{squeaky lean}

What is Lean? 5 Lean Management Principles Big Companies Must Learn

what is lean - 5 lean management principlesWhat is Lean?

A set of principles and practices that help a company or a team create more customer value, faster, with the same resource.

Savvy startups are all reading Eric Reis' 'The Lean Startup' and using the practices he discusses to build and launch their product to real users quickly.  And then to measure their customers' response to the product and learn about how to develop it further to make it more successful.

Moving through this cycle as quickly and as efficiently as possible, so you learn what your customers want and how best to respond, is what gives you competitive advantage. And to move through the cycle quickly, you need to be lean.

These practices are just as important for enterprises who are looking to innovate beyond their core products, so managers who are responsible for innovation, should learn them.

Before we get onto the lean management principles we should all be using, lets just start by saying one important thing:

"Major organisations have already done what all startups dream of doing."

Oh yes Mr Shiny Startup, shying away from the P word ('profit' .. thought I'd better clarify).

All major organisations dreamt up a product or service that they thought people might be interested in, started small and tested it out.

Feedback was good. They optimised and tested some more, listened intently to what their audience thought about it, and at some point, it took off in a big way!

They couldn't keep up with demand. But they responded quickly and grew fast. No one could believe how fast they grew.

They became the young, fresh-faced darlings of their industry. These hugely talented and determined individuals inspired their burgeoning workforce to still bigger and greater things and their company became big. Really big. One of the leaders in its sector.

Brilliant stuff!

So why on earth do so many of these companies, all these years later, have to put up with people questioning their management style, their processes, their siloed structures, even the quality of the food in their canteen (doesn't matter how good your canteen is, people will tell their friends it's terrible – you can't say your canteen's good, don't ask me why, you just can't).

"Actually," I hear you say, "I have a thing or two to say about our company! It IS frustrating when my team and I have to wade through policy, when we have to help other teams with their work while they have no regard for ours, when it's so hard to get time or investment to try out our AMAZING new idea.

But, I had a delicious enchilada in the canteen yesterday and told everyone it was too dry. Why did i DO that?!"

Well, fact is, there was a time when no-one questioned the way your company worked.

Everyone who worked there loved it.

There was an excitement in the air as people felt they were on their way to achieving a shared vision. They understood and believed in this vision. They trusted it. And they trusted each other.

"So what happened to that then?", you ask.

Well, fast growth requires more people. More people, requires some level of bureaucratic structure and a standardisation of roles, responsibilities and processes. 'bureaucratic structure' and 'standardisation', don't sound like phrases that go with 'clear vision' and 'trusting each other' do they.

They don't.

Standardisation is good when you've finished innovating and want some maintenance and protection.

But, taking that away and relying on a shared vision and some trust – well that's what's required when you really want to innovate again.

So – in big companies, you need standardisation for the bits that need protecting, but you need to relax it and go lean for the bits that need innovating.

We're here to talk about being lean and innovating. So here are 5 principles big companies need to relearn:

Lean Management Principle 1: Motivate with a Vision

Your company will have a vision that's written down.

Don't scoff at it (if you are scoffing at it, what are you doing there!). If you think it needs improvement, then improve it. You don't need to get it changed officially.

The point is to ensure you have something you truly believe in, that makes sense and sounds inspiring.

Got one? Now put it on the walls. Talk to everyone about it. Your team, your colleagues, your mum, your mum's bingo friends. Everyone.

Lean Management Principle 2: Set Objectives Objectively

If there is one process you need everyone to know about – it's a robust objective setting process. Less guessing, less copying the shiny thing your competitor is doing, more understanding what your strategic gaps are, and setting objectives to fill them.

Know exactly the journey you want your customers to take from the point they become aware of your product, to the point they become lifelong devotees, buying the product again and again, even if they don't need it anymore, tattooing your logo on their right arm and frightening their friends into acting in the same insane way.

Once you know all those points in a customer's journey where they can decide to behave the way you want them to or not, measure them to see how you're getting on. Make sure you cover how you're doing in terms of customer acquisition, retention and monetisation (and read Nicholas Lovell's posts about this – he introduced me to it!)

Right, once you've done that (and only once you've done that), you can you set some objectives. How can you know what you need to get better at if you don't know what you're not good at?

So set the objectives and then prioritise them. Pick the top three (though one or two would be better).

Now tell everyone again.

(For more on this principle, read Objective Setting for Dummies)

Lean Management Principle 3: Measure Conversion

This bit should be easy because you're now measuring the right things. And you're using the data for identifying gaps and setting objectives. Not for showing off once a month in a report. If you're still not convinced, read Avinash Kaushik's stuff. He'll make you understand that metrics are much more important than you think they are.

The measures specific to your current objectives are your Key Performance Indicators (KPIs), and these should be %s rather than volume numbers. Wherever possible, you're measuring the conversion rate of customers doing whatever it is you need them to do for your revenue model to work.

Once you have your KPIs – Tell everyone.

Lean Management Principle 4: Experimental Product Development

First of all, why are you developing a new product? You work in a company that has had a lot of success with previous products, what's the new one for? Who's it for? Are you sure they want it?

You might well think you're the next Steve Jobs, identifying products you know people want before they even know themselves, without any need for testing early versions out on them.

Um. No. You're not. (But just in case you are  – any chance my wife and I can get a discount for whatever it is you're developing?)

First of all, are you positive that this new product is the only way you can hit that objective and fill that strategic gap.

Let's just make doubly sure you can't hit that objective with the products you already have. Are these products performing as well as they could be? Are you measuring them properly to know you're not missing the fact that some optimisation and some tweaking, or a little bit of reorganising, might not just bring it back to life in terms of a nice healthy growth trajectory?

In the digital world, there are now products (Optimizely and Visual Website Optimiser are good examples) that will let you test dozens of variations of your product on a daily basis, WITHOUT having to bother a single developer.

This is true. These tools are really that good. So why on earth aren't we all obsessively testing, tweaking and optimising our way to much better products without much effort?

Actually, lots of companies ARE doing it. In fact, you know those online companies you admire so much – Amazon, eBay, Facebook? They're doing it. ALL of them. And with great results (see Wired's article on IGN's testing results) – so if you're not, well just get on with it. There is no debate to be had here. You should just get started. Tomorrow!

Dave McClure, who runs the big silicon valley VC, 500 Hats, and was one of the founders of Paypal, believes only 20% of our efforts should be in development, and 80% in optimisation. Watch him yell about this along with some of these other lean topics. He's pretty convincing. And he's done pretty well for himself.

Anyway – back to that shiny new product you have that grand design for. Ok, I'm with you now, let's do it.

20% of it. Sorry, yes. Just 20% of it. And then let's launch it.

I don't mean launching a shoddy product, I mean launching a product with only the absolute core features incorporated into it. Come on now, you know you've thrown everything AND the kitchen sink at it. I know what you were thinking, you want to make sure it works, right? So you didn't want to leave anything out, right?


Be ruthless and pare back the design to its purest form and launch it.

And then run tests with Optimizely and use the results to optimise it.

If you have a hundred days to build a product, launch it on day 20 and spend 80 days optimising it. You'll end up with the product your customers actually want, rather than the one you assume they want. And I don't want to finish this bit on a downer, but if you find out they don't actually want it at all, then you've only invested 20% of the time you would have done otherwise.

(For more on how to identify your Minimum Viable Product, read MVP Jenga – What's a Minimum Viable Product and How Do I Get One?)

Lean Management Principle 5: Team in a Room

The clincher! Get everyone who will contribute to this visionary product of yours, into a room. The same room. At the same time. Together.

I don't mean adding them to some 'collaboration software', I mean face to face. (Collaboration software has a place later, when you have some momentum, but not yet). If you can't be in the same room then set up video conferencing, but make sure everyone can see the whites of each others eyes.

This group of people will be cross-functional. You are breaking down the company's bureaucratic structure and laying it out to fit your new product lifecycle. Everyone who you need to care should be there. Now then – MAKE THEM CARE!

('Team in a Room' will speed up your product development too. Read Get Your Wasted Time Back. Here's How!)

Tell them EVERYTHING! Vision. Objectives. Measures. Product Process. And tell them that right now, right there in that room, is all the knowledge and skill required to get this product from vision to glorious reality. As long as they keep talking, face to face.

And tell them they don't need to write reports for each other any more, not on your project anyway.

Because you know what, they're all going to just trust each other.

Like this?

By Kevin Heery.


One Comment

  1. […] a 'Team in a Room' approach in place (see 5 lean principles big companies must relearn – this is no.5) The knowledge and authority required to approve things, doesn't seem to be […]

Leave a Reply