The lean startup movement rose to challenge the 75% failure rate of startup organizations, and it has spawned a string of brilliant success stories. The idea of a methodology that allows a company to save its resources and continually improve according to customer requirements seems a foolproof one. But lean startup is not a formula that you plug into a budding organization for automatic success. Many lean startups have met with the same failure as their fatty counterparts due to poor understanding of all that a lean startup entails. The lean startup requires constant balancing and measuring of success and failure, and although one of its goals is to minimize risk for the startup, it surely includes some measure of risk, and thus it calls for careful planning and data-driven decision making.
Many lean startup failures lie not with the lean startup methodology itself, but with faulty execution of its principles.
Although the answer to implementing successful lean startup methodology relies on many factors and varies depending on the organization, organizational intelligence is undoubtedly a critical element for success.
Organizational intelligence essentially means knowing your organization forwards, backwards, and sideways. It involves being able to understand complex situations, react quickly to the unexpected, and learn from both mistakes and successes. Successful organizational intelligence requires sorting through large amounts of data, benchmarking to show progress or regress, and brainstorming ideas for improvement. For any growing startup and certainly for established organizations looking to implement lean startup, that level of knowledge cannot possibly exist in one person’s head. In order to gain organizational intelligence, it therefore becomes necessary to break down silos and foster strong communication.
The basic road map for a lean startup is to create a basic business plan, come up with hypotheses for that plan, implement the plan, gather both internal and external feedback, and quickly respond and adjust to that feedback. Organizational intelligence is key to each of these components, as success in each requires a thorough understanding of the way an organization operates, what it is capable of, and potential areas of risk.
Organizational intelligence lends valuable tools to the lean startup and can also aid an organization in overcoming barriers to lean startup and lean management. Here we highlight eight areas where organizational intelligence proves key to a successful lean startup.
- Testing a faulty hypothesis/asking the wrong questions:Knowledge of an organization’s capabilities and customer requirements, will help eliminate the wastage of valuable resources by acting on the wrong hypotheses or asking the wrong questions.
- Building the wrong Minimum Viable Product :Although the goal of the lean startup is to improve a product piece-by-piece by building the minimum viable product (MVP), it is certainly still possible to build the wrong MVP. Two dangers lie here:wasting time adjusting to customer requirements unnecessarily, and making a product that is so minimally viable that it essentially isn’t viable at all. In order to achieve the perfect balance, an organization needs a thorough understanding of its customers – what they need and what they don’t need. Many times, the release of an MVP can be avoided by setting the right expectations for customers and saving resources to release a better product down the road. On the other side of the coin, an organization may need to spend more time and resources on a product release if customer needs demand it. Finding the balance requires constant communication and reevaluation as well as an understanding of the organization and its offerings that is thorough enough to be able to work around perceived issues.
- Measuring success and failure incorrectly: Success is not random; it is backed by data and must be evaluated by that data. Validation of a hypothesis does not mean that all resources should be poured into that hypothesis. The organization needs to know why it was validated and continue testing it for further improvement. On the other side, failure does not necessarily mean immediately abandoning an idea and moving on to the next. It is important to use organizational intelligence to understand why an idea failed and how to successfully recover from that failure.
- Identification of Waste:Quick identification and elimination of waste is critical for startups. Since employees are the ones who witness the waste on a day-to-day basis, the best way to comprehensively identify where an organization is wasteful is through organizational intelligence.
- Opportunities for Improvement:Identification of opportunities for improvement across the organization essentially begs for organizational intelligence. Crowdsourcing opportunities for improvement is the best way to ensure no stone is left unturned.
- Root Cause Analysis:Organizational intelligence is key here for identifying and thoroughly understanding the root causes for any issues that arise.
- Continuous Improvement:Lean startup methodology and organizational intelligence share the goal of continuous learning to improve. Organizational intelligence can identify elephants in the room and other cultural issues, areas where better communication, training, and strategy are needed, etc.
- Customer Needs:Organizational intelligence includes external knowledge as well as internal. Customer requirements are key to the lean startup, so a good grasp on what a customer is after is always necessary.
Lean startup is not a formula, but a methodology that requires constant vigilance of the organization and continual adjustment to the plan. There is no comprehensive checklist for how to create a successful lean startup, but data shows that organizational intelligence can fill in many of the gaps.