The Change Imperative: Why Pivotal Advocates Lean Startup Management Practices

This post was brought to you by our sponsor, Pivotal Labs.

Editor’s note: The 2015 Lean Startup Conference is just around the corner (it’s from November 16-19th in San Francisco, and there’s still time to get your ticket!). We have dozens of excellent speakers and mentors who are eager to share their product development, entrepreneurship, and innovation stories–you’ll never see these experts in one place ever again. Learn more about them in our ‘Lean Startup Speakers’ series.

Next up is Janice Fraser, who is Director of Innovation at Pivotal. She’ll be giving a workshop on The Lean Startup Leader’s Guide at the 2015 Lean Startup Conference. Learn more about her here.

A few months ago I had the pleasure of shadowing Eric Ries as he led an annual planning meeting for one of his clients. As I watched him field questions, organize team activities, and challenge their results with surprising frankness, I was struck with the clear insight that Lean Startup is not a process. It’s not even a mindset (something I’ve long advocated). It’s actually more far-reaching than either: Lean Startup is management.

More specifically, Lean Startup stands as an alternative to the management philosophies that have predominated over the last century, which are ingrained enough to be taken as fact. Lean Startup is an emerging management philosophy that enables all kinds of companies to rise to the substantial challenges posed by a tech-driven world, where the already-relentless pace of change is ever-accelerating. It’s a way of running a company, organizing people, and evaluating the effectiveness of their efforts.

“To meet the demands of the fast-changing competitive scene, we must simply learn to love change as much as we have hated it in the past.” That’s what management guru Tom Peters said all the way back in 1987. But the “fast-changing scene” he was talking about still had people sending memos on paper, and our phones stayed on our desks when we left the office.  

Pivotal Labs was formed only two years later, in 1989. In the decades that followed, Pivotal Labs became one of the most influential software shops in the world, specifically because it understood that software developers need to be responsive to change. As one of the earliest and most thoughtful leaders in the Agile movement, Pivotal Labs optimized its practices to manage the “unknown unknowns” of developing new products. (If you haven’t read The Agile Manifesto lately, it’s even more relevant today than when it was published in 2001.)  

The Air You Breathe

Despite experiencing the benefits of Agile, we’ve seen some companies—large and small—struggle to bring Agile home when they leave the Pivotal offices. They find it hard to deliver game-changing innovation when, for instance, their budgeting process requires a pre-approved list of specifications, and success is measured by how close to “on-time, on-spec” they deliver. It’s the things that happen outside of the software team that can prevent a company from routinely, efficiently delivering value-creating software.

Consider the typical project cycle:

  1. Someone creates a report around some analysis, or comes up with a “great idea”.
  2. It sounds good to their boss, so they make a plan.
  3. They socialize the plan around the company to build support.
  4. They get feedback – often from a select group of influencers – and revise the plan, strengthening the commitments and expectations.
  5. At a certain point, it’s deemed good enough to submit for funding through some type of investment committee.
  6. If they’re lucky, it’s Approved! Funded! The project is a Go! Huzzah!
  7. The team executes on the plan. Lots of project management goes into making the compromises and negotiations required to bring it in on-budget and on-time. If they’re really good, it comes in close to budget, and pretty much on schedule. But just as often they’re either behind schedule or over budget, or both.
  8. Go To Market.

There are at least two things wrong here.

First, the go/no-go decision is based on estimates of potential future returns (in the best case),  or on the opinions of a ratification committee (in the worst case). Second, success is measured in terms of project delivery rather than product value—did you do what you promised, when you promised, for the price you promised?

This classic “plan and control” process is flawed because it fails to validate the fundamental assumptions and premise on which the project rests. This leaves the entire effort vulnerable and explains why so many efforts (software or otherwise) fail to deliver the expected value to the business. Delivering software according to plan creates no value if the assumptions underlying the project are flawed.

The dominant management practices of the past century emphasized long-range planning and control to ensure predictable outcomes. Prediction was possible because past experience was a reliable source of knowledge in a more stable world of longer production cycles, where disruption was an occasional urgency rather than an ongoing reality.

From here on, management must instead optimize for adaptability—for learning and innovation—to ensure responsiveness in an unpredictable world.

And that’s why Pivotal is committed to Lean Startup. The imperative Tom Peters laid down in 1987 has even more dimensions than he might have imagined. In a world propelled by all things digital, we believe that Lean Startup provides a deeply effective and modern solution.

Retooling for Innovation

In his forthcoming book, The Leader’s Guide, Eric Ries says, “Building and growing a Lean Startup requires leaders to continually question whether our organization’s beliefs and values support or hinder entrepreneurial innovation. That means taking a good look at the way people are rewarded, the way projects are funded, and the way we talk about success and failure.”

Implementing an Agile software practice requires the same questioning and retooling, but it means more than recalibrating only your software team. When you live in a world where everything—from your wristwatch to the weather—might be completely different next year, the companies that create the most value will be those with acute perception, empirical decision processes, mechanisms to consistently test assumptions, and an organization that supports this.

As Director of the Innovation Practice at Pivotal, I’m often called into client meetings to talk about how a company can be “more innovative”. After 25 years in Silicon Valley, I can assure you that every human is innovative; it’s the company—optimized for business-as-usual predictability—that stymies innovation. The honest answer then, to our clients’ desire for innovation is: Change your company…a lot. From root to tip. It’ll take a while, but that’s expected. Others have done it, and you can too.

Imagine the scale of institutional changes that companies like GE, Intuit, and Twilio have undergone to shift their management practices toward Lean Startup:

Instead of asking funding teams to compare well-crafted, thoroughly socialized, politically supported plans, leadership teams compare projects based on the actual results of lightweight experiments. Plans are replaced by prioritized “assumptions to validate” and budget-allocation is managed like an investment board, releasing funds when empirical, market-based evidence shows that the “startup” is on the right track.

This is the process that Eric Ries was preparing teams for at the client planning meeting last month, with his typical candor. That company has been moving toward full-scale Lean Startup management for years, and it was enlightening to watch him deconstruct the teams’ plans by having them prioritize learnings, so that investment decisions could be made based on validated data.

Pivotal has partnered with Eric Ries and the Lean Startup Conference because together Pivotal’s Agile process and the Lean Startup management approach set a foundation for consistently, reliably delivering customer value with far less risk.

On November 16, I will be leading the first-ever Official Leader’s Guide one-day workshop as part of the Lean Startup Conference. Pivotal will be offering 11 more of these workshops to backers of Eric’s record-breaking Kickstarter campaign at Pivotal offices in cities around the world, including London, New York, Toronto, Los Angeles, and Tokyo.

Lean Startup Co will send an announcement with dates and locations for those workshops when the book ships. I can’t wait to meet you there!

*”Company” in this context can also mean non-profit, NGO, government agency, educational institution, or any other complex human endeavor.

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