Sexy start up product management techniques which are always being written about are not always easy to embrace inside the large enterprise. Big companies have legal restrictions to consider, existing revenues to protect, complex politics at each level of the hierarchy, economies of scale to achieve, policies to to follow and an established culture. What needs to change so large enterprise can innovate?
The processes and bureaucratic challenges large enterprises have established over the many years of their growth are serious obstacles for innovation and cripple product managers trying to improve value proposition and create growth. There is an answer, its over 60 years old, it originates from a huge Japanese enterprise known as Toyota and has been embraced by large enterprises that lead the worlds innovative landscape on the Internet, more recently Eric Reis has re-packaged the processes for tech start ups - it is "Lean Development".
I am not going to attempt to educate on the full details of Lean in one blog post. Instead lets simply consider one enterprise obstacle that prevents valuable profit making innovation in hundreds of thousands of companies (if not millions) all over the world.
How do you get funding for new product development?
The standard business approach adopted by many is to build a business case, this needs to illustrate that their will be return on investment if the company funds the product development. It is fair enough that businesses want a return, after all a business is a profit factory. The issue is the business case is fictional - yep you read that right, they are made up. Isn't it a co-incidence how they all see profit in year three (or five depending on how risk adverse your firm is), how research data always backs up the decisions and how everyone lives happily ever after.
The business case is total bullshit and pretty much all enterprise leaders know this to be true, Why does leadership so frequently insist on this dance to get funding? The excuse is normally "it encourages the right kind of thinking which results in a successful outcome". What a joke, instead the business case provides a teflon coated political protection when the investment goes sour, it can be fished out and the executive can sustain confidence with their stakeholders.
The business case encourages managers to obtain research that supports their ideas and exaggerate potential typically by widening the addressable market. A by product of the business case is for projects to be bigger and more costly in order to chase a larger fictional return.
How does Lean help?
Lean tells us to forget the business case, you should avoid this traditional and outdated business tool that attempts to predict the future like some fortune teller conning us out of our silver.
Instead we should focus on learning more about the business model.
Using tools like the "Business Model Canvass" product managers can learn how if the business model works and how to improve it. The starting point is to identify the assumptions made for the business model to work and then treat those assumptions as hypothesis in Lean experiments or MVP. It often requires little or even no technical development to learn more about the assumptions. The feedback provides key learnings that evolve or pivot the business model.
Lean funding should be made based on proposed business models and the amounts invested should be based on the volume of learnings from customer or user evidence collected from experiments. This way great ideas can be evolved (changed!) through true value proposition and addressable market discovery and their direction change before commitments are made, both from the product manager and from the accountants. The discovery phase can be days, weeks or months it depends on the level of unknowns and disruptive nature. The funding should start small and be increased as the learnings provide confidence in the model.