Lean Enterprise & Innovation Ecosystems
By: Tristan Kromer
What is a lean enterprise? How does it relate to an Innovation Ecosystem?
Lean Startup + Enterprise = Lean Enterprise?
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. Click To Tweet
“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 the same state as startups. For the most part, they have established business models. Compared to a startup, most enterprises can predict next year’s revenue for their core business with relative precision.
Although enterprise businesses can’t really function as “lean enterprises,” they can nurture startup mentality with innovation ecosystems, just as the ocean can hold and nurture an abundance of life in its biological ecosystem.
The slow march of evolution
A biological ecosystem is a community of living organisms interacting with nonliving components in a give-and-take system.
An enterprise also has an ecosystem — a variety of people doing a variety of jobs forming different groups that interact with each other through the lifespan of the enterprise. Just as natural ecosystems use nonliving components like air, water, and soil, groups in an enterprise utilize resources such as office space and production material, and are linked by cash flows, resource allocation, and the value chain.
Some 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 your business is selling hamburger meat, you can add spices, you can update your packaging, you can go organic. But between 80% and 85% lean beef, there’s not a whole lot of room for innovation, and trying to run the company as a “lean enterprise” isn’t going to get you anywhere.
It would be difficult to convince an existing business unit to stop doing business as usual, particularly when they’re making money and being judged on their ability to deliver ROI.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
However, the enterprise in its entirety has an interest in knowing if there is the 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, or that there has to be a single business model for all business units.
Homogeneity and Ecosystem Collapse
Homogenous business models across all units in an enterprise business are a recipe for disaster. A single point of failure can manifest itself systematically. When the business model is eventually disrupted, then the entire system collapses. (Death Star, anyone?)
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.
Those surviving species may have adapted to live in a small niche, but given the new environmental conditions — say perhaps their top predators have been wiped out — they can do very well and 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?)
Enterprise companies shouldn’t try to run “lean enterprises” 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.
So how do they do that? Well fortunately I already wrote another post about it: Check out my earlier musings in What Is an Innovation Ecosystem?, and drop me a note if you have any questions or feedback.Enterprises can become Innovation Ecosystems. Click To Tweet
If you’d like to dig even deeper into innovation ecosystems and how to develop them, you can download a preview of our Innovation Ecosystem Design Booklet, which covers our Innovation Ecosystem Map and the 9 common obstacles that stop innovation.
- Enterprise companies can’t run lean like startups…
- …but they can foster innovation ecosystems.
- I can’t draw dolphins.
* This post has been recently updated to reflect developing thoughts on this topic.