What is a ‘lean enterprise’?

Eric Ries, author of the the lean startup methodology, wrote “A startup is a human institution designed to create new products and services under conditions of extreme uncertainty.” Uncertainty? Not always on the wish list for most corporations. Ries developed his methodology to try to limit uncertainty by continuing to foster innovation while still testing and measuring your vision. But can this lean startup mentality be reworked to build a lean enterprise?

What is the Lean Startup Methodology exactly?

For Ries and his thousands of entrepreneurial followers, a lean startup is a perpetual science experiment that constantly risks change but at a lower cost over a shorter time frame. Each phase of this grand startup venture is focused not on if something can be done, but should it be done and can it be sustainable. If the answer is “Yes”, then you immediately develop a minimum viable product.

The MVP is really far from perfect or ready for market, but you push it out into the wild anyway for early adopters to test, you prove or disprove your hypothesis, and then rework concepts as quickly as possible. You get feedback from your customers, but you don’t necessarily listen to it – they’re just a part of the experiment. You determine quickly if you need to pivot the business model, completely dump it, or continue experimenting in the same direction. Adopting lean is all about: Build, Measure, Learn, Repeat.

Why the Lean Enterprise Is the Future of Big Business

Maybe before we talk about whether a corporation should try to become a lean enterprise, we should talk about if even one could. For big business, “the main obstacles to improved business responsiveness are slow decision making, conflicting departmental goals and priorities, risk-averse cultures and silo-based information,” found a report from The Economist.

The lean startup mindset can boil down to trusting your employees. In many larger companies, bureaucracy becomes a barrier to that trust and subsequent growth. While big companies like Apple and Google are certainly of a lean startup mindset, they were both based on risk-taking and experimental culture from the get-go. But what about a more traditional construction, oil and gas, or healthcare corporation? Governments? Can these more old-school organizations go lean?

What’s abundantly clear is that technology is essential to the Lean Enterprise. The lean startup probably couldn’t have been possible ten or maybe even five years ago. Both the lean startup and the lean enterprise are reliant on constant measuring, enabled bySoftware as a Service (SaaS) and business intelligence tools. Mobile business appsenable all sizes of business to unglue themselves from desktops and servers to become more agile and innovative. This not only allows for better measurement, but to scale and collaborate in a more secure and compliant way, from anywhere in the world.

So does enterprise hierarchy need to be adapted for Lean Change? We aren’t suggesting that you should tear apart your entire business model in order to go lean. Your core business must continue to function, but, in order to foster growth, you need specific teams dedicated to innovation, agility and lean experimentation. These are the teams who help you develop lighter products more efficiently. This can’t distract from your main objectives, but it can in fact help realign those objectives with the reality of the marketplace.

Large businesses have more of a need than ever to out-innovate the competition. By waiting to put something out there until it’s completely ready, traditional businesses actually take bigger risks by betting more resources on something that isn’t market tested. A lean enterprise benefits from getting out there first, and then, when something is inevitably amiss, you can more easily pivot in another direction. It saves you from investing big budgets into sinking ships.

This article is published in collaboration with Think Big. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Jennifer Riggins is a Columnist at Think Big Blog.

Image: A staff member of on-line retailer Jumia, pushes a cart loaded with goods at the company’s warehouse. REUTERS/Akintunde Akinleye