Title: The Startup Way
Author: Eric Ries
Published: 2017
Categories: Startup Strategies, Tech Startups, Business Models

Summary:

Eric Ries’ “The Startup Way” extends the principles he originally discussed in “The Lean Startup” and broadens their applicability to larger organizations. The book argues that startup methodologies can foster innovation within established enterprises, ensuring they remain agile and competitive in a rapidly changing market. Below is a structured summary of the key points and examples from the book, along with specific action steps readers can take to implement these strategies in their organizations.

Key Point: Lean Startup principles, such as validated learning, build-measure-learn cycles, and pivot or persevere decisions, can be effectively applied to larger organizations.

Example: General Electric (GE) adopted the “FastWorks” mindset, based on Lean Startup principles, to bring new products to market more quickly and efficiently. This approach allowed GE to reduce the production time of various projects significantly.

Action Step: Start incorporating build-measure-learn cycles in your projects to ensure that each initiative is based on validated learning. Begin with one project to test the process and refine it based on feedback and observations before scaling up.

Key Point: For innovation to thrive, companies must cultivate a culture that supports experimentation, tolerates failure, and encourages entrepreneurial thinking at all levels.

Example: Eric Ries mentions how Intuit, a large software company, shifted its culture to one that encourages employees to act like entrepreneurs. By implementing smaller, cross-functional teams empowered to make decisions, Intuit boosted its product development cycle and innovation rate.

Action Step: Organize internal hackathons or innovation days to encourage employees to think creatively and come up with new ideas. Offer rewards and recognition for initiatives that demonstrate significant potential, even if they fail.

Key Point: Large companies should maintain a balance between core business projects, adjacent innovations, and transformative initiatives, much like a diversified investment portfolio.

Example: Google (Alphabet) maintains a diverse portfolio of projects, from core search engine developments to moonshot projects like self-driving cars. By balancing different levels of risk and reward, they ensure sustainable growth and innovation.

Action Step: Evaluate your current projects and categorize them into core, adjacent, and transformative. Allocate resources appropriately to maintain a healthy balance and promote sustainable innovation across different realms.

Key Point: The traditional management approach needs to evolve to support the dynamic needs of modern companies. Strategies like continuous improvement and agility are crucial.

Example: Toyota’s implementation of “lean manufacturing” principles focuses on continuous improvement and waste reduction, which has significantly streamlined their production processes and enhanced efficiency.

Action Step: Introduce regular retrospectives in your team meetings to assess processes, celebrate wins, and identify areas for improvement. Use these insights to make small, incremental changes continuously.

Key Point: Organizations need to foster an entrepreneurship mindset among employees, encouraging them to take ownership, be innovative, and act like entrepreneurs within the company.

Example: Adobe’s “Kickbox” initiative provides employees with resources and a structured framework to develop and test new ideas, promoting entrepreneurial behavior across the company’s workforce.

Action Step: Design entrepreneur-oriented training programs to equip employees with the skills to identify opportunities, prototype quickly, and validate ideas with real customers.

Key Point: Specially structured innovation teams help drive new project initiatives and ensure they have the resources and freedom needed to experiment.

Example: Amazon’s “two-pizza teams” are small, autonomous units designed to stay nimble and innovative. Each team is only as big as can be fed by two pizzas, promoting quick decision-making and focused efforts.

Action Step: Create small, cross-functional teams for new projects. Ensure they have a clear mandate and the flexibility to pivot quickly based on findings and feedback.

Key Point: Blend the flexibility and speed of startups with the strategic oversight and resource strength of large corporations to create an optimal environment for growth.

Example: Ries cites how the global insurance firm, AXA, launched an internal accelerator program to combine the nimbleness of startups with its extensive corporate capabilities.

Action Step: Establish an internal accelerator or incubator that champions startup practices within the enterprise. Provide these internal startups with the resources and autonomy they need, while also setting clear performance metrics and strategic alignment checks.

Key Point: Innovation should not be a side hustle but integrated into your company’s core strategic vision. Aligning new projects with the overall business goals ensures cohesive and meaningful growth.

Example: Intuit’s commitment to being a 100-year company means their long-term innovation strategy is tightly integrated with their mission of providing business solutions that make customers’ lives easier.

Action Step: Regularly revisit and update your strategic plan to incorporate innovation goals. Ensure that each innovative initiative aligns with and furthers the company’s long-term objectives.

Key Point: Use different metrics for innovation projects compared to traditional business operations. Indicators like learning milestones and customer engagement can be more telling than traditional financial metrics early in the lifecycle.

Example: Ries explains how companies focus on innovation metrics such as customer acquisition cost (CAC) and lifetime value (LTV) instead of just immediate profit margins to gauge the success of new ventures.

Action Step: Define and track specific metrics for innovation projects that focus on customer feedback and product/market fit. Establish regular review periods to adjust strategies based on these insights.

Key Point: Consistent innovation requires sustained effort and should be woven into the fabric of the organizational processes rather than treated as a one-off initiative.

Example: Procter & Gamble’s “Connect + Develop” program systematically seeks out external innovations to integrate into their product development process, ensuring a steady stream of new ideas and continuous improvement.

Action Step: Develop and maintain partnerships with universities, startup ecosystems, and other industries to tap into a wide array of innovations. Encourage continuous learning and external perspective integration within your teams.

Key Point: The ability to scale successful innovations from small projects to larger company-wide initiatives is key to sustaining transformative growth.

Example: GE’s FastWorks initiative started with small teams and projects but scaled to become a core part of their operations, transforming their production and process management across the board.

Action Step: Once a project shows promise on a smaller scale, develop a structured approach to scale it by gradually increasing resources and scope while monitoring performance closely to guide further expansion.

Key Point: Executive buy-in is crucial for fostering a culture of innovation. Leaders need to champion new methodologies, support risk-taking, and demonstrate commitment to the long-term vision.

Example: Jeff Immelt’s support for FastWorks at GE provided the necessary backing for the successful adoption of Lean Startup principles across the company.

Action Step: Ensure executive leaders are not just supportive but actively involved in innovation initiatives. Regularly communicate the importance of these projects in meetings and provide the necessary resources and oversight to aid their success.

“The Startup Way” emphasizes that the innovative, agile nature of startups can serve as a powerful model for established organizations looking to sustain growth and competitiveness. By fostering an entrepreneurial mindset, streamlining processes to focus on learning, aligning strategy and innovation, and providing the necessary leadership support, even the largest companies can remain dynamic and forward-thinking. Adopting the principles and action steps highlighted in the book can lead to a transformative impact on how organizations innovate and grow.