Lean Startup and Lean Analytics in the Enterprise

It’s clear that Lean Startup is shifting from startups to the enterprise. There’s still a lot to learn amongst early stage entrepreneurs, and a lot of discussion that’s needed around implementing Lean Startup, but attention has definitely shifted to applying the framework in large organizations.

Alistair and I have been looking at how Lean Startup and Lean Analytics are working in the enterprise. He did a workshop on the subject at the recent Lean Startup Conference, and you can see the slides below:

In my research, I spoke with a bunch of intrapreneurs working at a variety of different companies (technology, telecom, media, publishing, etc.) and came away with some interesting and somewhat (in my mind), surprising insights. I wanted to share those with you, as the conversation around Lean Startup and Lean Analytics continues to expand.

1. It’s already happening.

Granted, there’s a bias here because I spoke specifically with folks that have applied Lean practices in their organizations, but I was incredibly surprised at how extensive their work has been. One Senior VP at a major media company talked about all of the small experiments they’ve run with different web properties, testing for specific behaviors, iterating quickly and abandoning things that didn’t work. It was inspiring to realize that people are implementing Lean and getting results, they just don’t share publicly in the same way that startups do.

2. JFDI.

I asked everyone I spoke to about how they got the Lean methodology into their company. The answer was simple, “We just did it.” One person (when he was assigned a new project) started it off by telling people they’d go speak with customers first, before building something. Everyone around the table just assumed that’s how things worked, so they followed along. And voila, Lean had infiltrated the organization. So there’s an opportunity to be stealthy/sneaky about applying Lean: start small and just do it. People will follow along.

3. Presentation matters.

Data people have no problem looking at and sifting through lots of information. But everyone else needs things presented in simple and consistent ways. You need to design scorecards and focus on key metrics that will really resonate. Even if managers ask for “more data” they don’t really want to see more data. They want answers to questions. And consistency is critical–you need to show the same thing over and over and over again for people to understand its importance.

4. The metrics are changing.

It’s happening slowly, but I definitely see a trend (particularly in speaking with publishing and media organizations) towards actionable metrics. Page views will always be a thing, but now the focus is on funnels and user engagement. And they’re simplifying too. This is right out of the Lean Analytics playbook (think: the One Metric That Matters), where they’re mapping a user’s path/funnel through a website or mobile app and deciding what they want people to do, and how they’re going to measure it. In a few cases, people had a full user behavior lifecycle mapped out and then they were drilling into specific areas, running short experiments and trying to improve those things.

5. Don’t call it Lean Startup.

This isn’t something I thought about, but it came up a few times. People are devouring Lean Startup (the book), and other material, but when they bring the concepts into their organizations, they don’t call it “Lean Startup”. Similar to my first point above, they just bring it in as a new way of doing things. The word “startup” seems to scare folks in larger organizations; they don’t think it’ll apply to them. And a few people told me that their bosses/managers don’t like the idea of espousing or being married to any one philosophy or approach. So if you’re looking to bring Lean into your company, drop the “Startup” and just focus on the actual to-dos and best practices.

6. Getting all the data you need is hard.

Large organizations have stuff all over the place. It’s not always clear who owns what, and over time data gets stuck in disparate systems managed by disparate teams. One person I spoke with told me that she spent 6 months just figuring out where everything was, and piecing together what they had. Only at that point was she able to figure out what data points they were missing and start collecting those. It’s a big undertaking to try and consolidate different data silos, but it’s an important step to building a solid foundation.

7. Test new product ideas and turn them into features.

New products that you test quickly as experiments (against an existing user base — which large companies typically have), may not become new products that you officially launch. But you might discover features that can be incorporated into existing products. I spoke with a couple of people that take this approach–they’ll build small mobile apps (or websites) on the side, testing against specific metrics (usually engagement related) and see what happens. Oftentimes they don’t end up with an entirely new product, but they’ve found a feature that works well for their existing product. We often see startups labeled as “features not products” — which for startups is a bad thing. For intrapreneurs it might not be, because they can roll those features into an existing product, and they’ve already proven the benefits (albeit on a smaller scale, in an experimental way). This kind of innovation is awesome.

Lean Startup and Lean Analytics is in the Enterprise

There’s a lot of work still to do. We need more people coming forward and sharing their stories. Alistair and I hope to do that in the near future. But it’s also clear that Lean Startup and Lean Analytics are firmly planting themselves in the enterprise and making a difference. Intrapreneurs aren’t asking for permission, they’re just going ahead and doing it. The corporate rules still apply — you need air cover, you need budgetary support, etc. — but things are moving. The wheels are turning.

It was exciting and inspiring to speak with intrapreneurs at large multinationals and realize that they’re, in some cases, more agile and nimble than many startups I’ve spoken to. When they finally get to applying Lean and running experiments, they’ve got significant resources (user base, web traffic, dollars, etc.) to put to good use. I expect we’ll see more big companies applying Lean in their day-to-day affairs, and we’ll see more stories and legitimate case studies emerge as well.

Tiny, New, Addictive Behaviors (or How to Build an Awesome Minimum Viable Product)

Early on, once you’ve identified a problem genuinely worth solving, you need to build a Minimum Viable Product (MVP) and put it into the hands of early adopters.

In Lean Analytics, we call this the Stickiness Stage. I recently wrote that most startups fail at this point–they simply don’t get the traction they need (in terms of regular usage, engagement and retention) to keep going. Sometimes they move ahead anyway and hope they can acquire (customers) their way out of the problem…it doesn’t work.

Thinking about this further (and having been asked numerous times about what makes a good MVP and how do you know if you’re ready to move forward), I said to someone recently:

“What you’re trying to do is create a tiny, new, addictive behavior. It’s something small and ‘simple’ that you want people to do, which they get value out of it (when they do it), and so do you.”

I put ‘simple’ in quotes, because doing this isn’t easy, but it’s helpful to think about the MVP and product development in this way.

Repetitive usage is key (at least for most startups/products).

That may be daily or weekly. If usage is spread out much more than that it’s going to be hard to keep people’s attention. To get someone to do something over and over, you want to keep the ask small; you don’t want to overburden or overwhelm them, because they’ll give up.

The behavior you’re trying to get people to do is new.

They haven’t done it with you before, although they may have done similar things in other products. If that’s the case it may be easier to get them to do what you want them to. If it’s totally new, that’s a harder climb. No matter what, you’re asking them to do something new with you, which is another reason to keep the ask small.

People need to get hooked on the behavior, which means getting hooked on the result.

The core value you provide has to be awesome. It can be tiny, but it has to be awesome. Instagram filters were awesome. (One might argue they are less awesome now because they’ve been copied, but they created an emotional response that drove people to post more photos, which is what Instagram needed to succeed.) Tweeting and getting retweeted is awesome. Seeing a song identified in Shazam is awesome.

You want to go after the most basic of emotions possible. Dave McClure says it very well: people want to be made, paid, laid or unafraid. You need to appeal to people’s desire for reputation/popularity, money, sex or security. You might want to take a look at the seven deadly sins too (just in case you forgot ‘em!) The tiny, addictive, new behavior doesn’t have to be negative, that’s not the point, but it has to speak to people, emotionally, at the most basic of levels.

This tiny, addictive, new behavior forms some kind of loop.

User A does A then B then C and boom–they’re rewarded. And part of that reward drives them to start all over. It also builds value for you, and possibly for other users as well. So User A does A then B then C, gets rewarded and sets User B in motion (possibly doing the same loop, getting rewarded and engaging User C…and so on…)

Getting retweeted is an example of one user’s tiny behavior driving another user to take a tiny action, which creates value for everyone. User A tweets then User B retweets. User A feels awesome, and so does User B. With Twitter there’s an even earlier example of this sort of thing happening around following and being followed back. Simple, tiny and super addictive.

Remember: The tiny, addictive, new behavior creates amazing value (early on it’s only in short bursts, which like a drug, drives people to do it over and over) and results in creating value for you as well. Eventually these tiny behaviors start to build upon themselves creating more and more value for everyone involved.

You have to find that one tiny, addictive, new behavior and make that the core of your MVP.

Nothing else really matters. If you can’t find that tiny, addictive, new behavior that drives frequent usage (and in turn drives virality and easier user acquisition going forward) you’re going to struggle mightily to succeed.

NOTE: This post is part of Startup Edition, which is an awesome collaboration of bloggers writing on a host of startup-related topics. I encourage you to check it out and sign up for updates. Past topics included pricing, founder mistakes, getting your first customer and more.

Lean Startup Versus Raising Capital

Lean Startup is about experimentation and learning. It’s about being intellectually honest and methodical in your approach. It’s about going slow before going fast. It’s about moving backward before moving forward.

Investing on the other hand is about storytelling and big vision. It’s also about proof and hockey stick traction.

So when raising money how do you balance this dichotomy?

Over the last few years as Lean Startup has grown in popularity, many startups went to raise money with the mantra, “We’re lean!” Throw in a pivot or two and boom, you were raising seed capital. Lean was (and is) a breath of fresh air for startups and investors, shining light on the harsh realities of building companies. Investors appreciated the more rigorous approach; they felt like they were being sold something more real…

But along the way something bad happened. Lean Startup got watered down and pivot got bastardized. Startups popped up over a couple days with no vision whatsoever; but pounding the Lean drum, they went out to raise capital anyway. A backlash grew amongst investors who, understandably, got tired of hearing Lean a thousand times over, with little else. I wouldn’t recommend walking into an investor pitch and saying, “We’re a Lean Startup,” it’s not going to go well. Frankly, I don’t think that was ever the right strategy.

The key is in blending awesome storytelling & big vision and practical, dirt under your fingernails strategy & tactics.

If you can’t tell a compelling story and tug on investors’ heart strings, you just won’t get their attention. A lot of founders aren’t natural storytellers, but it’s a skill you need to work on aggressively, because it makes a huge difference. Paint a great story, emote an immense vision, and you have a chance of drawing investors in.

At the same time, you can’t just wave your hands around, boldly say, “Imagine a world where…” and expect them to bite. I know a few people that can do that, but most of us can’t. So you need to get into the details–into the strategy and tactics–and show investors how you’re going to execute aggressively and intelligently towards your vision. That’s where Lean comes in. Lean Startup and Lean Analytics are all about strategy and tactics. They give us a practical guidebook on how to execute. You can paint an awesome picture, weave a fantastic story, share an immense vision, and then bring investors down into the details. Explain to them what you’ve learned and how you’re experimenting. Talk with confidence about the approach, and root it in more than just your own imagination. Use Lean principles and analytics to ground what you’re doing. The vision and story you paint will become that much more real when you demonstrate your ability to strategically execute and “get shit done” (with Lean Startup and Lean Analytics serving as the foundational guide).

Successful entrepreneurs can sell the dream and convince/demonstrate to investors that they’re ones to realize it (which is where the practical “stuff” plays a big part). That’s the key to blending storytelling and Lean, and in turn using Lean as an effective means of raising capital.

Ben Yoskovitz
I'm VP Product at Codified (makers of VarageSale).

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it).

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