About the book

“Nobody wants to work at an old-fashioned company. Nobody wants to buy products from an old-fashioned company. And nobody wants to invest in an old-fashioned company” (Jeff Immelt / General Electric).

The ambition of the book is to create a system that helps companies to create long-term growth and flexibility.

Second ambition is to teach that entrepreneurship is not only for entrepreneurs.

Make a Leap!

What are the key learnings?

The key learning of the book is:

A.   How to use The Startup Way as an organizational capability for continuous transformation.

B.   Innovation Accounting as a tool to understand the commercial potential of business development..

The ultimate goal is “to enable the entire organization to function as a portfolio of startups” and the new way of working becomes the culture. Driving forces can be crisis of any sort or new strategy or hyper-growth.

Lean Startup Method

In a nutshell the tool is the Lean Startup method. And the Lean Startup method is all about vision and how to find the fastest way on realizing the vision:

1)   Leap of Faith Assumptions (LOFA) are “the beliefs what must be true in order for the startup to succeed.

2)   Minimum Viable Products (MVP) are experiments where you test the assumptions “as quickly and as inexpensively as possible”. What people actually want?

3)   Validate Learning and think like a scientist. Follow the 3A rule:

o  Actionable (clear cause and effect).

o  Accessible (share the data).

o  Auditable (data must be credible).

4)   Build-Measure-Learn feedback loop is the tool. Take the learning from the experiments and start the loop again. Like in Growth Hacking?

5)   Cadence-Pivot-Persevere means that you should at least every six (6) weeks:

o  Regularly meet to learn from the experiments by asking questions.

§ What did you learn? How do you know it?

o  Make change in the strategy according the learnings.

o  Pivot or stay on course. Famous pivot stories: PayPal went from Palm Pilots to web-based version and Netflix moved from DVDs to streaming.

These are the topics on building a corporate version of the Lean Startup

A) MVP   

o How to use MVPs (minimum viable products) in corporate environments.

B)   Small Teams

It’s all about teams and small teams beat big teams:

o  Small teams have the bond and the communication in is intense due to the proximity.

o  Small teams are like hunting parties, desperately seeking for product/market fit.

C)   Pivot

a.   “A change in strategy without a change in vision” and “without a vision you cannot pivot”.

D)   Scarcity

a.   No extra time, no extra money, no extra people. Corporate death is around the corner.

E)   You have to focus.

a.   A true customer problem is the very first thing a team focuses on.

F)   Financializing learning.

a.   “Equity ownership is not a cash bonus. It’s a measurement of what the startup has learned about far future profits. Equity ownership is the least distortionary set of incentives”

Accountability is the foundation of management:

1)   Accountability

a.   “The systems, rewards and incentives drive employees’ behaviour and focus their attention”.

2)   Process

a.   “The process is the tools and tactics that employees habitually use every day to get work done”.

3)   Culture

a.   “Beliefs that determine what employees believe to be possible”.

4)   People

a.   “The success of any organization depends on the calibre of the people it is able to attract and retain”.

Recovery process is needed when 5hit hits the fan. Obey these rules:

Rule 1: The war room is the place where the problems are solved, not for shifting blame.

Rule 2: Talking is allowed only to the people who know most about the issues.

Rule 3: We need to stay focused. 

The “How” behind the startup way

Any corporate can develop it’s way of working towards startup way with three phases – critical mass, scaling up and deep systems.

In critical mass you get the leadership into the movement and spreading the word out companywide. In scaling up you have enough political capital to bypass any issues arising from the startup method. Last but not least this will lead into an organizational capability for continuous transformation.

Create a one-pager for the internal startup teams how to deploy MVPs:

–      A pre-approved MVP makes life easier. The pre-approved MVP formula goes like this – it is an experiment “with fewer than X customers possibly affected, total liability of Y and a cost of Z”.

–      If the experiment is a success and you want to scale it make sure that the experiment is “a) built on an initial MVP and b) you get managerial sign-off”.

–      “If you want build bigger and more complex – talk with legal and finance. Here is the hotline to call….”

Innovation Accounting

Innovation accounting is a tool to recognize “the early signs of success as worthy of further investment”. It is “a way of evaluating progress when all the metrics typically used in an established company are effectively zero.” The typical company metrics are revenue, customers, ROI, market share). Innovation accounting enables you to apples-to-apples comparison and gives you:

–      A framework.

–      A focusing device.

–      A common mathematical vocabulary.

–      A way to tyie long-term growth and R&D.

The Innovation Accounting has three levels:

1)   Dashboard

2)   Business Case

3)   Net Present Value

Dashboard is built around per-customer input. Aim of the dashboard is to help the team to see the customer as a flow and help them on focusing in customers. Learning metrics can be:

–      Conversion rates.

–      Revenue per user.

–      Lifetime value per customer.

–      Retention rate.

–      Cost per customer.

–      Referral rate.

–      Channel adoption.

Second Level

Second level is Business Case level will validate the leap-of-faith assumptions and business case. Sensible metrics are built around value and growth hypothesis.

–      Value metrics should be about repeat purchase, retention, willingness to pay premium or referral.

–      Growth metrics are based on the law of sustainable growth – word-of-mouth, paid engine of growth or viral engine of growth. Important is that it indicates a number that shows “it can grow sustainably”.

Net Present Value is the last level in innovation accounting. Here “the goal is to translate learning into dollars by rerunning the full business case after each new data point”.

Eric Ries even built a “Bingo Card” of the key questions to support the Innovation Accounting. That is worth checking out.

How should we change according to the book?

We avoid the economic stagnation:

1)   An epidemic of Short-termism is the rise of management through financial engineering instead of customer value creation.

2)   Lack of entrepreneurial opportunity is about massive reduction in opportunities for regular small business.

3)   A loss of leadership is about “preserving the results of past investments than investing in the future.”

4)   Low growth and instability.

What should I personally do?

Two things:

–      Face the challenges and being brutal honest about the facts.

–      “Plans are useless, but planning is indispensable” (Dwight D. Eisenhower).

Summary

The book in six words – “Hypergrowth for a company also requires hypergrowth of the people inside it”.