Want to know how to scale the “Startup Way” of doing business to conventional organizations? Want to know how to keep on perpetually innovating new products and processes? Then “The Startup Way- How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth” should be for you. According to Eric Ries, it outlines nothing less than a “unified theory of management.”
Wow. What a claim. I was excited, as I admire Eric Ries last book, the “Lean-Startup” and many of its sister publications like “The Lean Enterprise.” And finding better ways to manage in the digital age is all that my work is about.
Spoiler Alert: I was bitterly disappointed.
How to transform a company to work like a start-up?
The recipe according to Eric Ries is to:
- Fully understand the Lean Start-up Model with its Minimal Viable Products, Experimentation, Pivots, Leap of Faith Assumptions, Iterations & Learning, etc.
- Gain top Management buy-in, so that they commit themselves fully to a big change management program that focusses on training more and more people in “Entrepreneurship.”
- Institutionalizing Entrepreneurship in a separate line function. So Entrepreneurship become a department, such as HR, Finance, IT, Sales and Purchasing are. In contrast to the other departments, the “Entrepreneurship” unit has some matrix functions in the other line functions, such as training and coaching entrepreneurs and maintaining start-ups like funding and governance structures. Thereby the “Entrepreneurship Department” is mimicking external start-up functions internally inside a company.
- Continually change the processes of a company by experimentation and iteration to come up with just the right ones for your company. Do it scientifically, never stop experimenting and adapting and you will be fine for all time to come.
Eric’s “Unified Theory of Managment”
The new organization will be a combination of “general management practices” (see the left side of the graphic below) and “experimental management practices” (on the right side). Traditional management practices based on hierarchy and experimental, team-based, lean start-up practices are meant to coexist in every company:
Experimental Management is like a bolt on general management practices.
Nothing much changes in General Management practices. Eric describes experimental management – in a less than humble manner – as the “missing part of the lean manufacturing system,” known as Toyota Production System (TPS), the mother of all Lean and Agile movements. Lean Manufacturing (and its off spins like Six Sigma) have been all about efficiency (doing the things right). But they couldn’t help at all in effectiveness, i.e. determining what things are the right things to do. These “right things” can only be identified by customer-centric experimentation. This is exactly what the lean startup method is there for.
And if these two pillars of the house of management are built on solid foundations, i.e., vision, purpose, a focus on people and long-term thinking, the house will stand. It will deliver excellence and continuous improvement if only the shared values of all people in the company embrace truth and discipline.
That’s it. That’s all there is. How stupid have we been not to see this future of management! Just bolt on experimental management and get the senior management team to sponsor vision, truth and discipline et voila: The Organization of the future.
It is so naive. So torpedos away.
Eric’s 4 step recipe for transforming a company is EXACTLY what a conventional change management program is all about since time immemorial. Get Management Buy-in, teach and motivate people, lead by example, devote time and attention, train-the-trainers, etc. This is business as usual in modern companies. It is just another top-down driven Change Program. There is nothing to assume that this program will be more efficient than any other change program is.
Oh, wait! Maybe there is: Entrepreneurship is an institution now. We are adding a new department to the company. Surely this will help! It will help exactly like installing a “Chief Digital” or a “Chief Innovation Officer” helps to promote those themes on the board. The name is different, but there is nothing that indicates why a “Chief Entrepreneur” should be more effective. Those Organisations will always be the “weak line”: Organizations are dominated by those “strong lines” of the departments doing the real work, closer to the business. Hell, they ARE the business. Entrepreneurship is just another matrix function.
But wait again! The strong lines, the realm of General Management, will be all aligned with experimental management now, as they all share a vision and embrace truth and discipline now – as in the neat graphic above.
This degree of naivete leaves me speechless. There is nothing in this book and in the world that will indicate any more success with this as with all other Change management initiatives before.
Looking deeper into “Deep Processes.”
Eric Ries describes the deep processes, such as career and promotion, salary management or purchasing, as “Deep Processes.” Those are the final frontier to conquer once all the successful experiments produced such a momentum to do this in a company’s drive to everlasting change and improvement.
This is very shallow. These are not the deep processes of an organization. These processes are just the result of the management hierarchy coming up with rules and regulations, that minimize variation, seek security in control and assign people to jobs like cogs in a machine.
To really change the “deep processes” you need to change the “metaprocess” under which decisions about processes are made. These are things like giving people a voice, letting the people who are doing the work decide what is best, utilizing all their local knowledge and sensors to come up what is best, giving them leverage to experiment and learn by their own initiative and not by the initiative of an autocrat of the management hierarchy.
It requires flatter hierarchies. It needs more self-management. It requires more local autonomy, less fear, and less separation. But there is no reference to that in the Startup Way. None at all.
A House divided against itself can not stand: The insecurities brought about by experimental management and its rule-breaking nature collide fundamentally with the stability and predictability seeking hierarchy.
Eric asserts that companies need to act more based on rigorous “scientific experiments,” for which Lean Start-up is the vehicle. In doing that, he is basically giving the same advice that Frederick Winslow Taylor gave in 1911 in his book “The Principles of Scientific Management.” While no one can argue with this benefits of putting more science in management by doing more experiments, the “Startup Way” adds nothing new. The problem is still: How to get the hierarchy to embrace uncertainty and unpredictability? There are no answers to this in his book.
Damm it, he even gets the reference to Taylor’s all-time classic book wrong. This book, one of the most important books ever in the realms of organization and management, has been published in 1911, not 1915 as Eric Rees claims on page 355. A small, insignificant error? I think this is a symptomatic error. Just skim through the list of sources, and you will find secondary sources taken for example from such “authoritative” sites like Quora.
What happened to Eric Ries?
I feel kind of personally injured by “The Startup Way.” Lean Start-up was a great book. So many fabulous ideas that inspired such a great movement and community.
But it appears that all the well earned success within the Corporate world, for example in his long commercial engagement with General Electric, all those speeches to deliver, left him with only minimal time for deep thinking and research.
It feels like Eric Ries is out of his (Start-up) waters in the corporate world. His intentions are good, but there are much more thoughtful and ultimately helpful books available on the future of management such as Fredericks Laloux’s “Reinventing Organizations,” Jurgen Appelo’s “Management 3.0” or even General Stanley McChrystal’s “Team of Teams.” Or this Blog 😉
The “Startup way” is a shallow book.
This is what I think. What do you think?