Innovation In Large Organizations: Siemens And Lean Startup

Source: Innovation In Large Organizations - Siemens Interview

By Brant Cooper on October 13, 2014

Not unlike startup entrepreneurs, intrapreneurs seeking to foster innovation in large organizations often obsess over technology. They feel as if innovation must involve invention (see the difference in our article What is Innovation How to Innovate - What Exactly is Innovation ).

On the sustaining innovation end of continuum, this results in new features, or me-too products that don’t truly represent “innovation” at all. On the “breakthrough” side, the focus is typically on invention; in other words on creating new technology. Historically, this has resulted in the “labs in the wilderness”, where new stuff is actually invented, but never sees the light of day.

Lean-Entrepreneur-Innovation-Continuum http://www.movestheneedle.com/wp-content/uploads/2015/09/Lean-Entrepreneur-Innovation-Spectrum-300x133.png

There’s another way of thinking about this, however. In reality, “breakthrough innovation” is in the eye of the beholder. If you take a product successful in one market and deliver it to a new market (Steve Blank market type: segmented niche), it’s quite possible that said product is disruptive to the new market even if the technology has been around for years.

So take an existing successful product, introduce it to a new market — and boom! — breakthrough innovation, new revenue stream, high-fives all around, right

Well, not so fast. It’s a lot harder than it sounds!

The tendency is to think that rolling out the new product is simply a matter of execution, in other words, doing the things you already know how to do well: repackage features, rebrand, shove it down the channel and voila!

Actually however, it’s a matter of search. A new market requires you to look at what product capabilities are necessary to solve the specific problems the new market has? How does this market expect to be marketed to? How do they expect to buy? Are internal operations prepared to support the new market?

Even if you’ve sold to this market in the past, in today’s rapid change environment, things have likely changed quite a bit. The organization needs to learn all over again.

We spoke with Karsten Newbury, SVP of Siemens PLM, who leveraged Lean Startup principles to learn before executing. We encourage you to set aside an hour or so to listen in on the Karsten’s journey and how to foster innovation in large organizations.

But for those who can’t wait, conversation highlights below in the video:

SIEMENS PLM LEAN STARTUP GO-TO-MARKET

Siemens has a very successful CAD and Engineering tools business they sell to very large enterprises globally. The question for Karsten’s group was, “can you take this successful enterprise product and re-launch it for the SMB market.”

This was not a technology problem. They carved up the product and re-packaged it and went to market. While they had some success, after 3 years market penetration was still limited. They needed a better go-to-market strategy.

Karsten started running experiments, small pilot activities, to try and figure out a new business model for this market. He did this before Eric Ries’ book, The Lean Startup http://theleanstartup.com/book. At that time, Karsten had a difficult time explaining to his team, colleagues and management, why he was doing these tests.

“People couldn’t understand what we were doing; they kept asking for the business plan and that sort of thing.”

The Lean Startup was eye-opening. Not just because it provided a lexicon to describe what he was doing and a means to share the ‘why’, Karsten found that in reality he wasn’t being disciplined enough in how they were doing validation.

So while yes, the product was already in the market, it took 3 years (1 release/year!) to get the right product to market.

“There’s so much waste to avoid if you become more disciplined about customer validation. It’s hard work. Read the book and understand it, but applying it is hard.”

As if straight from The LEAP-JOURNEY Keynote: Agile Australia 2014 , Karsten went in search of allies, in order to ‘become more disciplined.’

First he went to the CIO, who was a key ally. He was responsible for the whole Siemens PLM software business. He controlled a lot of the corporate infrastructure, so Karsten never would have been able to run e-commerce experiments without him on board.

He convinced the head of Engineering to look into Lean Startup, by inviting him to the annual conference. These are smart people. They ‘got it.’ He said, paraphrasing:

“I thought this was going to be a fun thing about startups, blew me away, this is a new management methodology. This isn’t just about startups or running little projects or prototyping, this is a new way of thinking and working.”

The key to Karsten’s success in bringing on allies is to include them in the business case development. It’s not just about asking for things, but demonstrating the big vision.

“Unless I empower my business partners by giving them knowledge about what we’re trying to do and making them part of it I don’t have a chance in hell of getting anywhere. The CIO actually helped me think about the problem from a financial value perspective rather than just a technological one. He has a strong business mind. He wants to work on a real business problem.”

The same goes not only for IT and Engineering, but also marketing, legal and compliance. They have to be brought on as business partners, not service providers.

Siemens overall is a massive business with 100 billion dollar in revenue. They have an incredibly strong, global brand. Part of that branding describes how all web sites must look, including stringent rules around what you can do and can’t do. 20 years ago this made a lot of sense. But in an Internet world, not so much.

“If you sit down and explain what you’re trying to accomplish: Listen, I’m not just trying to redesign, but if I want to build an ecommerce site it’s going to look different. I need a pilot, let’s pick a region. I want a separate web site and run all kinds of experiments on it, without being bound by the corporate web design rules. We’ll show you the data regarding what changes work.”

And compliance. How do you grow while adhering to export compliance? Chunk off a little piece and experiment.

“The export compliance team was pretty nervous, but then as we moved through they started to see how it works, how it was automated, how it would actually make their lives easier; the toughest barriers you have to nibble away at and break down the barriers over time.”

SO WHAT HAPPENED?

Siemens lean startup venture into e-commerce has been a clear success.

They’ve already accomplished some of their primary goals: Since starting in late 2013, monthly growth rates of seats sold via the e-commerce site have been greater than 70%. More importantly, all business is new and not cannibalizing the perpetual license business sold through channel partners. The channel partners follow up on these and are able to build new relationships with users they would have never reached before.

As is part of the classic here’s journey, upon “enlightenment”, you must return to society with your newfound knowledge. As a result of Karsten’s work, other business segments inside Siemens PLM seek to join the e-commerce platform. Says the CIO: This is the biggest reward for me: to see the recognition of our fellow executives for what we’ve built!

“Lean Startup is not easy. It takes time. Maybe it takes too long. But we’re making progress. You just have to keep at it; it’s a question of mindset, and becoming aligned, one step at a time.”