April 21, 2014

Agile Coaching Blog

3 Keys for Innovation: Why Lean Startup Isn’t Enough

Innovators have a new dilemma. While it is cheaper than ever to achieve problem/solution fit, the rate of change makes it expensive and difficult to maintain product/market fit.

Companies need to do more than just apply Lean Startup concepts, they need a holistic focus on three key areas:

1. Lean Startup
2. Business Model Innovation
3. Continuous Delivery

lean startup business model innovation continuous delivery

The Dangers of a Myopic Approach

Though leveraging all three at once may seem overwhelming, those who do so can thrive in extreme uncertainty. To see why, let’s start by breaking down the dangers of only focusing on one of these key ingredients.

Lean Startup Alone

Lean Startup has gone viral. I heard Marc Andressen say, “It’s like we discovered the theory of relativity,” while being interviewed by Eric Ries last winter. Unfortunately people are running with Lean Startup in ways that at best are local experiments and at worst destructive to an organization. Lean Startup is powerful stuff, but by itself it does not address how you retain product/market fit or deliver stable, scalable software to the customer.

lean startup

Business Model Innovation Only

At the same time, the days of a static business model, with an organization structured like a factory to execute on the model, are long gone. Today, Business Model Innovation is crucial for any business to survive. CEO’s need to be constantly creating, testing and modifying business models. Unfortunately much of this work occurs in a vacuum that is completely decoupled from the delivery of the product. Worst yet, without Lean Startup to validate/invalidate the risky assumptions in your business model it becomes nothing but an interesting thought exercise.

business model innovation

Continuous Delivery By Itself

The emergence of Continuous Delivery is a game changer. We are standing on the shoulders of Extreme Programming and Open Source giants as we can now safely increase speed to customer with our software. Unfortunately these efforts often originate in IT Departments and do not address the inputs for creating customer value. By itself, Continuous Delivery has merely given you a way to deliver waste faster.

continuous delivery

Lean Startup + Continuous Delivery

Lean Startup + Continuous Delivery is a powerful combination. Not only can you rapidly design tests to learn but you have the software capabilities to do it in a well designed, scalable manner. However with the absence of Business Model Innovation, you have little hope of taking advantage of the revenue generating opportunities. You’ll pivot in and out of product/market fit if you fail to leverage it with an innovative business model.

lean startup and continuous delivery

Lean Startup + Business Model Innovation

Lean Startup + Business Model Innovation is another powerful combination. Not only are you rapidly designing business models but you are systematically validating/invalidating them through Lean Startup experiments. Unfortunately without Continuous Delivery, you’re chances of scaling it and remaining responsive to customer’s changing needs are slim. Organizations that do not address their delivery streams end up experimenting outside of their release cycles. This is manageable for a time, but will not work well after you need to iterate product quickly.

lean startup and business model innovation

Business Model Innovation + Continuous Delivery

Business Model Innovation + Continuous Delivery is an interesting combination, yet I wonder that it can really exist in practice without some element of Lean Startup. Essentially you’ve coupled your Business Model Innovation efforts directly to your customer without validating/invalidating risky assumptions. While you could rely on the customers to validate those for you at an aggregate level, that’s an amount of risk I doubt you’ll want to incur.

business model innovation and continuous delivery

The Power of a Holistic Approach

This brings us back to Lean Startup + Business Model Innovation + Continuous Delivery. The combination of all three disciplines gives you an API for thriving in extreme uncertainty. You can create new business models, rapidly validate/invalidate the risky assumptions and deliver value to your customers in a quick and scalable manner. I would not go so far as stating you will be invincible with this combination, but you will be extremely hard to beat.

lean startup business model innovation continuous delivery

If you focus on all three of these key areas, you soon will discover that instead of being reactive to competitors, your competitors have become reactive to you.

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About David Bland David Bland

David has enjoyed success using lean and agile techniques at several companies in San Francisco and Washington DC. He joined his first dot com startup in 1999 and helped lead it to a 13 million dollar acquisition in 2006. Currently David brings startup thinking into large organizations to foster corporate entrepreneurship. He can usually be found writing, speaking and coaching around lean startup, business model generation and kanban.

COMMENTS:

  1. Just to say, David, that I whole-heatedly agree with your assertion. Nice work!

  2. David Bland
    David Bland says:

    Wow, thank you. I hope more read this and see the forest as these are exciting times.

    @davidjbland

  3. I enjoyed your post. It resonated with me as I have seen some horrific failures using lean and agile approaches and outcomes that were contrary to the established goals. It is not always clear that lean gets you to the big idea faster or leads to customer delight. Coincidentally, I also just published a piece titled “The Minimum Lovable Product.” It suggests that the goal should be customer love, not customer tolerance.

    http://blog.aha.io/index.php/the-minimum-lovable-product/

    Let me know what you think.

  4. David Bland says:

    Brian,

    Thank you for the feedback. My take on MVP is that people get too hung up on the P. You also have conflicting definitions of it out there in the wild (Cagan vs Ries). I heard a wise man say once that whoever sells the most books, gets to define it .

    My personal view on MVP is more of MVE (Minimum Viable Experiment). Your MVP is designed to learn more than anything. People get in trouble when they try to scale horribly buggy, not well designed code that was hacked together for a test to learn.

    For a “lovable product”, I think you are keying in on what Patrick & Brant speak to with Passionate Users in the Lean Entrepreneur. I’ve also been going down that path in my consulting work. I want people to understand who their passionate users are, how they became passionate, etc so that they can leverage them for their engine of growth. If you have no passionate users as of yet, then reverse engineer your way back to see if you can optimize the funnel through experiments to create them.

    Good stuff though, keep writing :)

    @davidjbland

  5. Good points. it would be great to connect. If you are interested, feel free to use my email to contact me. I would love to get your feedback on what we are up to.

  6. Mark Taylor says:

    Absolutely, Dave. I learned this through 4 startups, all with successful exits, and 2 established acquiring companies (HP and Broadcom). My 4 overlapping areas have the same results just slightly different names.

    - Lean/Agile Startup
    - Deliver on differentiable customer value
    - Dynamic business model engine
    - Dynamic stakeholder engine

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