Why Big Companies Need Lean Startup Techniques

September 28, 2016

Contributor: Kasey Panetta

Traditional companies need to look to startups to compete in the digital world.

GE is a 125-year-old company. By definition, it couldn’t be farther from a startup.

But that didn’t stop the industrial giant from adopting certain lean startup techniques to succeed in more uncertain times.

In 2012, GE created FastWorks, a branded internal approach to translate lean startup principles and other disruptive strategies across its ecosystem. GE recognized the need to combine the speed and agility of a startup with the scale and resources of a large enterprise.

“ By 2021, more than 50% of established corporations will be leveraging lean startup techniques”

Using the FastWorks approach, each project is encouraged to design experiments to test minimum viable products (MVPs) with customers early in the process. The GE team is able to change or “pivot” the project more easily based on what they learn with the customer, as opposed to the traditional way that may mean the project is near completion before it is shared with customer, making changes impossible or far more costly and time-consuming. FastWorks is about early customer discovery and collaboration, early and frequent testing of assumptions to validate or invalidate them, and using those lessons to make adjustments and further test throughout the project.

Gartner estimates by 2021, more than 50% of established corporations will be leveraging lean startup techniques at the business level to increase the pace and success of business transformation.

“Businesses must change how they change — they must enhance and rebalance their transformation capabilities to handle uncertain environments as well as certain situations,” said Bruce Robertson, vice president and distinguished analyst.

Avoid the big bang model

In a rapidly changing world, larger businesses might discover that they aren’t good at changing. However, businesses are also discovering that change is essential to success — whether that means keeping up with customers, beating out competitors or diving into new markets.

Part of the problem is that larger companies often only have practiced one way to change: the big bang mode. While this approach has worked in the past, it requires a future that is understood with certainty, yet this certainty does not exist in the digital business world.

“ Lean startups look to eliminate waste in transformation and innovation activities”

The solution is to enable an increasingly balanced bimodal operational approach, with a BizOps Mode 2 alongside the traditional big bang Mode 1. This bimodal operation will enable a company to experiment with innovations and transformations and then stabilize and scale up those changes.

GE uses this bimodal approach in FastWorks. The company has developed a portfolio of investments, but they aren’t traditional big bang projects or initiatives.

Use MVPs to validate assumptions

A critical challenge for many organizations will be adopting radical MVP thinking in the business (not just in IT). Businesses must define what is the least investment needed (in time, budget, resources, etc.) to test the most uncertain assumptions for the new product or service.

For example, when the Queensland state government needed a better system for connecting businesses to a complex array of international agencies for services and certifications, they created the State Assessment and Referral Agency (SARA). SARA was up and running — and gaining kudos — just seven months after legislation. The agency’s case management system was not integrated with back-end agency systems. Instead, the case managers made phone calls and contacted agencies directly.

This surprisingly imperfect and incomplete implementation (and much smaller investment than usual when floating an entirely new government agency) allowed the state to validate the assumption that it was worth creating the intermediating business “customer-” focused agency, and they didn’t waste time attempting to implement the perfect IT solution in the meantime. Plus, this more agile approach meant the state was able to revamp the solution sooner than planned when the laws changed.

Traditional companies focus on gaining consistency and eliminating waste during execution for business operations, but lean startups look to eliminate waste in transformation and innovation activities. To get big changes or transformations while living with uncertain business conditions, businesses need to act small — like a startup, or more precisely, a bunch of little startups.

MVPs enable businesses to act small to validate assumptions about the value of transformational changes in both business and operating models. By connecting existing agile and design techniques to the lean startup MVP techniques, enterprises can test and validate ideas while allowing for necessary changes.

Experience Information Technology conferences

Join your peers for the unveiling of the latest insights at Gartner conferences.