Books In Minutes: The Lean Startup Chapter 12 – Innovate

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The 3 Prerequisites for Building a Startup Team

Ries thought that as startups grow into larger companies, they could still be innovative. There are three prerequisites for both standalone startup teams and internal startup teams to succeed.

Secure resources

It is common sense that more resources do not guarantee a startup to succeed. Unsecure resources also jeopardize a startup's chance to succeed. Division leaders in larger companies spend large effort in allocating as many budgets as they can because they know the budgets could be tampered with later. A startup team cannot afford its already limited resources to be unstable.

Running Independently

In the sense of both running without approvals and running without external help. Both kinds of external dependencies slow down the team's speed to go through the Build-Measure-Learn feedback loop. Having a cross-functional team could decouple the external help dependency. To run without approvals requires the parent organization to create a sandbox for the team to run experiments without hurting the parent organization itself.

Credits

Credits could come in the form of financial, such as equity or bonuses, or non-financial, such as title, or simply let the name of the creator be transparent to the end-users.

Innovation Sandbox

It is often that the innovation team needs to run experiments that have conflict in interest to their parent organization. Creating a sandbox for the innovation team could contain the impact of the experiments but not constrain the methods they use. Here are the seven rules to create a sandbox:

  1. The team can create a experiment that affects only the sandboxed parts of the product, or only certain customer segments or territories.
  2. The team must see the whole experiment through from end to end.
  3. The experiment cannot be ran longer than the predefined amount of time.
  4. The experiment cannot affect more than the predefined number of customers.
  5. The experiment has to be evaluated on the basis of a single standard report with no more than five to ten actionable metrics.
  6. Every team and product inside the sandbox must use the same metrics to evaluate success.
  7. The team that creates an experiment must monitor the metrics and customer reactions, and stop the experiment if something catastrophic happens.

The 4 Phases of a Product in a Company

There are four phases of a product a company must manage:

  1. The work requires the ability to make an idea into a product from nothing to a new segment of customers and markets
  2. The work requires the ability to grow. PR, marketing, sales, and business development come into play
  3. The work requires operational excellence. The product gets commoditized, the market gets crowded.
  4. The work requires the ability to optimize cost.

The problem of many companies is that employees often follow the products as the products move from phase to phase, whereas each phase requires very different strengths. Having cross-functional teams could solve the problem by handing the product to a different team during different phases.

This reminds me of Bill Gross's EPAI personality types, that every person has dominance in one of the entrepreneur, producer, administrator, and integrator personalities, and has weaknesses on the others.

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