As stated in Capgemini Consulting’s When Digital Disruption Strikes: How Can Incumbents Respond?,
“Since 2000, 52% of companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist”.
In large part due to the digital revolution, competitors are able to disrupt existing business models at a faster rate. To compound this, large companies are slow in response. Capgemini has found that “nearly 74% of companies responded to digital disruptions only after the second year of their occurrence”. This is an eternity. How can large companies learn from these disruptive startups and address this existential threat?
We propose to consider “Lean Startup” principles. But, how can you be a lean startup, when you are neither lean nor a startup?
Large companies face an alarming number of challenges in achieving the results of smaller more nimble, “Lean Startups”. Consider the following as some examples:
For organizations that have not implemented or have little experience with LEAN:
- Inexperience with tools and approach
- New techniques are a stark departure from the normal procedures
- Critical mass adoption can take significant time (and investment)
- Existing efforts focus on product/service, not customers
For organizations that have multiple locations, large number of employees, and complex structures:
- Rigid capital investment and project funding controls
- Numerous stakeholders and complex relationships
- Complex IT infrastructure and software (Legacy)
- Lengthy decision making processes (bureaucracy)
Lean Startup MethodologyLean Startup methodology can be used by large companies to combat the competitive pressure from disruption. However, Lean Startup adoption by large companies will be challenging but not impossible.
As chronicled in Harvard Business Reviews’ article How GE stays young, General Electric built upon its success with Lean Six Sigma to incubate an energy storage company. Durathon, as it was called, became a $100M business within 5 years. “FastWorks” a program based upon lean startup principles, was responsible.
Lean startup, as a methodology, was born out of the lean manufacturing revolution and from a desire of small companies to innovate rapidly, reach the market quickly, and respond to the ever-fast-changing demands of customers. The core of the methodology is the “Build, Measure, Learn” (BML) loop. This loop is iterative and never ending. Within the BML loop, we find a rigorous attention to customer feedback, a zealous reverence to data, and never-ending education.
- Build phase: The methodology utilizes agile, an iterative, focused development approach
- Measure phase: The attention is on “metrics that matter” and contextual customer feedback on an Minimal Viable Product (MVP)
- Learn phase: Lean Startup value quick, fact-based decision making
Part 2, Part 3, Part 4 and Part 5 will explore these topics in more detail and provide additional context for large companies. We will continue to expand the existing conversations surrounding digital disruption and rapid innovation by offering ways companies can adopt lean startup methodologies.