Lean Enterprise | Jez Humble

Summary of: Lean Enterprise: How High Performance Organizations Innovate at Scale
By: Jez Humble

Introduction

Lean Enterprise: How High Performance Organizations Innovate at Scale shares invaluable insights into creating and maintaining a lean, efficient, and highly innovative organization. It explores the importance of viewing employees as individuals, valuing their autonomy, and fostering cross-disciplinary teamwork. Drawing inspiration from Toyota’s approach, the book highlights the significance of instilling a strong work culture without limiting innovation. It also introduces ‘Lean Startup’ principles that focus on streamlining innovation and adapting to user needs and feedback. This mobile book summary will provide a comprehensive overview of the key concepts and methods suggested by Jez Humble for building a successful lean enterprise.

How Toyota Turned Around GM’s Dying Factory

In the 1980s, GM’s Fremont plant struggled with strained labor relations and poor product quality, resulting in its closure in 1982. However, in 1984, GM and Toyota formed a partnership to reopen the factory under the Toyota Production System (TPS). TPS valued individual autonomy and teamwork, resulting in enthusiastic and energized workers who learned a variety of roles. Production halted until workers and managers resolved any issues, ensuring top-quality cars. Despite the success of the Fremont plant, GM failed to adopt the new culture in its other factories due to corporate resistance. Toyota’s approach to building a lean enterprise is a case study in valuing workers’ individuality and building a strong human system.

The Lean Startup Approach

The Lean Startup Approach introduced in Running Lean by Ash Maurya emphasizes on testing innovative concepts efficiently. Instead of investing time in refining the perfect business model, the approach suggests creating a basic “business model canvas” that outlines the product and its assumptions. The viability of the product should be evaluated next, and a “minimum viable product” must be developed as a test case, not a final product. This lean approach works best for complicated and risky projects and can shorten timelines and budgets. The Lean Startup model streamlines testing and rollouts while ensuring systematic and continuous improvement. The approach is not limited to launching new products and can be helpful in process innovations and system upgrades within the organization. The Lean Startup method allows an organization to minimize the risk of investing in a failed innovation and encourages the constant improvement of processes through testing and refinement of the basic offering.

Building a Successful Innovation Team

To achieve successful innovation, lean organizations apply discipline to creative projects by constantly testing their hypotheses and using relevant data. When starting a new project, it is vital to create an environment that maximizes everyone’s potential. As the team moves through the discovery phase, managers must keep the lean team small and build a nimble, enthusiastic group. The team should focus on the “one metric that matters” – a leading indicator that captures the viability of the test product – to keep members motivated and recalibrated. Customer feedback should be a part of the feedback loop, and a cross-disciplinary team that works with every main function involved in the product is paramount.

Innovation Accounting

Traditional accounting methods may not work for innovative businesses, which require a different approach called Innovation Accounting. This method focuses on meaningful metrics that don’t fit traditional accounting formats and can help identify profitable products. In Eric Ries’ The Lean Startup, he distinguishes between “vanity metrics” and “actionable metrics,” with the latter being useful for business purposes. Examples of actionable metrics include the number of user sessions, subscriber response to emails, and application downloads and activations. Innovation accounting is essential for startups that have little-to-no revenues and negative cash flow during the innovation period. Unlike traditional accounting, innovation accounting measures the success of a business by metrics, not by financial ratios or cash flow analysis. The focus of innovation accounting is to identify the metrics that matter, track them, and use them to learn about the market to build a successful business.

Overcoming “The Alignment Trap”

Many old-fashioned organizations only view their IT departments as builders or runners of software, and the rest of the business gives it orders. However, innovative organizations recognize the central role of the IT team in the overall organization. One way to reshape innovation teams and become more agile is through the Improvement Kata. This methodology prioritizes achievable goals over a long list of unattainable ideas. The HP’s LaserJet Firmware division faced a situation where marketing was overwhelming IT with impossible demands, and a backlog of routine work arose. The Firmware IT team’s leaders used the Improvement Kata approach to divide the challenge into monthly goals or iterations. By doing this, they overcame the obstacles that had impeded progress and became marketing’s trusted partner. With Improvement Kata, agile and responsive teams that acknowledge the inevitability of processes evolving over time are empowered to make a significant impact on any organization.

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