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Teaching GE to think like a startup



…. insight on how an ” external Business Innovation Facilitator ” improves outcomes

Oct 2017 – by Eric Ries – Innovation Consultant and author of – The Startup Way : How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. Book excerpt –

A group of GE Engineers and Executives met to discuss their multi–$100 million, five-year plan for developing a new diesel and natural-gas engine. Their goal was to enter a new market with the new Series X engine – with broad applications in many industries, from energy generation to locomotive power. All of this was very clear to those assembled in the room – except to me as the external Business Innovation Facilitator. Being entrepreneurial and having the benefit of numerous innovation initiatives, with no knowledge of engines, energy, or industrial product production, I asked various questions including – “ What is this used for ? Is it for a boat ? On a plane ? By sea and by land ? On a train ? ”.

This originated from GE’s then–chairman and CEO Jeffrey Immelt and then–vice chair Beth Comstock invitation to learn more about how the principles of entrepreneurial management could be applied to any industry, size of company, or sector of the economy. Believing GE needed to adopt those principles, the goal was to set a path for growth and adaptability by building on their legacy with new thinking and processes to flourish long term.

Extending on the above questions, other important questions around culture and effecting change included –

  1.  How are people encouraged to think more like entrepreneurs ?
  2.  How can we build new products for new markets without losing existing customers ?
  3.  How can a culture be created that balances the needs of existing business with new sources of growth ?

It was no accident Series X was picked as the first project to test. The thinking was that if we could get this huge, multiplatform engine project operating in a new way, there would be no limit to Lean Startup applications companywide, which aligned perfectly with the company’s desire to simplify its way of working across its many businesses. Hours after my first meeting in Crotonville, I found myself in a business school–type classroom elsewhere in the building, along with engineers representing the businesses involved in the Series X engine development, the CEOs of each of those businesses, plus a small cross-functional group of top-level executives who had orchestrated my visit.

We had gathered to try to address a real issue – “ Why is it taking five years to get a Series X engine ” ?

In the workshop the Series X team walked us through their five-year business plan. My role as the Business Innovation Facilitator was to ask questions about what the team actually knew vs. what they had guessed. What do we know about how this product will work? Who are the customers, and how do we know they will want it? What aspects of the timeline are determined by the laws of physics, vs. GE’s internal processes ? The team proceeded to present the currently approved business case for the Series X, including a revenue forecast with graph bars going up and to the right with such velocity that the chart showed this as-yet-unbuilt engine making literally billions of dollars a year as far into the future as 30 years hence. Beth Comstock recalls: “It was like all the business plans we see, with a hockey stick that is going to grow to the moon in five years, and everything is going to be perfect.” Things got more complicated, of course, as we dug deeper. But the biggest question looming over the room remained: Why does it take so long to build this engine? I don’t want to undersell the technical challenges involved: The specifications required an audacious engineering effort that combined a difficult set of design parameters with the need for a new mass-production facility and global supply chain. A lot of brilliant people had done real, hard work to ensure that the plan was feasible and technically viable.

But a large part of the technical difficulty was driven by the specifications themselves. Remember that this product had to support multiple distinct uses in very different physical terrains (visualize how different the circumstances are at sea, in stationary drilling, on a train, for power generation, and in mobile fracking). The uses were based on a series of assumptions about the size of the market, competitors’ offerings, and the financial gains to be had by supporting many different customers at once. These “requirements” had been gathered using traditional market-research techniques. But surveys and focus groups are not experiments. Customers don’t always know what they want, though they are often more than happy to tell you anyway. And just because we can serve multiple customer segments with the same product doesn’t mean we have to. If we could find a way to make the technical requirements easier, maybe we could find a way to shorten the cycle time.

There were also many questions about the plan’s commercial assumptions. One of the executives present, Steve Liguori, then GE’s executive director of global innovation and new models, recalls, “We had a whole list of these leap-of-faith assumptions around the marketplace and the customer. What percentage gains is the customer looking for? Are you going to sell it or lease it or rent it? Are you going to pay for distribution? We had about two dozen of these questions, and it turns out that when we asked the team how many they thought they could answer, it was only two of the 24.” Liguori recalls this as the “aha moment.” The company had been so focused on the technical risks—Can this product be built?—that it hadn’t focused on the marketing and sales-related risks—Should this product be built?

Since the best way to test market assumptions is to get something out to customers, I made what was, to the room, a really radical suggestion: an MVP diesel engine. The MVP, or “minimum viable product,” is a concept I explored in The Lean Startup. An MVP is a product with just enough features to satisfy early customers; producing one quickly, and making it available in a small, controlled way, can generate feedback that guides the next steps in a product’s development. The Series X team was trying to design a piece of equipment that would work in multiple contexts. As a result, it was caught up in the budgeting and political constraints that accompany such a multifaceted project. What would happen if we decided to target only one use case at first and make the engineering problem easier? The room went a little wild. The engineers said it couldn’t be done. Then one of them made a joke: “It’s not literally impossible, though. I mean, I could do it by going to our competitor, buying one of their engines, painting over the logo, and putting ours on” – which lead to nervous chuckles.

Of course, they never would have actually done this, but the joke led to a conversation about which of the five uses was the easiest to build. The marine application had to be waterproof. The mobile fracking application needed wheels. Ultimately, the team arrived at a stationary power generator as the simplest technical prospect. One of the engineers thought this could cut their cycle time from five years to two. “Five years to two is a pretty good improvement,” I said. “But let’s keep going. In this new timeline, how long would it take to build that first engine?” This question seemed to once again cause some irritation in the room. The participants started to painstakingly explain to me the economics of mass production. It’s the same amount of work to set up a factory and supply chain, no matter how many engines you subsequently produce. I apologized once again: “Forgive my ignorance, but I’m not asking about one line of engines. How long would it take you to produce just one single unit? You must have a testing process, right?” They did, and it required that the first working prototype be done and tested within the first year. When I asked if anyone in the room had a customer who might be interested in buying the first prototype, one of the VPs present suddenly said, “I’ve got someone who comes into my office every month asking for that. I’m pretty sure they’d buy it.”

Now the energy in the room was starting to shift. We’d gone from five years to one year for putting a real product into the hands of a real customer. But the team kept going. “You know, if you just want to sell one engine, to that one specific customer,” said one engineer, “we don’t even need to build anything new. We could modify one of our existing products.” Everyone in the room stared in disbelief. It turned out that there was an engine called the 616 that, with a few adjustments, would meet the specs for just the power generation use. This new MVP was literally an order of magnitude faster than the original plan: from more than five years to fewer than six months. In the course of just a few hours—by asking a few deceptively simple questions—we had dramatically cut the project’s cycle time and found a way for this team to learn quickly. And, if they decided to pursue this course, we could potentially be on track to save the company millions of dollars. What if it turned out that that first customer didn’t want to buy the MVP? What if the lack of a service and support network was a deal killer? Wouldn’t you want to know that now rather than five years from now? Or was it? As the workshop wound to its conclusion, one of the executives in the back of the room couldn’t stand it anymore. “What is the point,” he asked, “of selling just one engine to one customer?” From his point of view, we had just gone from talking about a project potentially worth billions to one worth practically nothing. His objections continued: Even putting aside the futility of selling only one engine, targeting only one customer use effectively lowered the target market for this product by 80%. What would that do to the ROI profile of this investment? “You’re right,” I said. “If we don’t need to learn anything, if you believe in this plan and its attendant forecast that we looked at a few minutes ago, then what I’m describing is a waste of time. Testing is a distraction from the real work of executing to plan.” With this, the executive looked satisfied ! And that would have been the end of my time at GE, except for the fact that several of his peers objected. The executives themselves started to brainstorm all the things that could go wrong that might be revealed by this MVP: What if the customer’s requirements are different? What if the service and support needs are more difficult than we anticipate? What if the customer’s physical environment is more demanding? What if the customer doesn’t trust our brand in this new market segment?

When the conversation shifted from “What does this outsider think?” to “What do we, ourselves, think?” it was a whole new ball game. Mark Little, who was then senior vice president and chief technology officer of GE Global Research, was the person the engineers in the room most looked up to, and whose skepticism—voiced quite clearly earlier in the day—had them most worried. He ended our workshop by saying something that stunned the room: “I get it now. I am the problem.” He truly understood that for the company to move faster, he, along with every other leader, had to adapt. The standard processes were holding back growth, and he, as a guardian of process, had to make a change. “What was really important,” Little recalls, “was that the workshop changed the attitude of the team from one of being really scared about making a mistake to being engaged and thoughtful and willing to take a risk and try stuff, and it got the management team to think more about testing assumptions than creating failures. That was very liberating.”

The Series X team turned into one of the many pilot projects for the GE program we came to call FastWorks. The team got the test engine to market dramatically sooner and immediately got an order for five engines. During the time they would have been doing stealth R&D in the conventional process, waiting for what Mark Little calls “the big bang,” they were gaining market insights and earning revenue from their MVP.

Importantly, during this workshop—and the months of coaching that followed—no one had to tell these engineers what to do. Not me, not Beth Comstock, not Mark Little, not even Jeff Immelt. Once presented with the right framework for rethinking their assumptions, the engineers came up with the new plan through their own analysis and their own insights. It became obvious to everyone in the room that this method had worked and that the team had arrived at an outcome that the company would not have been able to get to any other way. The reason GE was able to tackle changes at this level, at this stage, was because the transformation was driven very early on by people completely dedicated to making it happen. But this is not only an innovation story about GE. It’s about how dedicated founders are the engine that powers entrepreneurship within an organization. Every company has levers that make it run. All it takes to pull them is courage with a shared appreciation of –

Lesson Learned to be better at Business Innovation

To improve outcomes, attract and retain the best people, and be better positioned to be relevant in the future – it’s critical organizations treat talent and energy as a precious resource to encourage human creativity with the right for people to –

  1.  Know their work is meaningful to someone other than their boss.
  2.  Have an idea turned into a minimum viable product and evaluated rigorously and fairly.
  3.  Become an entrepreneur – as long as they’re willing to do the hard work to make things happen – with limited resources.
  4.  Stay involved with an idea as it scales, as long as they’re contributing productively to its growth.
  5.  Share in the rewards in the growth they helped create – no matter the role or job title (ie: bonus(s), recognition, equity, etc.).

And the huge value from an ” external Business Innovation Facilitator ” to provide fresh insights and new ideas to improve outcomes. And by being external, another perspective to help effect change.

 

CAIL – Innovation Industry Commentary

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