Innovation and disruption are the hallmarks of a lean enterprise

Barry OReilly
Barry O’Reilly ThoughtWorks.

Barry O’Reilly and Joanne Molesky, principals at ThoughtWorks and co-authors of “Lean Enterprise: how high performance organisations innovate at scale”, share their insights into the challenges and opportunities for organisations operation in an age of disruption.

In an age of disruption it is easy for company leaders to feel all at sea as they grapple with the need to innovate around customer needs rather than the old-school approach of pushing products or services onto their customers.

Many organisations have suffered the crippling consequences of not adapting to new business models because of the enormous challenge of developing a new organisation mindset. Not surprisingly, traditional businesses have been overtaken by technology startups that have won favour with customers for their convenience and cost – although that satisfaction is primarily grounded in addressing real needs.

“We have seen rising levels of frustration within many organisations who are failing to reap the rewards of delivering software more frequently, largely because it does not solve the problem of delivering the products or services that customers want,” O’Reilly says.

This continuous delivery principle is the basis of the lean enterprise, which O’Reilly points out, is less about a process than it is a mindset focused on the human elements within it – whether those are the people within an organisation, or its customers.

Molesky summarises the mindset challenge as a disconnect between 21st century technology, 20th century management processes and 19th century management principles. “In order to use today’s technologies to the best advantage of the organisation, some of those management practices and principles have to change,” she says.

A great way to bridge the gap between executive level ambitions and customer needs, Molesky adds, is for business leaders to gain first-hand experience of a customer’s interaction with the product or service. They should also be exposed to the experience of the organisation’s people in delivering that service or product.

In so doing, they are able reshape preconceived notions and build a better organization that is focused on true customer value. O’Reilly says that these principles apply to any organisation, although technology-driven solutions obviously have the advantage of introducing innovation at scale. He suggests that companies involve customer feedback into the software development cycle to ensure that solutions are actually meeting customer needs.

This may seem a radical shift from the traditional way of doing business, but in the absence of such a shift, organisations should expect to be left behind. The scale of this threat is so large that Deloitte’s Shift Index predicts that the average life expectancy of a Fortune 500 company has declined from around 75 years half a century ago to less than 15 years today. Navigating such monumental shifts can be daunting. O’Reilly suggests that as threatening as this may seem, it also presents an opportunity for organisations to act now.

He suggests a three-pronged approach to remain relevant, which is based on the concept of three horizons for a company’s products and services. The first horizon is focused on extracting maximum value from mature business models that already drive revenue for the business. The second horizon looks at innovations required over the next three to four years to keep products and services relevant.

“In horizon three, you’re starting to think about the experimental ideas four to five years out that are going to be relevant to your customer then,” he says. “It’s about understanding that you need different practices and principles to manage each one of these horizons. “In the first you have a lot more data about those products and services, but in horizon three there is a lot of uncertainty over what works and not. You want to be making small investments using small, cross-functional teams to test and learn iteratively and cheaply.”

O’Reilly says this approach is encapsulated in the Thoughtworks philosophy of ‘Think Big’, which is about starting now and learning fast. Organisations can adopt this approach by identifying one, small aspect of the business, and forming a small cross-functional team to explore opportunities at speed. “Find out what works, and what does not. Then share those lessons with other areas of the organization,” he says.

Staff Writer