The Lean Enterprise

With glowing references from people I have huge respect for, it was only a matter of time before I sat down and read “The Lean Enterprise’. It is a fascinating book which contains plenty of advice, backed up by case studies that really bring it to life. There is a lot of information in the book, with many common themes reinforced throughout. There were a number of areas that stood out to me, based on past or current experiences, namely:

1) Ability to Innovate
2) Command and Control versus Mission Command
3) Continuous Improvement
4) Value Stream Mapping
5) Role and Importance of IT
6) IT Best Practices
7) Multiple Strategies

1) Ability to Innovate
The long term value of an enterprise is related to its ability to increase the value it provides to customers – and to create new customers – through innovation. We are in a rapidly changing world, and no business can afford to stand still, as no business model is indefinitely sustainable. It was fascinating to read the average expectancy of a Fortune 500 company has declined from around 75 years half a century ago, to less than 15 years today. Professor Richard Foster of Yale University even estimates that by 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet.

The example was given of Kodak who invented the digital camera in 1975. However, this was seen as competing against their existing business model optimised around developing photographs. As a result of not recognising future trends, and the unwillingness to cannibalise (or disrupt) their existing business model, they ended up filing for bankruptcy in 2012. Other examples include Blockbuster vs Netflix, HMV and Tower Records vs iTunes, YouTube and Spotify. This all adds to the evidence that you need to constantly scan the horizon, and restlessly reinvent yourself.

2) Command Control vs Mission Command
This struck a chord after spending many years working for a global services organisation.

Command and Control is the idea that people in charge make the plans and the people on the ground execute them. This is thought to be modelled on how the military operates, but is outdated. My own experience was working for an organisation in which any change needed to be escalated to get approvals at a continually higher level. What seemed worse, was that an American-led organisation, the strategies and setup were based on the US market, which in many cases was different than in the UK. There were plenty of people who in my mind “got it”, and had some great ideas. However, they were never entrusted to act on it, without spending months escalating to the core central team.

The organisation itself was so large, that lots of formal processes were put in place. However, this placed focus on pre-defined ways of working. It meant that innovation was stifled, which was a real shame. I can fully understand the rationale behind it, but the primary measurement for employees was utilisation. This also prevented an environment where learning new skills was encouraged, as all focus was on utilisation, and most quarters I was there (which was many) training budgets were slashed and courses cancelled.

Counter to Command and Control is Mission Command. With this approach, the general direction or intent of the mission is communicated from the centre, but those below have the authority to make decisions as situations change without waiting for approval through the chain of command. This also means the centre can specify the outcome they are looking to achieve, whilst allowing others to derive their own plans to achieve this based on their own knowledge of the local market.

3) Continuous Improvement
A number of methods where discussed that all had similar characteristics:
Eric Ries Build-Measure-Learn loop
Colonel John Boyd created the OODA loop (Observe, Orient, Decide and Act)
Deming Cycle Plan-Do-Check-Act

The key is to run cheap and quick experiments and building in feedback loops. Much of this thinking is already incorporated in the Government Service Design Manual with the service design phases moving from Discovery to Alpha, Beta and Live.

4) Value Stream Mapping
This was another aspect of the book that I could relate too. Many features take a small to develop and test, but take a long time to deliver end-to-end as a result of waiting time. The best way to understand where problems start is by performing an activity called value stream mapping. A value stream is the flow of work from a customer request through to the fulfilment of that request. Each value stream crosses many functions or lines of business within an organisation.

I have spent a long time working on various client sites, many of which heavily weighed down by red tape and process. There are often governance boards of one variety that sit infrequently, and rely on submissions being well in advance. The cost of missing one of these submissions can add weeks in and of itself. Then you read about companies such as Amazon, Netflix and Etsy where teams in many cases do not need to raise tickets and have changes reviewed by an advisory board to get them deployed to production.

5) Role and Importance of IT
The 2015 State of DevOps Report found that high performing IT organisations experience 60x fewer failures and recovery from failure 168x faster than their lower-performing peers. They also deploy 30x more frequently with 200x shorter lead times. An MIT Sloan Management Review report found that companies whose engineering teams did a good job of delivering their work on schedule and simplifying their systems achieved better results with much lower code bases, even if their IT investments aren’t aligned with business priorities.

6) IT Best Practices
Decouple deployment and release: Deployment is the process of installing a piece of software, Release is the process of making the new feature available to the end user. Release is a purely business decision. There are different techniques available for this. For example, using blue-green deployments which requires two separate production environments. There is also a concept called ‘dark launching’. Developers can protect new features using ‘feature flags’ so they are only accessible to a particular set of users. This also allows for different flavours of a feature to be tested to see which is more popular, a technique known as A/B testing. Companies such as Amazon and Microsoft typically run hundreds of experiments in production at any one time and test every new feature using this method rolling it out. The same goes for Etsy, Bing, Facebook and Netflix
Perform Real Failure Injection Exercises – Amazon, Google and Facebook inject faults into their production systems on a regular basis to test their disaster recovery processes. Netflix run a set of services known as the Simian Army, led by Chaos Monkey.
Automate Everything – make sure all builds and deployments are automated to reduce risk of releases
Reduce Batch Sizes

7) Multiple Strategies
It is important for most organisations to have a balanced portfolio. It is also clear that exploring new opportunities and exploiting existing ones are fundamentally different strategies. The ‘Three Horizon’ model can be used to look at these different horizons.