LEAN Enterprise and Enabling Innovation
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LEAN Enterprise and Enabling Innovation
- 1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Karim Hopper, Solution Architecture APAC 27 May 2015 Driving Innovation and Agility Lean Enterprise Hong Kong
- 2. What we know today
- 3. 75% By 2020 Of the S&P 500 Will be companies we have not yet heard of - Richard Foster (2013) Yale University Professor 85%Of new products FAIL - Harvard Business Review
- 4. What if we could reduce failures by just 10%? Or innovate at the speed of a startup?
- 5. That’s where Lean can help
- 6. First - let’s talk about the past
- 8. Create value for customers While minimizing or eliminating waste LEAN THINKING
- 9. Ford pioneers the assembly line Motorola develops Six Sigma management based on mass production principles 1986 Eric Ries creates The Lean Startup 2008 Toyota develops just-in-time / lean manufacturing and TPS 1960s - 1980s 1913 Ford & GM refine mass production 1920s “Lean Enterprise” 2010s
- 10. Lean Startup: Why Products Fail YOU CustomerDon’t know what the customer wants, so you build the wrong things A lot of the time doesn’t actually know what they want
- 11. Uncertainty and innovation go hand in hand Lean can help you navigate the uncertainty
- 12. SIX SIGMA taught us how to build THINGS RIGHT While LEAN teaches us how to build the RIGHT THINGS
- 13. Experiment Use actionable metrics Iterate at speed 1 2 3
- 14. Experiment 1
- 18. The purpose of an experiment is to confirm or reject a hypothesis
- 19. In Lean we use Minimum Viable Products (MVPs) to experiment
- 20. An MVP can be anything that can be used to test a hypothesis or validate an idea MVPs should be designed to test critical leaps of faith first MVPs reduce uncertainty
- 22. Enterprises must avoid Vanity Metrics Metrics that make you feel good but don’t allow you to take action, e.g. Website hits Registered customers
- 23. Actionable Metrics Split testing (or A/B testing) Customers Product v1 Product v1.0.1 Same as v1 except – •Larger product images •Large buy button Customer Revenue (AVG) $57.4 5 $91.8 2 Implement
- 24. Source: Dave McClure http://500hats.typepad.com/500blogs/2007/09/startup-metrics.html Actionable Metrics Funnel metrics – “AARRR”
- 26. Iteration Time Scale Started: odeo, site to create & share podcasts MVP
- 27. Iteration Time Scale Became: Twitter Now: micro-blogging, 500M users, IPO, >18Bn market cap MVP
- 29. Rare Release Events “Waterfall Methodology” Smaller Effort Minimized Risk Frequent Release Events “Agile Methodology” Larger Effort Increased Risk Time Change Time Change
- 30. So how is this relevant to the AWS cloud?
- 31. “Cloud is like a fertilizer that creates Startups” - Eric Ries
- 32. In addition to applying lean principles these startups all have something else in common
- 33. The cloud reduces waste By enabling customers to focus resources and time on product development and innovation
- 34. 1 2 3 Elasticity PAYG Platform Expand and contract with market opportunities Highly scalable services Access huge amounts of resources Pay for what you use No upfront costs Global reach Breadth of services (build anything!) Secure and trusted by 1 mil+ customers
Notas do Editor
- --- Notes Designed for a 20 minute speaking slot
- So I want to start by setting some context
- Richard foster also found that the rate of disruption is increasingly and new businesses need only wait 15 years before being at risk And that sad fact is that 85% of new products fail. This is actually the HBR number. Many sources go even higher. A recent Wiley report published this week (05 MAR 2015) stated that the figure is closer to 95%. Whatever the case, if you think about your own organization, I’m sure you’ll find that the number is close enough! Are these two statistics somehow related to one another? ----- Meeting Notes (5/27/15 09:55) ----- Disruption cycle is shrinking ----- Meeting Notes (5/27/15 10:57) ----- cycle of disruption is quickening
- The good news is there are existing proven tools that can help and that’s where lean comes into the picture.
- So what is lean and where did it come from?
- In 1960s GM had 60% market share and a reputation for large vehicles but pretty unreliable vehicles. Meanwhile Toyota, a small manufactuer at the time, was churning out more reliable, smaller vehicles using just in time manufacturing and what was known as the Toyota Production System . GM was no slouch itself, having developed what is now know as “mass production”. But by 2004, GM’s market share stood at 25% and by 2009 they had filed for chapter 11 bankruptcy. No one wanted to buy big cars anymore. Toyota on the other hand had become and he largest car manufacturer in the world. And this is still true today in 2015. The keys to Toyota’s success lay in the manufacturing method they had developed which would later be known as “lean manufacturing” It was an issue of product-market fit
- So what is it? There is a lot to lean but for simplicities sake you can think of it in this way.
- Before we talk about Lean in more detail lets talk about where it came from…. I mentioned before that Lean came from Toyota but it’s roots go further back than that, JIT improved plant flow times, throughput times, and eventually lead times to customers. Six Sigma TPS manufacturing concepts and applied them to essentially any business process, such as procurement or change management or contract review. But, this was still about improving quality in order to squeeze a few % out of the cost base. Lea Startup came along and applied the concepts of Lean to product development and “revenue generation” and
- I talked before about how 85% of products fail. Lean introduced the idea of the wall between marketing and engineering. Lean Startup and took this idea and turned it around. the reason for that is that there is a wall between you and your customer You don’t know what they want And in fact, they don’t know what they want…. from Henry Ford. “If I’d built what the customers wanted, we’d just have faster horses.”
- So how does Lean do this?
- SIX SIGMA nailed the process of building products efficiently and at high levels of quality. But if you are building the wrong things the right way it doesn’t matter. LEAN focuses on building products that customers want
- So how does Lean do this?
- Experimentation is science. And science is driven by data. And in Lean we need data to drive decisions on choices we make in product development. Therefore its critical to have the right data and therefore have the right metrics.
- ----- Meeting Notes (5/27/15 09:55) ----- It's not that innovators love failure
- What they love is experimentation. They love to test ideas in the market, and use the results of those tests to make decisions about an innovation.
- There is no failure in experimentation. E.g.
- Just read
- Start by describing what an MVP is not An MVP Is not a product with the fewest possible features to launch into a market An MVP is anything that can be used to test a hypothesis. It might be something like what we see here. By the way, does anyone know what this is? Yes it is the first mouse developed out of Xerox. But, it could also be a fairly feature rich, mature product. Alternatively, as we’ll discuss later, it might not even be a physical thing at all! Just remember, the MVP is all about testing hypotheses. They test critical leaps of faith first – when a “reject” result invalidates the entire product or idea.
- Experimentation is science. And science is driven by data. And when we use Lean we need data to support the business and product development decisions we make So its critical to have the right data and therefore have the right metrics. ----- Meeting Notes (5/27/15 11:11) ----- experiments are important but measuring metrics are just as important
- Website hits – you don’t know how they arrived at your website or anything about what they did when they got there
- Split testing provides highly actionable data.
- Dave Mclure Customer lifecycle events for a typical website.. Lifecycle will vary based on your app This is essentially funnel metrics, which allows you to do cohort analysis ----- Meeting Notes (5/27/15 11:11) ----- Increase in conversion rates at the top flow through to revenue
- Does anyone know who odeo was? Odeo was a podcast company
- That became Twitter. Again, you can see that there was incredible change from what they thought would be a great idea, to when they discovered one
- What made Twitter sucessful was that they were prepared to pivot their business model and functionality around the most commonly use part of their platform
- Agile development Continuous Deployment BV = At Amazon, 75% reduction in outages related to deployments, 90% reduction in outage minutes
- What made Twitter sucessful was that they were prepared to pivot their business model and functionality around the most commonly use part of their platform
- Cloud and lean are fundamentally interconnected and I’m going to show you why
- They are all customers
- Imagine if you could take 20% of your time and resources and re-invest that into