreneurship is experiential and requires theory and a ton of practice.

Therefore, we developed the 8-week Lean LaunchPad class to teach students how to think about all the parts of building a business, not just the product.  We organized the class as:

  • Team-based
    • Students apply and learn as teams of 4. Eight teams per class
  • A “flipped” classroom
    • Students watch the lectures as homework via our MOOC
  • Every week we teach a new part of the theory of how to commercialize an insight or invention
    • using the business model canvas as the framework
  • Every week we teach the practice of Lean
    • by having the students get out of the classroom and talk to 10-15 customers a week and build a new Minimum Viable Product weekly
    • in order to validate/invalidate their business model hypotheses
    • The teaching team critiques their progress and suggests what they might do next
  • Every week the teams present their results
    • “Here’s what we thought, here’s what we did, here’s what we found, here’s what we are going to do next”

Class flowThe combination of the Business Model Canvas, Customer Development and Agile Engineering is an extremely efficient template for the students to follow. It drives a hyper-accelerated learning process which leads the students to a “information dense, evidence-based” set of conclusions. (Translation: they learn a lot more, in a shorter period of time, than in any other entrepreneurship course we’ve taught or seen.)

Demo Days Versus Lesson Learned Presentations
One thing we always kept in mind – we were teaching students a methodology and a set of skills for the rest of their lives – not running an incubator or accelerator. As a consequence, we couldn’t care less about a “Demo Day” at the end of the class. We don’t want our students focused on fund-raising, we want them to maximize their learning. Secondly, even for fund-raising, you couldn’t invent a less useful format to evaluate a startup’s potential then the Demo Days held by accelerators. Demo Days historically have been exactly what they sound like, “Show me how smart your team is at this instant in time.”  Everything depends on a demo, presentation and speaking style.

We designed our class to do something different. We wanted the teams to tell the story of their journey, sharing with us their “Lessons Learned from our Customers”. They needed to show what they learned and how they learned it after speaking to 100+customers, using the language of class: interview, iterations, pivots, restarts, experiments, minimal viable products, evidence. The focus of their presentations is on how they gathered evidence and how it impacted the understanding of their business models – while they were building their MVP.

Reflection Week
In the past, our teams would call on customers until the last week of the class and then present their Lessons Learned. The good news is that their presentations were dramatically better than those given at demo days – they showed us what they learned over 8 weeks which gave us a clear picture of the velocity and trajectory of the teams. The bad news is since their heads were down working on customer discovery until the very end, they had no time to reflect on the experience.

We realized that we had been so focused in packing content and work into the class, we failed to give the students time to step back and think about what they actually learned.

So this year we made a change. We turned the next to last week of the class into a reflection week.  Our goal—to have the students extract the insights and meaning from the work they had done in the previous seven weeks.

We asked each team to prepare a draft Lessons Learned presentation telling us about their journey and showing us their:

  • Initial hypotheses and Petal diagram
  • Quotes from customers that illustrated learnings and insights
  • Diagrams of key parts of the Canvas –customer flow, channel, get/keep/grow (before and after)
  • Pivot stories
  • Screen shots of the evolution of Minimum Viable Product (MVP)
  • Demo of final MVP

The teaching team reviewed the drafts and provided feedback to the teams and to the class as a whole. We discussed what general patterns and principles they extracted from all the customer interaction they had. On the last day of class, each team shared their Lessons Learned presentations, giving everyone in the class the benefit of what every team has learned.

We used this week to help teams reflect that they accomplished more than they first realized. For the teams who found that their ideas weren’t a scalable business, we let them conclude that while it was great to celebrate the wins, they could also embrace and celebrate their failures as low cost learning.

By the time the final week of the final Lessons Learned presentations rolled around, the students were noticeably more relaxed and happier than teams in past classes. It was clear they had a solid understanding of the magnitude of their journey and the size of their accomplishments – eight teams had spoken to nearly 900 customers, built 50 minimum viable products, and tested tons of hypotheses.

Here are four examples from our 2016 Stanford class

Pair Eyeware
Be sure to look at how they tested their hypotheses on slides 11 and 12, and the before and after value proposition canvases on slide 13 -17. A great competitive Petal diagram is on slide 22

Share and Tell
Great story and setup in slides 3-7. Understanding their market in week 6, slide 31.

Allocate
Notice how they learned about their customer archetypes on slides 12-14. After 80 interviews, a big pivot on slide 16.

Nova Credit
Look at the key hypotheses on slide 2 and their journey in the class on slide 5.

Lessons Learned

  • Dedicating a week for reflections expands what everyone learns
  • Students extract the insights and meaning from the work they did
  • See all the presentations here

Pixar, Artists, Founders and Corporate Innovation

I’m still surprised when I find unexpected connections with innovation in different industries.

—–

In a recent workshop with a large company focused on the Innovation@50x process, I mentioned that founders and intraprenuers operate more like artists than accountants – on day one they see something no one else does. One of the innovators in the room said, “It sounds like you’re describing exactly what Ed Catmull the CEO of Pixar wrote in Creativity, Inc.”creativity inc

Say what?  I kicked myself knowing that I should have thought of Pixar.

While I’m sure Ed Catmull doesn’t remember, when Pixar was a startup selling the Image Computer, their VP of Sales and Marketing brought me in to put together their marketing strategy. John Lassiter was just beginning to make commercials, Alvy Ray Smith was building Iceman and Loren Carpenter and Rob Cook were writing Renderman.

I should have realized there was a ton I could learn about corporate creativity by looking at Pixar.

So I bought the book.

——-

I always thought that when I used the “founders as artists” analogy, the “artists” I was describing were painters, writers, sculptors and composers. I wondered what lessons Pixar, an animation studio, could have for founders. What were the parallels? Startup founders operate in chaos and uncertainty. Founders get out of the building to talk to customers. We create minimal viable products to test hypotheses/our vision, and we build a culture that supports innovation. It never occurred to me that the directors of 3D animated movies at Pixar could be the same “founders as artists.”

It turns out that they are. And in fact, the creative process at Pixar has a ton of lessons for both startup founders and corporate innovators.

Directors = Startup Founder
Pixar is a filmmaker-driven studio. That means the entire company is driven by directors – the artists – not by corporate executives in management with MBA’s or financial models or a development department.

A director at Pixar is the equivalent of a startup founder. At Pixar a director’s vision for a film is much like a founder’s vision for a startup. The director starts with a vision of a great story he wants to turn into an animated movie. On day one, all a director has is his vision – she doesn’t yet know the exact path to get to the final movie. (Like a startup founder.) Pixar directors use their ability to tell a compelling story to convince management that their initial idea is powerful enough to be a great movie. (Like a startup.) They get approval, build and rally a team, get their team out of the building and do research and iterate and at times pivot the story/film as they refine the vision of the movie. (Like a startup.) Once their idea is approved, the company organizes its technical and production resources (hundreds of people on each movie) behind those directors to turn their vision into a great movie that lots of people will go see. (Like a startup.)

It Starts With a Vision
While the parallels between a director and a startup founder are striking, what’s even more surprising is the match between the creative process Pixar uses to make its movies and our implementation of Lean for startups in the Lean LaunchPad and I-Corps incubators.

When Pixar begins a new movie the movie doesn’t exist yet. It’s only an idea in the head of the director (or in the case of a startup, the founder.) How the director crafts reality out of this vision is exactly like how a founder creates a startup – it’s a combination of vision, reality distortion field, tenacity and persuasion.

pixarDirectors, like founders, develop mental models for how they search for an unseen destination – they “get in the zone.” Some directors view it as finding a way out of a maze, or looking for a light at the end of a tunnel or uncovering a buried mountain.

Greenlight = VC Funding
At Pixar, if you’re a director with a passion for a project you pitch a very simple minimum viable product – in this case storyboards which are just rough illustrations that help to tell the story page by page. If you can convince John Lasseter, Pixar’s chief creative officer, the film will be greenlit – it gets funding. The process is akin to pitching a VC firm.

Braintrust = Continual Feedback
One of the systems that Pixar has put in place to keep the development of a movie on track is regular doses of open and honest feedback from other experienced directors in regularly scheduled meetings called the “Braintrust.” A director shares his latest progress in the the form of storyboards, demo reels, etc. (what we in startup world would call the minimum viable product) and the critiques from other directors take the the form of comments like, “Have you considered x or thought about y?” Directors are free to come up with their own solutions. But if feedback from the Braintrust is given and nothing changes… that’s a problem. And if the director loses the confidence of his crew, Pixar management steps in.

In the Lean LaunchPad/I-Corps our equivalent to the Braintrust are weekly meetings where teams present what they learned from talking to customers and show their latest minimum viable products, and instructors provide continuous feedback.

I found other parallels between Pixar’s method for managing innovation and what we built in the Lean LaunchPad/I-Corps incubators. (Oren Jacob, Pixar’s ex CTO has been teaching with us at Berkeley and Stanford and has been trying to point out this connection for years!)

Innovation Management – Animation and Startups
Dailies are the way animators (and movie makers) show and measure progress. Everyone can comment but the director decides what changes, if any, to make. Dailies are Pixar equivalents of showing your incremental MVP’s- minimum viable products. In the Lean LaunchPad/I-Corps, we make our teams show us MVP’s weekly to measure progress.

Research trips – Pixar wanted to avoid the trap of cutting up and reassembling what was done in previous movies so they instituted research trips – “getting out of the building” to get authenticity and keep clichés at bay. Pixar animators flew to Hawaii and went scuba diving for Finding Nemo, to Scotland while they were making Brave and drove Route 66 when making Cars. Pixar movies feel authentic because they’re modeled after the real world.

Lean Startups are built around the same notion as Pixar research trips. With startups, there are no facts inside your building so founders have to get the heck outside. Entrepreneurs work hard at becoming the customer, so they can understand customers needs and wants and experience the customer’s the day-in-the-life.

Pivots – Directors can pivot as long as their team can believe the reasons for changing course. When you lose your team’s trust, the team will bail. Same is true for startup founders. And if pivots don’t work or the Pixar Braintrust feels that after lots of feedback, the movie still is heading in the wrong direction, they replace the director – identical when a founder loses the the board’s confidence and gets replaced.

The power of limits – Although Pixar movies are incredibly detailed, one of their strengths is knowing when to stop.  In a startup knowing that every feature isn’t necessary and knowing what not to ship, is the art of a founder.

Postmortems – After a film is completed, Pixar holds a postmortem, a meeting to summarize what worked, what didn’t and what they could do better next time.  In the Lean LaunchPad/I-Corps classes, the teaching team does post mortems weekly and then a final wrap-up after class. More importantly, our teams’ final presentation are not a Demo Day, but a Lesson Learned presentation summarizing what they hypothesized, what they did and what they learned. 

Artists and Founders

Pixar            Startups
Visionary Director Founder
Discovery Research Trips Customer Development
Outside Feedback Braintrust feedback Weekly team feedback in
Lean LaunchPad/I-Corps
Progress Dailies Minimum Viable Products
Continuous Learning Post mortems Lessons Learned Day &
Instructor Post Mortems

Continuous corporate innovation @ Pixar
While the parallels between individual Pixar movies and startups is striking, Pixar’s CEO Ed Catmull has built is a company that has continued to innovate, making hit after hit.  While part of Pixar’s success has been built on a series of world class directors (John Lasseter, Pete Docter, Brad Bird, Andrew Stanton, Lee Unkrich), what makes Pixar unique is that in a “hits-based business” they’ve figured out how to turn directors’ visions into blockbuster movies repeatedly. Pixar has built a process of continuous corporate innovation.

Innovation Killers – Pixar Lessons for Corporate Innovation
Ed Catmull points than one of the impediments to innovation in a large company is the “fear of failure”. In a fear-based culture people avoid risk. They repeat things that are safe and have worked in the past. His solution at Pixar was to get directors to talk about mistakes and their part in them.  Surfacing failure publically by the most respected innovators makes it safe for others to do the same. (Getting middle management to tolerate and not feel threatened by problems and surprises is one of the biggest jobs of Pixar’s CEO and senior leadership.)

The second innovation insight at Pixar is the power of iterative trial and error – the notion of being wrong fast. (One of the key tenets of the Lean Startup.) Catmull observed that even the smartest person can’t consider all possible outcomes. Managers who over-plan just take longer to be wrong. Managers see change as a threat to their existing business model – and it is. Self-interest motivates opposition to change but lack of self awareness fuels it even more.

Finally, Catmull’s observation that “originality is fragile” speaks to the startup process as well as to making movies. At Pixar in it’s first moments, originality is often far from pretty. Early mockups of Pixar films are called “ugly babies.”  However, while it may be ugly, it’s the opposite of the established and entrenched. (We remind large companies that version 1.0 of disruption – these ugly babies – coming their way always looks like a toy.)

——

Lessons Learned

  • Founders are closer to artists than any other profession
  • Founders and Pixar directors have uncanny parallels
  • Pixar, more than Apple, Google, Amazon or any other large company, holds the record for continuous innovation
  • Pixar and the Lean LaunchPad/I-Corps share common ways to support repeatable innovation and market success

 

Why Corporate Entrepreneurs are Extraordinary – the Rebel Alliance

I’ve spent this year working with corporations and government agencies that are adopting and adapting Lean Methodologies. The biggest surprise for me was getting schooled on how extremely difficult it is to be an innovator inside a company of executors.

—–

What Have We Lost?
I’ve been working with Richard, a mid-level executive in a large federal agency facing increasing external disruption (technology shifts, new competitors, asymmetric warfare, etc.). Several pockets of innovation in his agency have begun to look to startups and have tried to adopt lean methods. Richard has been trying to get his organization to recognize that change needs to happen. Relentless and effective, Richard exudes enthusiasm and radiates optimism. He’s attracted a following, and he had just been tapped to lead innovation in his division.

He’s working to get his agency to adopt Lean and the Horizon 1, 2, and 3 innovation language (Horizon 1 executes current business models, Horizon 2 extends current business models and Horizon 3 searches for new business models) and was now building a Lean innovation pipeline created out of my I-Corps/Lean LaunchPad classes.

Yet today at dinner his frustration just spilled out.

“Most of the time our attempts at innovation result in “innovation theater” – lots of motion (memos from our CEO, posters in the cafeteria, corporate incubators) but no real change. We were once a scrappy, agile and feared organization with a “can-do” attitude. Now most people here don’t want to rock the boat and simply want do their job 9 to 5. Mid-level bureaucrats kill everything by studying it to death or saying it’s too risky. Everything innovative I’ve accomplished has taken years of political battles, calling in favors, and building alliances.” He thought for a minute and said, “Boy, I wish I had a manual to tell me the best way to make this place better.”

Richard continued, “Innovation is something startups do as part of their daily activities – it’s in their DNA. Why is that?”

While I understood conceptually that adopting new ideas was harder in larger companies, hearing it first-hand from a successful change agent made me realize both how extraordinary Richard was and how extraordinarily difficult it is to bring change to large organizations. His two questions– 1) Was there a manual on “how to be a successful corporate rebel”? and 2) Why are startups innovative by design but companies are innovative by exception?–left me searching for answers.

Why Startups are Innovative by Design
If you come from the startup world, you take for granted that on day one startups are filled with rebels. Everyone around you is focused on a single goal – disrupt incumbents and deliver something innovative to the market.

In a (well-run) startup, the founder has a vision (at first a series of untested hypotheses) and rallies employees and investors around that singular idea. The founders get out of building and rapidly turn the hypotheses into facts by developing a series of incremental and iterative minimal viable products they test in front of customers in search of product-market fit.

While there might be arguments internally about technology and the right markets, no one is confused about the company’s goal – find a sustainable business model, get enough revenue, users, etc., before you run out of money.

Every obstacle Richard described in his agency simply does not exist in the early days of a startup. Zero. Nada. For the first year or so startups actually accumulate technical and organizational debt as they take people and process shortcuts to just get the first orders, 100,000 users or whatever they need to build the business. All that matters is survival.  Process, procedures, KPI’s, org charts, forms, and bureaucracy are impediments to survival as a new company struggles to search for and find a repeatable business model. Founding CEO’s hate process, and actually beat it out of an organization when it appears too early.

In the technology world companies that grow large take one of two paths. Most common is when startups do find a repeatable and scalable business model they hire people to execute the successful business model. And these hires turn the startup into a company – a Horizon 1 or 2 execution organization focused on executing and extending the current business model – with the leadership incented for repeatability and scale. (See here for explanations of the three Horizons of Innovation.)

But often as the company/agency scales, the early innovators feel disfranchised and leave. Subsequently, when a technology and/or platform shift occurs, the company becomes a victim of disruption and unable to innovate, usually stagnates and dies.

Alternatively, a company/agency scales but continues to be run by innovators. The large companies that survive rapid technology and/or platform shifts are often run by founders, (Jeff Bezos at Amazon, Steve Jobs at Apple, Larry Page at Google, Larry Ellison at Oracle) or faced with an existential crisis and forced to change (Satya Nadella at Microsoft) or somehow have miraculously retained an innovation culture through multiple generations of leadership like W.L. Gore.

I offered that perhaps his top-level management would embrace Three Horizons of Innovation from the top-down. Richard replied, “In a perfect world that would be great, but in most agencies (and companies) the CEO or board is not a visionary. Even when our CEO’s acknowledged the need for Horizon 3 innovation, the problem isn’t solved because entrepreneurs run into either “a culture of no” or worse yet the intransigent middle management.

Richard explained, “In a Horizon 1-dominated culture, where everyone is focused on Horizon 1 execution, you can’t grow enough Horizon 3 managers. Instead we’ve found that support for innovation has to come from rare leaders embedded in the Horizon 1 organizations who “get it.” We’ve always had to hide/couch Horizon 3 style change in Horizon 1 and Horizon 2 language, which is maddening but I do what works.  In Silicon Valley, the operative word in any pitch is “disrupt.”  In Horizon 1 organizations, uttering the word “disrupt” is the death of an idea.”

That really brought home the stark difference between our two worlds.

(Lean Innovation management now offers Horizon 1 executives a set of tools that allow them to feel comfortable with Horizon 2/3 initiatives. Investment Readiness Levels are the Key Performance Indicators for Horizon 1 execs to measure progress.)

What about a manual of “how to be a successful corporate rebel”? Serendipitously after I gave my Innovation @ 50x presentation, someone gave me a book saying “thanks for the strategy, but here are the tactics.”  This book entitled Rebels@Work had some answers to Richard’s question.

Rebels at Work
If you’re a mid-level manager in a company or government agency trying to figure out how to get your ideas adopted, you must read Rebels@Workit will save your sanity. rebels at workThe book, which was written by successful corporate innovators, offers real practical, tactical advice about how to push corporate innovation.

One of the handy tables explains the difference between being a “bad rebel” versus a “good rebel.” The chapters march you through a series of “how to’s”: how to gain credibility, navigate the organizational landscape, communicate your ideas, manage conflict, deal with fear uncertainty and doubt, etc. It illustrates all of this with real-life vignettes from the authors’ decades-long experience trying to make corporate innovation happen.good rebels bad rebels

The Innovation at 50x presentation gives corporate rebels the roadmap, common language, and lean tools to develop a Lean innovation strategy, but Rebels@Work gives them the tools to be a positive force for leading change from within.

After I read it I bought 10 copies for Richard and his team.

Lessons Learned

  • In a startup we are by definition all born as rebels
  • While startups are not smaller versions of large companies, companies are very much not larger versions of startups
  • Canonical startup advice fails when applied in large companies
  • The Three Horizons offer a way to describe innovation strategy across a company/agency
  • Lean Innovation Management allows startup speed inside of companies
  • However:
    • Horizon 1 managers run the company and are not rebels
    • Horizon 3 ideas might have to be couched in Horizon 1 and 2 language
  • Rebels@Work offers practical advice on how to move corporate innovation forward

Innovation @ 50x in Companies and Government Agencies

I’ve spent this year working with corporations and government agencies trying to adapt and adopt Lean Methodologies.  In doing so I’ve learned a ton from lots of people. I’ve summarized my learnings in this blog post, and here and here and here and put it all together in the presentation below.

if you can’t see the presentation click here.

But the biggest surprise for me was getting schooled on how extremely difficult it is to be an innovator inside a company of executors.  More on that in the next post.

Graphic recording - SteveBlank - Innovation at 50x - Trent Wakenight OGSystems 20150814

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