The Lean Startup - Eric Ries [106]
It’s important to emphasize that this fear is well founded. Sabotage is a rational response from managers whose territory is threatened. This company is not a random, tiny startup with nothing to lose. An established company has a lot to lose. If the revenue from the core business goes down, heads will roll. This is not something to be taken lightly.
The Dangers of Hiding Innovation inside the Black Box
The imperative to innovate is unrelenting. Without the ability to experiment in a more agile manner, this company eventually would suffer the fate described in The Innovator’s Dilemma: ever-higher profits and margins year after year until the business suddenly collapsed.
We often frame internal innovation challenges by asking, How can we protect the internal startup from the parent organization? I would like to reframe and reverse the question: How can we protect the parent organization from the startup? In my experience, people defend themselves when they feel threatened, and no innovation can flourish if defensiveness is given free rein. In fact, this is why the common suggestion to hide the innovation team is misguided. There are examples of one-time successes using a secret skunkworks or off-site innovation team, such as the building of the original IBM PC in Boca Raton, Florida, completely separate from mainline IBM. But these examples should serve mostly as cautionary tales, because they have rarely led to sustainable innovation.2 Hiding from the parent organization can have long-term negative consequences.
Consider it from the point of view of the managers who have the innovation sprung on them. They are likely to feel betrayed and more than a little paranoid. After all, if something of this magnitude could be hidden, what else is waiting in the shadows? Over time, this leads to more politics as managers are incentivized to ferret out threats to their power, influence, and careers. The fact that the innovation was a success is no justification for this dishonest behavior. From the point of view of established managers, the message is clear: if you are not on the inside, you are liable to be blindsided by this type of secret.
It is unfair to criticize these managers for their response; the criticism should be aimed at senior executives who failed to design a supportive system in which to operate and innovate. I believe this is one reason why companies such as IBM lost their leadership position in the new markets that they developed using a black box such as the PC business; they are unable to re-create and sustain the culture that led to the innovation in the first place.
Creating an Innovation Sandbox
The challenge here is to create a mechanism for empowering innovation teams out in the open. This is the path toward a sustainable culture of innovation over time as companies face repeated existential threats. My suggested solution is to create a sandbox for innovation that will contain the impact of the new innovation but not constrain the methods of the startup team. It works as follows:
1. Any team can create a true split-test experiment that affects only the sandboxed parts of the product or service (for a multipart product) or only certain customer segments or territories (for a new product). However:
2. One team must see the whole experiment through from end to end.
3. No experiment can run longer than a specified amount of time (usually a few weeks for simple feature experiments, longer for more disruptive innovations).
4. No experiment can affect more than a specified number of customers (usually expressed as a percentage of the company’s total mainstream customer base).
5. Every experiment has to be evaluated on the basis of a single standard report of five to ten (no more) actionable metrics.
6. Every team that works inside the sandbox and every product that is built must use the same metrics to evaluate success.
7. Any team that creates an experiment must monitor the metrics and customer reactions (support calls, social media reaction, forum threads, etc.) while the experiment