How to Apply Lean Startup Principles to the B2B Market
“Lean Startup”, a business development and innovation methodology popularized by Eric Ries and Steve Blank, proposes a management approach based on certain core principles that mirror lean production:
- Generation of evolving business model hypotheses rather than adherence to rigid business plans
- Focus on customer engagement and feedback to identify problems to be solved, rather than insular technology development and “push” strategies
- Agile development of minimally viable products, samples, and prototypes to gather customer feedback quickly and iteratively
This methodology originated in the world of tech startups, but many of our clients – mostly B2B advanced materials and specialty chemicals companies – have embraced it and benefited. They’ve renewed their focus on the customer, and they’ve evolved an organizational culture that emphasizes speed and rewards failing fast.
One of our clients, for example, regularly deploys small teams to test the attractiveness of specific opportunities by conducting hundreds of customer interviews over a period of just two months. If those visits validate a high-potential area for growth, our client moves forward; if the interviews tell a different story, they terminate the initiative and move on. Consequently, they have been able to kill off many projects that had previously distracted the organization and focus on what is really gaining market pull.
The most profound change we’ve noticed, and the one we find most encouraging, is the increased number and quality of customer relationships being developed, and the new, unforeseen business options that arise as a result. Another of our clients has re-engineered their innovation process to be more customer- and design-centric: they engage through prototypes to gather rapid feedback, and listen for additional problems to be solved in order to hone the final product. As a result of these practices, they’ve increased their pipeline from five stagnant innovation projects to nearly a dozen in two years with a similar resource budget.
Not everyone has embraced this change, however. It is unclear what the fundamental barriers to adoption of this methodology are, but Newry has identified several challenges that must be overcome or avoided in order for Lean Startup initiatives to succeed:
- Lack of top-level leadership support resulting in limited traction and result
- Not addressing the culture and organizational change necessary to embrace the lean-startup principles (which do not always align with traditional measures of success)
- Deploying lean-startup philosophy only on “home run” transformational opportunities rather than all projects (including incremental or adjacent innovation “singles and doubles”)
- Narrowly defining business model options and/or capabilities, resulting in many missed opportunities and a general lack of progress
The solution to these challenges is not necessarily simple, but the best client examples we’ve witnessed consistently rely on C-level or board level engagement, and demonstrate strong commitment to staffing and supporting broad deployment over a period of years to gain traction and adapt culture.
We are excited by the impact Lean Startup has had at several of our clients and are anxious to see another cohort of clients deploy it successfully.