Rethinking Lean Startup at a Big Corporate

As Startups are disrupting established companies’ business model, some corporations try to find countermeasures. Two configurations are dominant: the first one are the "(Digital) Labs", i.e. a company's spin off where a huge part of the people are contractors; the second consists of building inner startups with the internal people present.

For nearly a year, this is the path that a well-established Fortune 100 Insurance Provider has been pursuing. We had the opportunity to share this journey with Michael Nir. Michael Nir is coaching the teams in Lean Startup thinking and we asked him about it. In the part about the first experiment, Michael mentions the MOSCOW method.

InfoQ: You are currently working with a major healthcare insurance provider – possibly the biggest in the US. What is the path this organization chose regarding the digital transformation?

Michael Nir: The main challenges that they’ve been facing are: outdated ‘green screen’ backend mainframe IT system, rapid regulatory changes to their product base has impacted their main product line sending them searching for alternatives, on top of which little focus to consumer needs and wants leaves them alienated at times, to their consumers. Outside, there’s ongoing talk about digital transformation – which in the insurance business is known as ‘Digital Payer’.

The executive leadership team embraced Lean Startup thinking to reinvent the business. This translated to an all-encompassing training– coaching– demonstrating program. In other words – they’ve started from the top in training senior leadership in Lean Startup – and then broadened and deepened the initiative. Over the past year we’ve trained Lean Startup with 30 cross functional teams – approximately 200 employees; these teams are then tasked with ideating a new capability, product, service or enhancement. The teams identify assumptions, craft hypotheses, and run experiments. They pivot if needed. After three months the teams present their findings to the leadership team – we’ve had some exciting new projects emerge from the process. What’s important to remember is that training in Lean Startup alone and training in general tends to be of little value, without an element of a follow-up project for the teams to experience and experiment with the new learning.

At the same time we also applied Lean Startup thinking to the backend Policy Administration System (PAS) replacement program. Traditionally these projects are Big Bang 2-3 years undertaking. We’ve decided to rethink the traditional delivery approach, and combine Lean Startup Experimenting with Scaled Agile delivery to quickly iterate through capability development. As far as I know, this has never been done in multimillion IT back end replacement.

InfoQ: Why did they decide to build internal Startups? Why did they select this configuration over a Lab?

Nir: Innovation labs are all the rage and yet there is surmounting evidence that they are often a waste of money and effort: see "Why innovation labs fail and how to make them succeed" and "So Many Corporate Innovation Labs, So Little Innovation".

I’ve witnessed the same when discussing Lean Startup at keynotes I deliver. The Lab might be innovative; however it has to be part of business in order to succeed. When asked to integrate into the business the innovation’s lab products face the hard truth of long delivery cycles and disinterest from the people actually doing the work.

We decided to have the people doing the work, learn lean startup, experimenting with them and validating the merit; employees throughout the organization often have great ideas for innovative capabilities, but they lack the process to quickly validate and turn them into reality. Traditionally, they pre-think of the solution and ask IT to develop the automated capability, then they wait in a queue to have it delivered; more often than not, dissatisfied with the results.

What we’ve been able to achieve was that we first think about the problem, then experiment with non IT solutions - yes sometimes manual works best for a small subset experiment - and then incrementally roll out the solution in an operational environment across a product and customer base. Since the people running the experiments are the same ones involved in the operational work, they are committed to integrating the successful experiments into the business.

InfoQ: How are they managing their internal transformation? What are the key steps they used?

Nir: We identified key aspects of change leadership, and put in place a mechanism that celebrates success as well as retrospects the entire process.

We have internal champions, a community of practice, a monthly newsletter and on top of all a cultural alignment model.

Every month we develop learning aids, exercises and discussion points for managers to engage their employees with Lean Startup concepts. Not all the employees have undergone the two day training, yet; thus the impact of the cultural alignment model is twofold: it educates the entire organization and it distills a sense of value to the program; rather than people being forced into taking the training, the participants truly want to be part of the program and the transformation.

InfoQ: What is the role of management in this transformation?

Nir: Leadership has been the driver for the success of the program.

The participants of first workshop were members of senior leadership; they joined a focused and extensive two day off-site workshop. They played, discussed, imagined and strategized. This paved the way to a successful program.

Every workshop since, has a senior leader join for a session; sharing the importance of Lean Startup thinking to the organization surviving and thriving the disruption they are facing.

They also appointed a leader to be the internal lean startup coach; I like to call him the internal troublemaker. He questions the status quo, debates the merits of the traditional approaches and in general asks the right questions to get people thinking.

InfoQ: What are the first experiments they did, and what have you learned in the process?

Nir: The ones I can share ...

We had little knowledge of our consumers; I’ve asked others and this is something that is common with insurance providers. We were doing MOSCOW prioritization for the capabilities we planned to release – there were user stories that internal folks were convinced we had to offer and after validation with consumers guess what – they didn’t really care. Things like credit card payment over ETF (electronic fund transfer) which we assumed were Must Haves were actually Should Have; another things that struck us was the capability to select the day of the month on which to pay the premium; this was something that was offered in the past and we were absolutely convinced we Must offer it with the new system; surprisingly people don’t really want that as long as they can select between three dates. In hindsight this seems logical however before the validations these discussions where heated. Moving away from these two features saved a lot of up front customization effort.

On the other Lean Startup initiative – the cross functional teams that were tasked with ideating a new capability, product, service or enhancement; we got some cool new products, changes to existing processes and much more. For example one team streamlined the onboarding process by removing errors in the application process; another reduced the incoming call volume by validating assumptions in the welcome email that consumers received – making it more consumer centric rather than system centric; and a third team reduced manual claim processing by allowing consumers to email rather than fax claims.

From the outside, these wins might seem trivial at times and yet the amount of effort required to overcome entrenched thinking and assumptions that have been around for 30 years or longer is immense. By having the people doing the work, using Lean Startup thinking we’ve been able to quickly iterate and deliver breakthrough results with little investment; I mean – traditionally – these low hanging fruit projects would have been the bread and butter of a McKinsey or Boston Consulting Group Lean project – that would have cost millions of dollars to implement; however by shifting the ownership to the teams and structuring a Lean Startup program around them, we’ve been able to harness their skills and dedication to realize great results!

InfoQ: What are the pitfalls you fell into, and how did you improve?

Nir: Number one pitfall – jumping to the solution and thinking too big! Thinking about the IT capability that is needed, rather than analyzing the process and the problem.

One team started out with figuring out a way to enable faxing from the consumer representative station to promote first call resolution. However, by digging deeper into the problem and using tools such as 5 Whys, and clearly stating the hypothesis they’ve been able to identify the root causes and solve them.

Another pitfall we came across was that while Lean Startup is coupled with the mobile disruption and Lean UX; we had to figure a way to channel the concepts to internal projects at an organization that’s been around 50 years with entrenched thinking. I joked that at a workshop of 25 participants – we had more than 500 years of cumulative experience ... this required breaking of assumptions such as – we don’t need to analyze 8000 consumer Net Promoter Score reports to get to the bottom of the consumer feedback; sometimes all you need are 5 data points ...

InfoQ: What are the next steps for the organization?

Nir: Recently, we facilitated a user story mapping session to validate assumptions, with the new back-end delivery team and identified key capabilities we need to quickly develop to match a new product line. We had the right people in the room and gained the buy-in from leadership.

We are moving quickly to put the capabilities in place.

On the operations side, we are putting a plan in place to training another 350 front line employees ASAP. The organization is truly seeing Lean Startup as their 2.0 operating model.

InfoQ: If my company wants to follow a similar path, what do you recommend as the first step?

Nir: Have a road map of the transformation – what are the key steps; what does success look like; who are you sponsors; how will you drive the change.

Have a program in place – training is part of the program – it’s the start; how do you apply Lean Startup thinking to your organization – is an important question to answer.

And make sure you know who will be leading the initiative and make sure that you can apply constant pressure to promote success.

About the Interviewee

Michael Nir, Transformation Inspiration Expert, Lean Agile Coach; empowers organizations to deliver results.
With over sixteen years of experience Michael has been leading change at global organizations in diverse industries: Intel Corp, Philips Healthcare, United Healthcare, Volvo, JPMorgan Chase, Citi and others. Committed to breakthrough results as well as the journey, Michael balances a passion for creativity and innovation alongside tested proven approaches for solution delivery. Michael inspires people and teams to change, cognitively and emotionally, building on enthusiasm from climbing the hill AND reaching the top.
In his toolbox are: agile product development and Scrum, project management know how, Lean Startup and Lean Agile expertise, change leadership and team building experience, and pragmatically integrating theory into practice.