The Lean Startup Conference/Jakub Mosur and Erin Lubin
The Lean Startup Conference/Jakub Mosur and Erin Lubin

Remember that time your corporate innovator guru told you to get advice from your lawyers? Yeah, neither do we. That is, until we heard it from Lean Startup pioneer, Eric Ries. We recently hosted the author of The Lean Startup and The Leader’s Guide at our April live Lean Lunch Google Hangout. In addition to revealing the secrets to getting senior management onboard when adopting lean innovation.  Ries also spoke about how lawyers, regulatory experts, and even government officials are helping push the Lean Startup movement forward.

Time to call your lawyer

A company Ries did a workshop for planned to launch a product that had been successful in the U.S. into 42 additional countries. The company had an 18-month rollout plan with massive TV campaigns in each country, and was planning to launch the product campaign in all countries simultaneously. Through the Lean Startup workshop, Ries and the team decided that it would be safer to test whether people in each country would buy the product, and then tune the rollout plan accordingly.

“We agree to do a minimum viable product where the company offers the product for pre-order in select countries, and a hundred people will get the chance to pre-order this product,” Ries said. “The deal was if you give us your credit card right now, we would send you the English-language version of the product today, and we would also send you the localized version when it came out in your country.”

Many of the countries have lots of English speakers who would, the hypothesis goes, be able to use the English version of the product.

“Hold on, the legal department will never go for it. The security and liability of holding the credit cards, there’s always a regulatory issue,” someone said.

“To hold a hundred credit cards? Are you sure?” Ries asked. “Who from legal told you that? What is the name of the person who told you that?”

“No one has to tell us, we just know it,” the team member said.

Ries got the name of the person in the legal department who has the authority to make a decision on the phone. The team member starts explaining the issue to the General Counsel.

“Excuse me Mr. General Counsel, do you mind if we go into a bunch of countries and take a bunch of customers’ credit card numbers, and tell them we’re going to ship them a product but we’re not really sure if we’re going to,” the team member said.

“They’re describing this experiment the worst possible way,” Ries said. “So I said to the General Counsel, ‘We’d like to take 100 people’s credit card and offer them a product that has a retail value of $30 for a maximum liability to the company of $3,000 total. Does that change how you feel about it?’  And the General Counsel said, ‘Why are you calling me?  You don’t need my permission for this. This conversation that we just had right now has already cost the company more money than the total liability of this experiment.  Why are you wasting my time with this?  Go do it.’”

Ries described the team’s response as surprised and confused—was this a trick?

“In that particular scenario we built for the company a series of guidelines from the legal department that said if you meet these requirements you are pre-authorized to run these kinds of experiments,” Ries said. “And legal went from being part of the problem to part of the solution and it was very cool.”

How did a product launch team get tripped up by their own misconceptions about what is and is not allowed? In some companies, each function works in its own silo, unaware of how the other functions actually impact the business. When companies are organized like that, it builds antagonism and politics—leading to people and departments getting in their own way. The assumption that you’re not going to get any support, so why even ask, is a huge obstacle. That kind of self-editing can be deadly in a business.

Are requirements required?

Ries told us about a project at General Electric where the traditional waterfall process was very long. It’s a highly capital intensive, heavily regulated project that requires a lot of engineering. When the marketing team asked the engineering team how long it would take to build a product with X-level efficiency, the engineering team responded that it would take 9 years.

“One of big powers of a minimum viable product is that if you take a proposed product to a customer and have them react to it and ask them to actually pre-order it, you can ask them what the true requirements are,” Ries said.

I actually hate the word requirements as applied to product specification, because honestly, on this earth, the laws of physics are required, everything else is optional.”

What the team found through collecting pre-orders and feedback from customers was that the X-level efficiency was not as important to customers as getting the product fast.

“The customers were willing to make all kinds of compromises,” Ries said. “And what’s cool about this kind of testing is that by conducting the experiments with easier specifications each time you run an experiment, your engineers have it a lot easier.”

This resulted in a simpler and cheaper product with a shorter time to delivery.

“The regulators loved it too because it’s much more likely to produce a safe outcome because there’s less uncertainty about what’s going to happen,” Ries said. “Regulators are often asked to approve these installations seven years in advance before anyone knows anything about whether something is safe and that’s a nightmare scenario for them. So compressing the timeline is really a win for everybody.”

Better products through better process

These examples illustrate the lineage of Lean Startup. The lean manufacturing concept of continuous improvement was about not just building better products but about improving the process. And improvements in the process can come from anywhere.

Ries mentioned that Lean Startup has infiltrated the US Government, too, much due to the efforts of former US CTO, Todd Park. If lawyers, regulators, and even the government are advancing the methods of Lean Startup, then what are the limits of lean innovation?

“As the universe of Lean practitioners expands,” Ries said, “the zone of where you can’t do Lean Startup is shrinking to the point that I am not even sure anymore. I’ve met people working on all kinds of stuff that violate the ‘rules.’”

This post was written by Brant Cooper from Moves the Needle. Moves the Needle brings Lean Startup to the enterprise. At the intersection of creative inspiration and scientific rigor, Moves The Needle’s methods help organizations build deep customer empathy, apply rapid experimentation for idea validation, and make evidence-based decisions in order to continuously innovate.

The Lean Startup Conference — a gathering for entrepreneurs, corporate innovators, and thought leaders from across sectors and structures — is a fast paced, highly curated program featuring the best of the Lean Startup community. Held on November 16 – 19 in San Francisco, you’ll receive practical ways to immediately implement the Lean Startup methodology into your daily business. http://2015.leanstartup.co/

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