This is a continuation of the previous blog...
Today I delivered a presentation in front of a group of venture capitals in Oresund top 10... I was very surprised by the reaction after the presentation was completed. I never thought that VCs would react on a presentation the same way that an inspired group of conference attendees do.
OK onward to the question is lean start-up the most cost effective start up? Yes and No. Let's start with the NO. When is Lean start-up not cost effective? The simple answer is when it is not managed properly. This happens when too much waste is generated by multiple failures without learning from such failures. It also happens when you overpromise and under deliver thus ruining your reputation in the market and losing further business. Remember the Minimum Viable Product? It is good for marketing but be careful as an organisation you don't have too many chances to disappoint your customers. There are several other reasons why a lean start-up is not cost effective, however those two are endemic.
So when is lean start-up cost effective? Again it boils down to good management and avoiding the most common fit fall of overpromising and under delivery. Furthermore it is cost effective when you manage to eliminate CAPEX intensive technologies and go open source. Why open source? It allows you to benefit from innovation of others without spending your time and resource re-inventing the wheel. Why re-invent the wheel when you can fly?
There are more arguments why lean start-up is cost effective but I guess I have to leave that to Eric Ries :-).... If you want to know more from me then simply ask :-)
Can someone please prove me wrong?
Friday, November 6, 2009
Tuesday, November 3, 2009
Lean Startup in Large Companies
Today I attended Eric Ries' seminar on lean start-up in Malmö. To those who attended the event you might have known me to be the last person to have had asked a question before the panel discussion started. The question of course was captivating "How can you use lean start-up principles to obtain VC funding?" and resulted to a long and entertaining answer from Eric.
During the panel discussions there were 3 questions that strike a cord on me and did not get a clear answer from the panel members. (1)How can you apply lean start-up in large companies? (2)Is lean start-up the most cost effective way of starting up a successful company? (3)Does outsourcing innovation work? Pity that there were no meaningful answers provided on this questions, well, answers were provided but not concrete enough nor definitive enough.
Having practiced lean start-up since '98 and have been exposed to the early lean start-up practices in a telecom operator way back in the mid '90s I can shed light into the questions above. My observations are very limited to the telecom sector so I can not claim that it can translate across multiple industries.
Onwards to the question of "How can you apply lean start-up in large companies?" Actually this is not a new concept, the practice of lean start-up principles has been around for decades and it’s been called good management practice. Several fads have come and go but the good old management practice remains the same. So how do you exactly implement lean start-up principles in large organisations? To answer that let me tell you a story.
While managing business development for a large firm (1B$ in revenue) I was responsible in developing business and establishing operations in new territories. The process of establish this new operations is similar to starting up a new company. The limitations are the same (1)Budget is very limited (2)You need to get funding (3)No existing customer (4)All you have is a concept. The difference here is that the concept is proven to have worked in other countries, having said that there is no guarantee that such concept will work in another country with a different business culture and a very different business climate.
To be able to establish a new country operations you need (1) get customers fast (2)generate good profit immediately (3)expand rapidly (4)use new operations to spring board to other relevant markets. So what's the secret recipe in getting it right? Well, it’s very simple. It's called sales... sales... sales... The minimum viable product in this particular company is really very early stage, like in there is no product at all and no product prototype... all there is a concept and a promise of delivery.
To achieve success you need to gain trust of your potential customers, enough trust to sign a multi-million Euro contract without knowing what they are buying. Once you receive the order make sure you build a team that can deliver the promise. The delivery do not have to perfect in the first run, failures are accepted in the beginning since it is a learning process to fully understand the customer requirement. The key is constant communication and collaboration with the customer to reduce if not eliminate failure points and deliver flawlessly.
But wait a minute... How do you exactly do that? What do you need to establish the country operations? The answer is you only need 2 part time people, one finding the problem and the other looking for a solution. It is possible to get up to the point where contract is signed or order is received with only 1 brilliant person. And don't forget to that face to face contact accelerates the process and increase the probability of success. Why? Because decision making is highly influenced by emotions and perceptions.
Ok then to the second question "Is lean start-up the most cost effective way of starting up a successful company?" it's coming on the next blog.
During the panel discussions there were 3 questions that strike a cord on me and did not get a clear answer from the panel members. (1)How can you apply lean start-up in large companies? (2)Is lean start-up the most cost effective way of starting up a successful company? (3)Does outsourcing innovation work? Pity that there were no meaningful answers provided on this questions, well, answers were provided but not concrete enough nor definitive enough.
Having practiced lean start-up since '98 and have been exposed to the early lean start-up practices in a telecom operator way back in the mid '90s I can shed light into the questions above. My observations are very limited to the telecom sector so I can not claim that it can translate across multiple industries.
Onwards to the question of "How can you apply lean start-up in large companies?" Actually this is not a new concept, the practice of lean start-up principles has been around for decades and it’s been called good management practice. Several fads have come and go but the good old management practice remains the same. So how do you exactly implement lean start-up principles in large organisations? To answer that let me tell you a story.
While managing business development for a large firm (1B$ in revenue) I was responsible in developing business and establishing operations in new territories. The process of establish this new operations is similar to starting up a new company. The limitations are the same (1)Budget is very limited (2)You need to get funding (3)No existing customer (4)All you have is a concept. The difference here is that the concept is proven to have worked in other countries, having said that there is no guarantee that such concept will work in another country with a different business culture and a very different business climate.
To be able to establish a new country operations you need (1) get customers fast (2)generate good profit immediately (3)expand rapidly (4)use new operations to spring board to other relevant markets. So what's the secret recipe in getting it right? Well, it’s very simple. It's called sales... sales... sales... The minimum viable product in this particular company is really very early stage, like in there is no product at all and no product prototype... all there is a concept and a promise of delivery.
To achieve success you need to gain trust of your potential customers, enough trust to sign a multi-million Euro contract without knowing what they are buying. Once you receive the order make sure you build a team that can deliver the promise. The delivery do not have to perfect in the first run, failures are accepted in the beginning since it is a learning process to fully understand the customer requirement. The key is constant communication and collaboration with the customer to reduce if not eliminate failure points and deliver flawlessly.
But wait a minute... How do you exactly do that? What do you need to establish the country operations? The answer is you only need 2 part time people, one finding the problem and the other looking for a solution. It is possible to get up to the point where contract is signed or order is received with only 1 brilliant person. And don't forget to that face to face contact accelerates the process and increase the probability of success. Why? Because decision making is highly influenced by emotions and perceptions.
Ok then to the second question "Is lean start-up the most cost effective way of starting up a successful company?" it's coming on the next blog.
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