Lean Enterprise & Innovation Ecosystems

What is a lean enterprise? How does it relate to an Innovation Ecosystems?

Lean Startup +  Enterprise = Lean Enterprise

Compelling. Isn’t it?

The idea that an enterprise scale company with tens of thousands of employees can be as swift and nimble as a startup is enchanting…

…but it’s false.

Comparing an enterprise to a startup is like comparing an ocean to a dolphin. They simply don’t equate. Click To Tweet

Enterprises can’t be like startups and they certainly can’t be Lean Enterprises. They can however nurture startups as the ocean can hold and nurture an abundance of life.The ecosystem paradigm applies to lean enterprise

(I’m not the first person to make this analogy or talk about startup ecosystems. You can read some back story in the National Science Foundation or Forbes.)

The Ocean

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.  – Eric Ries, What is a Startup?

Enterprises don’t exist in this state. For the most part, they have established business models.

We can argue that we live in uncertain times and all enterprises exist in conditions of extreme uncertainty. Ok. Fine.

Compared to a startup, most enterprises can predict next year’s revenue for their core business with relative precision.

An enterprise is not a startup and to treat it as such is dangerously wrong. Click To Tweet The most comparable thing to an enterprise is not a startup, but a startup ecosystem. Click To Tweet

An ecosystem is a community of living organisms (plants, animals and microbes) in conjunction with the nonliving components of their environment (things like air, water and mineral soil), interacting as a system. These biotic and abiotic components are regarded as linked together through nutrient cycles and energy flows. – Wikipedia, Ecosystem

Dolphins - The friendly members of the aquatic ecosystemAn enterprise has within it, a variety of people doing a variety of jobs who dynamically form different groups through the lifespan of the enterprise. These groups utilizes various resources such as office space, production material, etc and are linked together via cash flows, resource allocation, and the value chain.

Some of these groups operate in conditions of extreme uncertainty, some do not.

The Case for Waterfall

Waterfall Development in Lean Enterprise, innovation ecosystemsSome groups, responsible for executing a known business model in a stable market, don’t need to operate using Lean Startup principles. The markets are, for the most part, predictable.

If you’re selling hamburger meat you can add spices, you can package the meat differently, you can go organic, but between 80% lean and 85% lean beef, there’s not a whole lot of room for innovation.

It will be difficult, if not impossible, to try to convince the existing business unit to stop doing business as usual, particularly when they’re making money and being judged on their ability to deliver ROI.

However, the enterprise in its entirety has an interest in knowing whether there is a possibility to disrupt the market radically. At least before someone else does it for them. (Lab grown beef anyone?)

Investigating disruptive innovation shouldn't mean killing the cash cow prematurely. Click To Tweet

Fortunately, enterprises don’t have to make this choice if they accept the idea that they are not a single organization bound to a single set of rules and a single business model for all business units.

Homogeneity and Ecosystem Collapse

Business model/business unit homogeneity is a big problem. It creates a single point of failure. When the business model is eventually disrupted, then the entire system collapses.

There’s a clear parallel to biodiversity.

In a thriving ecosystem, changes to the environment can radically reorganize the species living there. Many may go extinct. But even in a state of catastrophic environmental change such as with the Permian mass extinction (yes…I’ve been watching Cosmos), some species will survive and thrive.

The typical enterprise business model - ready for disruption

Those surviving species may have adapted to live in a small niche, but given the new environment conditions, they do very well and can occupy a more dominant role in the ecosystem.

In an ecosystem with limited biodiversity, even a minor environmental change can cause a complete collapse of the ecosystem. Irish potato famine anyone?

Too Small for Our Business

cash cow - the enterprise staple foodThe common investment thesis of many large corporations orients itself on the size of the market opportunity under the assumption that market sizes are static and/or highly predictable.

Enterprises rarely encourage diversification into an assortment of niches which may one day grow due to radical market disruptions. It’s “too small of an opportunity for our business, so shut it down!” Why invest in something the size of a grasshopper?

Enterprise resources are allocated to the cash cow, oblivious to the plague of locusts about the devour all the grass. Click To Tweet

We should all remember the lessons of Kodak, who consistently failed to invest in alternative business models.

The Innovation Ecosystems

Enterprises shouldn’t try to be a Lean Enterprise or simply “do” lean startup. That’s a fool’s quest.

Instead, the enterprise can set up conditions favorable to small startups, internal or external, using lean startup principles to discover new business models in adjacent markets that leverage the company strengths or develop new ones.

Enterprises can become Innovation Ecosystems. Click To Tweet

Innovation Ecosystem Map

Innovation Ecosystem Design BookletIf you’d like to learn more about innovation ecosystems and how to develop them, you can download a preview of our book on Innovation Ecosystem here, the Innovation Ecosystem Design Booklet

 

The booklet covers our Innovation Ecosystem Map and the 9 common obstacles that stop innovation.