The Lean Startup - Eric Ries [107]
At the beginning, the sandbox has to be quite small. In the company above, the sandbox initially contained only the pricing page. Depending on the types of products the company makes, the size of the sandbox can be defined in different ways. For example, an online service might restrict it to certain pages or user flows. A retail operation might restrict it to certain stores or geographic areas. Companies trying to bring an entirely new product to market might build the restriction around customers in certain segments.
Unlike in a concept test or market test, customers in the sandbox are considered real and the innovation team is allowed to attempt to establish a long-term relationship with them. After all, they may be experimenting with those early adopters for a long time before their learning milestones are accomplished.
Whenever possible, the innovation team should be cross-functional and have a clear team leader, like the Toyota shusa. It should be empowered to build, market, and deploy products or features in the sandbox without prior approval. It should be required to report on the success or failure of those efforts by using standard actionable metrics and innovation accounting.
This approach can work even for teams that have never before worked cross-functionally. The first few changes, such as a price change, may not require great engineering effort, but they require coordination across departments: engineering, marketing, customer service. Teams that work this way are more productive as long as productivity is measured by their ability to create customer value and not just stay busy.
True experiments are easy to classify as successes or failures because top-level metrics either move or they don’t. Either way, the team learns immediately whether its assumptions about how customers will behave are correct. By using the same metrics each time, the team builds literacy about those metrics across the company. Because the innovation team is reporting on its progress by using the system of innovation accounting described in Part Two, anyone who reads those reports is getting an implicit lesson in the power of actionable metrics. This effect is extremely powerful. Even if someone wants to sabotage the innovation team, he or she will have to learn all about actionable metrics and learning milestones to do it.
The sandbox also promotes rapid iteration. When people have a chance to see a project through from end to end and the work is done in small batches and delivers a clear verdict quickly, they benefit from the power of feedback. Each time they fail to move the numbers, they have a real opportunity to act on their findings immediately. Thus, these teams tend to converge on optimal solutions rapidly even if they start out with really bad ideas.
As we saw earlier, this is a manifestation of the principle of small batches. Functional specialists, especially those steeped in waterfall or stage-gate development, have been trained to work in extremely large batches. This causes even good ideas to get bogged down by waste. By making the batch size small, the sandbox method allows teams to make cheap mistakes quickly and start learning. As we’ll see below, these small initial experiments can demonstrate that a team has a viable new business that can be integrated back into the parent company.
Holding Internal Teams Accountable
We already discussed learning milestones in detail in Chapter 7. With an internal startup team, the sequence of accountability is the same: build an ideal model of the desired disruption that is based on customer archetypes, launch a minimum viable product to establish a baseline, and then attempt to tune the engine to get it closer to the ideal.
Operating in this framework, internal teams essentially act as startups. As they demonstrate success, they need to become integrated into the company’s overall portfolio of products and services.
CULTIVATING THE MANAGEMENT PORTFOLIO
There are four major kinds of work that companies must