strategy+business Winter 2013 : Page 92

Paul Michelman michelman_paul @strategy-business.com is executive editor of strategy+business . He’s @pmichelman on Twitter. VIDEO FEATURE In Conversation: Eric Ries on How to be Entrepreneurial Inside a Big Company View our full five-part video series, with the author of The Lean Startup . cracy, checklists, and rigid ways of thinking. We need management more than ever because we are confront-ing more and more uncertainty. We must cease to think of it as a way to organize people. Management must be a way to predict the future, keep things orderly, and drive out varia-tion. We’ve seen that in manufactur-ing, but it also needs to apply to the practice of innovation, even as we try to provoke variability and cause disruption. S+B: It sounds like you’re telling the wild-eyed entrepreneurs they need to rein it in, and the established company that it needs to loosen up. RIES: I have experienced the phe-have been. Where did all those dif-ferent business divisions come from? Were they handed down from God on tablets? No, they were created. They were once startups. S+B: How does that affect the typical innovation process in a large company? RIES: Most of these companies have 92 nomenon of being unwelcome in both camps. From the point of view of many entrepreneurs, launching something new is all about punch-ing the universe in the face till it does what you want. It involves ma-chismo and making things happen through sheer determination. To those people, talking about manage-ment seems really boring. But in a traditional organizational context, to some I sound crazy. Of course, large companies are full of entrepreneurs and always some version of a stage-gate develop-ment process for new products. It’s a linear, rigorous, checklist-based pro-cess with a series of go/kill decisions. All these companies have introduced successful new products. Their win rate may not be very high, but the law of large numbers says every company has at least some new product successes. I’ve noticed a strange phenom-enon. If I ask the senior manage-ment for an example of the stage-gate process working well, they’ll tell me about a successful new prod-uct they just launched. Then, when I interview the product develop-ment team—I’m always looking for new case studies—the conversation will go something like this: “Did you guys follow the stage-gate process?” “Are you kidding? Of course we didn’t.” “Why does senior management think you did?” “Well, that’s what we told them. You get fired if you don’t check the boxes. But we actually set up a parallel process to bring out the product, working off the books, and then we retroactively applied the stage-gate process to describe what happened.” The first time I heard this, my reaction was: “You committed fraud against the corporation. You should be fired.” The response was always the same: “You don’t understand. Nobody in this company believes these reports. Nobody thinks the official process works.” In nearly every big company, the real work of developing new products and new businesses is happening underground, in secret. There’s an incredible amount of in-efficiency and waste because we go through these gyrations to pretend we’re following a completely differ-ent process. We try to fit the circle into the square box. S+B: So there is a subtle chaos at work in organizations everywhere? RIES: Sort of, but it’s not the product strategy+business issue 73 thought leader development process that’s chaotic. It’s the world. In traditional compa-

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