It seems that for most people I’ve encountered lately, 2014 flew by in a flash.
Lo and behold in the blink of an eye it’s 2015 and we find ourselves reading goal-setting blogs, buying gym memberships, and feeling a mix of remorse for what was left unaccomplished in the past 12 months, and hope for what we might accomplish in the year to come.
Forbes reports that among the 40% Americans who make new year’s resolutions only 8% will be able to achieve their intended goals.
In the last 2 years, I have learned to be a bit more forgiving about my unaccomplished new years’ resolutions. This doesn’t mean that I have been slacking off…however, perhaps through age and experience, I have come to understand two things:
1. More often than not, projects take longer than anticipated – which means that what I seek to accomplish in one year might take longer than that.
2. There is quite a bit of pre-work involved in developing a new habit or skill which is often ignored in the goal setting process…and as the saying goes…if we fail to plan…we plan to fail.
In the bible, Jesus describes it in the following way:
“If one of you is planning to build a tower, you sit down first and figure out what it will cost, to see if you have enough money to finish the job.” – Luke 14:28
Recently, I came across Eric Ries’ “Lean Startup”. In it, the author highlights a process for managing innovation in organizations. One of Ries’ main contributions is the insight that due to the fact that innovative ventures are qualitative different that traditional manufacturing ventures, innovation-related activities should be evaluated and managed differently. The “Lean Startup” is a coherent framework to approach innovation in organizations and I suggest it might have valuable insights for our goal setting process for 2015.
This framework can provide a useful tool in the preparation and execution stages of our goals; if we conceptualize our new years’ resolutions (or any goal in our life) as an innovative activity, we can apply concepts such as “validated learning” and “minimum viable product” to our initial execution process. This will give us a robust method to self-evaluate, giving us a more positive outlook and hopefully bringing up the resolution’ success ratio for this year’s Forbes report 🙂
Below, you can find my summary of the book. God bless!
Lean Startup – Key Concepts/Takeaways
Scientific Management 2.0
Ries proposes a scientific approach to innovation management akin to Taylor’s contribution to general management through his scientific (productivity) management theory, which emerged at the turn of XX century.
Just like the absence of a framework supporting managerial practices created an opportunity for wasted human resources and curtailed productivity in the industrial sector of Taylor’s time, Ries’ postulates that due to the absence of “a coherent paradigm for new innovative ventures, we are throwing our excess capacity with abandon” (pg. 18).
Ries’ highlights the qualitative difference of innovative ventures vis-à-vis traditional productive ventures in organization:
Traditional productive ventures:
· Focus on manufacturing and marketing an existing product (measured by production)
· Create sales revenue by controlling production and marketing costs (measured by inventory)
· Seek to maximize sales and profit margin (measured by revenue)
Innovative Ventures:
· Focus on moving from vision of a product or service to a concrete concept
· Establish the boundaries of the initial investment/infrastructure required
· Develop a new product/service
· Engage in traditional productive ventures for the new product/service (outlined above)
Ries defines entrepreneurship as management; those who manage and engage in innovation activities are “intrapreneurs (those working inside an established organization) /entrepreneurs” operating in the context of a “human institution designed to create a new product or service under the conditions of extreme uncertainty” (a start-up/ pg.27).
Traditional Manufacturing vs. Innovation Ventures:
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| Ries’ Framework |
Since innovative ventures are qualitative distinct from traditional product manufacturing ventures, there should be different accounting currency to manage these ventures, namely; innovation accounting. The Lean Startup provides a framework for accounting in the early stages of innovation management.
Innovation Accounting
In order to move from vision to concept formulation and to minimize the risk in moving towards an investment in infrastructure we need:
1. A minimum viable product (MVP) that provides baseline metrics on which we test our assumptions
(Assumptions consist of a value hypothesis and a growth hypothesis)
2. A mechanism to integrate feedback learnt through user experience
3. A strategy to pivot or persevere towards a final product
The milestones in these three stages are measured using validated learning.
The concept of validated learning and its application is illustrated through IMVU’s case study. The original idea of IMVU’s product development was to create a 3D IM environment that would enable users to integrate across platforms with existing IM applications/contacts.
The assumptions were that users would find value in interacting using 3D avatars and that viral growth would occur through the individual’s social network (calculated using Metcalfe’s law). The MVP version of IMVU was released to users and optimized based on their feedback. However, after the initial round of optimization there were no improvements in the diffusion of the product across users. The feedback-optimization process occurred a couple of times before the production team realized that the underlying assumptions were inaccurate and thus, the optimizations were ineffective.
1. Users did not want to integrate IMVU with existing contacts (growth hypothesis was inaccurate)
2. Users were not ready to pay for IM service that was analogous to other IM services (value hypothesis was inaccurate)
The case study illustrates the difference between optimization and validated learning. Unlike optimization (utilizing consumer feedback to building existing assumptions), validated learning uses customer feedback in a grounded approach, to test the underlying assumptions in terms of growth and value hypotheses that yield “evidence that a sustainable business can be built around its products or services” (pg. 126).
The outcome of the validated learning is therefore measurable by being actionable, accessible and auditable. Furthermore, it relies on actionable metrics that explain steps ahead and use more precise methodology such as cohort analysis vs. vanity metrics that rationalize failure and use totals.
Recommendations
Small Batches – Ries recommends to release MVPs in small batches targeting early adopters for feedback; this creates a quick turnaround for the feedback loop to iterate.
Stagewise Progression for feedback validation using split-test methods – Ries recommends to integrate consumer feedback systematically from backlog to validation. Feedback items in the progression should be limited to a maximum of three in each stage, and they should not be considered complete until they had been validated through split-testing. This provides a systematic way of integrating customer feedback for validated learning.
