Adopt a startup process. This fifth installment of the Digital Transformation Process: A Key Guide to Success explores how startup strategies like lean startup can be applied in large enterprises. It covers the challenges of adopting and executing lean startup, design thinking, and agile methodologies, as well as considerations for digital transformation (Industry 4.0, DT, DX, digital transformation) in large organizations.
Lean Startup: Key Strategies for Entrepreneurship
The concept of a “lean startup” was once much talked about in the enterprise market. Lean Startup is a management strategy created by startup entrepreneur Eric Ries based on his own experiences with successful and unsuccessful startups. It’s still considered a valid rapid execution approach and an agile methodology.
Startups with limited capital and resources can benefit from practicing Lean Startup by quickly gathering market feedback and quickly fixing identified problems rather than spending all their time and resources on a complete product. Lean startups release a minimum viable product (MVP) based on a product idea and business model hypothesis, gauge audience reaction, and either fix the problem or pivot. It’s a way for startup founders to keep trying new things while lowering their risk of failure.
Applying lean startups in large organizations
As business uncertainty increases and growth stagnates, even large companies are looking for ways to create innovative products and services, and lean startups are one of them. In the past, Six Sigma, Reengineering, and other IT systems have been popular, and creativity training has gained traction with methodologies such as Brainstorming and Triz. Then, as digital penetrated all industries, lean startup methodologies gained traction. Especially in the context of launching a new business, it was crucial to empower them with an entrepreneurial spirit.
Different methodologies for lean startups
Lean Startup isn’t the only methodology with a similar concept. IDEO, a design consulting firm, has proposed Design Thinking, which is similar to Lean Startup in that new ideas are rapidly vetted by multiple members and continuously evolved. In IT development, Agile is a popular alternative to the traditional waterfall methodology, where products are created, deployed, and validated quickly to find and fix problems. (Agile is a development transformation strategy, and lean is a management transformation strategy.)
The American professor Clayton M. Christensen’s concept of “disruptive innovation” also influenced the creation of these methodologies. Regardless of the methodology you choose, they all have one goal in mind. They’re all about doing things differently in response to an uncertain future. The key is to start small, get to market quickly, validate and evolve, and eventually innovate.
DXs should also consider using these methodologies to change their business models, launch new businesses, or digitize existing products and services to create new growth engines. However, the problem is that if you don’t have hands-on experience in applying these methodologies, you’ll end up going through the motions and missing the point.
Lean startup methodology adoption and execution challenges
Let’s say you’re running a DX with a lean startup methodology. Even if the business model hypothesis is well agreed upon, there may be disagreements or conflicts of interest between organizations about releasing a minimum functional product. From a startup perspective, there is no brand and the process of planning, designing, developing, and operating can only be done by a small number of people, so product validation and testing can be streamlined. It’s inevitably faster.
However, if you are not a startup, but a large company, and you own a very famous brand, the idea of releasing a minimum functional product that is not even a finished product in your eyes is not an easy decision. There are a lot of arguments against it, from the logic that it could undermine the existing brand value to the fact that customer complaints will inevitably increase the cost of handling after-sales service in the call center. Of course, all of these are true in a normal product launch process, but if you don’t understand that the essence of lean startup is ‘hypothesis testing’, then DX with this method will be a lost cause.
Beyond branding issues, there are also problems with the launch phase. From a traditional product launch perspective, a minimum viable product looks really bad. Naturally, it can’t even pass internal quality testing standards. And it’s constantly slowing down. This complexity is an inevitable part of the transition from manufacturing hardware to a disparate business like releasing software or services. Transitioning to digital is an activity that should take advantage of digital as a means to an end. The beauty of digital is that products and services are already in use by customers and can be easily modified through a process called patching. This is a difficult concept to grasp for companies centered around hardware or physical products.
Digital transformation in large enterprises and the application of lean startups
How would the quality department of a Korean car company understand that the software in a Tesla car is patched and upgraded once a week, improving the performance of the product? By their standards, they probably wouldn’t even be able to launch the car. Nowadays, there are so many advances in artificial intelligence that it’s hard to say what the right answer is for quality testing. The basic logic of A.I. is not that if you input A, you will get B. It is a kind of black box, and it will produce great results according to the learning model. Therefore, the question of how to verify quality in such cases is always an issue.
The importance of roles and responsibilities in the execution organization
In the end, there is no shortcut to solving these problems other than having the right mix of experienced external resources. It is imperative to have experienced people in the execution team and to ensure that members of the common or support organization have a high level of understanding with minimal training. If that is not possible, you may need to partner with an experienced professional organization to address these issues.
If you’re worried about diminishing the value of your existing brand with a minimalistic product, you may want to consider launching it under a separate brand or as a private service without the company name. There are plenty of examples of this already in the market. By not using a brand, you can give the impression that you’re working in the same environment as a real startup and get a more objective market assessment.
In the end, it’s up to the DX organization to decide on the number and methodology of the different cases described above. If you follow traditional processes, you’re likely to be up to speed internally but slow to collaborate with other departments. It’s important to remember that empowerment and accountability go beyond the core of execution to unite all members of the chain of business model or new product testing and centralize all decision-making.