The Lean Startup - Eric Ries [13]
This kind of change is hard. After all, the company has a significant number of existing customers who continue to demand exceptional service and investors who expect steady, growing returns.
Scott says,
It goes against the grain of what people have been taught in business and what leaders have been taught. The problem isn’t with the teams or the entrepreneurs. They love the chance to quickly get their baby out into the market. They love the chance to have the customer vote instead of the suits voting. The real issue is with the leaders and the middle managers. There are many business leaders who have been successful because of analysis. They think they’re analysts, and their job is to do great planning and analyzing and have a plan.
The amount of time a company can count on holding on to market leadership to exploit its earlier innovations is shrinking, and this creates an imperative for even the most entrenched companies to invest in innovation. In fact, I believe a company’s only sustainable path to long-term economic growth is to build an “innovation factory” that uses Lean Startup techniques to create disruptive innovations on a continuous basis. In other words, established companies need to figure out how to accomplish what Scott Cook did in 1983, but on an industrial scale and with an established cohort of managers steeped in traditional management culture.
Ever the maverick, Cook asked me to put these ideas to the test, and so I gave a talk that was simulcast to all seven thousand–plus Intuit employees during which I explained the theory of the Lean Startup, repeating my definition: an organization designed to create new products and services under conditions of extreme uncertainty.
What happened next is etched in my memory. CEO Brad Smith had been sitting next to me as I spoke. When I was done, he got up and said before all of Intuit’s employees, “Folks, listen up. You heard Eric’s definition of a startup. It has three parts, and we here at Intuit match all three parts of that definition.”
Scott and Brad are leaders who realize that something new is needed in management thinking. Intuit is proof that this kind of thinking can work in established companies. Brad explained to me how they hold themselves accountable for their new innovation efforts by measuring two things: the number of customers using products that didn’t exist three years ago and the percentage of revenue coming from offerings that did not exist three years ago.
Under the old model, it took an average of 5.5 years for a successful new product to start generating $50 million in revenue. Brad explained to me, “We’ve generated $50 million in offerings that did not exist twelve months ago in the last year. Now it’s not one particular offering. It’s a combination of a whole bunch of innovation happening, but that’s the kind of stuff that’s creating some energy for us, that we think we can truly short-circuit the ramp by killing things that don’t make sense fast and doubling down on the ones that do.” For a company as large as Intuit, these are modest results and early days. They have decades of legacy systems and legacy thinking to overcome. However, their leadership in adopting entrepreneurial management is starting to pay off.
Leadership requires creating conditions that enable employees to do the kinds of experimentation that entrepreneurship requires. For example, changes in TurboTax enabled the Intuit team to develop five hundred experiments per tax season. Before that, marketers with great ideas couldn’t have done those tests even if they’d wanted to, because they didn’t have a system in place through which to change the website rapidly. Intuit invested in systems that increased the speed at which tests could be built, deployed,