I think of Eric Reis’ book, The Lean Startup, as an innovation handbook. Eric, a software engineer turned successful entrepreneur, sets out to dispel myths around innovation and entrepreneurship. He unpacks what it actually takes to innovate in the real world.
What the book really does is recast the old entrepreneur-in-a-garage yarn we’ve heard so many times. Eric reminds us (video link to his Google talk) that every entrepreneurship story we’ve ever been told (think The Social Network) has the same basic structure:
Part 1: entrepreneur (and a couple of friends) have a revolutionary idea. They pull all-nighters in the proverbial garage, write a bunch of code, and the idea comes to life.
Part 2: “photo montage” that lasts about two minutes long while they actually build the company.
Part 3: entrepreneurs fight over how to distribute the spoils.
The Lean Startup is all about Part 2, the actual work of figuring out if the thing you’re building is of any value to your customers.
Eric’s main premise, based on his own experience as a serial entrepreneur, is that most innovators and their teams waste huge amounts of time because they prioritize getting work done over figuring out what their customers want. In Eric’s case, as the CTO of a software company called IMVU (which lets you make cool online avatars), he spent six months killing himself writing 25,000 lines of code. The catch was that when IMVU put the software in front of 16 year old kids (their customers) they discovered that a core functionality of the software that had taken six months to develop – that it worked with every major instant messaging platform – was absolutely useless to the 16-year-olds. Six months of work totally wasted because the team wasn’t willing to test their assumptions at the beginning. Six months building functionality when they could have built a webpage in one day and gotten the same answer.
If innovation is all about operating within conditions of extreme uncertainty, and if we are first and foremost in search of answers and only THEN building our products, then we have to get a lot better at getting answers quickly (and yes, I do believe that social change work nearly always operates under conditions of “extreme uncertainty.”) To do this, we have to get better at what Eric calls “validated learning” – getting clear data around our core assumptions – by iterating through a BUILD – MEASURE – LEARN cycle:
By embracing a Lean Startup mindset, you build products in a completely different way. Your early products’ only job is to allow you to test your assumptions; you do this by MEASURING results that validate or reject these assumptions; and you LEARN from these results, and either pivot your company strategy to a new direction or continue on course.
The big point of the giant chart (the whole point of the book really) is: the main determinant of whether / how quickly we innovate is how quickly we can go through the BUILD – MEASURE – LEARN cycle. The faster we go, the more quickly we learn, the more often we pivot, the less time we waste. We optimize for learning and build organizations that are made to adapt quickly.
Makes sense, but it’s not how we (any of us) act most of the time.
And this is where the lightbulb went off for me about the social sector. It’s never felt to me like we are, by and large, built for innovation, yet that always felt like it had to do with willingness to take risk – especially on the part of the big institutional players. And while there’s some truth to this critique, it also partially misses the mark.
Imagine if you had to write Eric’s chart for the nonprofit sector. My best attempt at this looks like this:
The lightbulb moment for me is that we are structured as a sector to have a BUILD – MEASURE – LEARN cycle that lasts three years (sometimes longer)…the time it takes to get a grant, execute against that grant, write the grant report during and after the grant, and potentially renew. So the underlying problem isn’t about willingness to take risk, the underlying problem is the false premise that long cycle times make sense – when in fact as a sector we need new and better solutions nearly everywhere and need to create engines of innovation to get us there.
Our sector conducts itself with an academic approach to learning – with all of the rigor and the long, slow cycle times that always entails.
Of course there’s amazing work going on nearly everywhere, people bucking the system, working around the barriers, making incredible things happen despite the structure being all wrong.
But what would a world look like in which we acknowledged that we don’t have all the answers? What would it look like if we asked ourselves NOT to be right from the get-go but instead to create approaches and systems that are designed from the outset to incorporate learning quickly?
I think it would look pretty different from what we’ve got today. I think that business approaches would be a bigger part of the answer not because it’s inherently better when people pay for things but because businesses are designed with built-in feedback loops from customers. I think that providers of capital would feel more like long-term partners and no one would survive who didn’t learn quickly and adapt often. I think we’d listen to end customers a lot more and treat experts less like experts and more like people with accumulated experience from which we can all learn.
What else would a Lean Nonprofit sector look like to you?
13 thoughts on “The Lean Nonprofit”
Thanks for the post, a interesting topic indeed. The Lean Nonprofit sector to me takes out the writing and grant part and adds a ‘valuate’ section. This ‘valuate’ section is the process of crowdsourced funding and market validation. Many people can imagine what a service/non profit will offer with a basic outline and structure presented online. Of course, to really know if it will work, the nonprofit needs to complete the cycle as mentioned above.
Take a look at watsi.org, I think you will be interested.
I really enjoyed this article! I am a sophomore at Oklahoma State University and I am wanting to go into the new for-purpose sector when I graduate. I like the last line when you say, “I think we’d listen to end customers a lot more and treat experts less like experts and more like people with accumulated experience from which we can all learn.”
I believe this is a very important part, especially for me as a college student. I have great opportunities to meet and speak with some very influential people in both the for-profit and non-profit sector. When I used to meet people that were in charge of a $6 Billion company, I would freeze and wouldn’t be able to learn anything from them because I was so intimidated. Now when I meet these people, instead of looking at them like that I look at them as a person I can learn something from. Whether they be a 50 year old lawyer in charge of the legal department of that $6 billion dollar company, or the five year old I meet down the street at the school that I volunteer at, this is how I have opened my mind, learned much more and found my true passions! Thanks for the great read!
The Lean Startup provides an excellent framework to reconceptualize what a start up is and how it should function. The whole time I was reading it I was thinking how the nonprofit industry and social enterprise space should adapt the lean principles. However, I have to disagree with your reworking of the lean cycle. Besides slight language changes (i.e. coding to implement or something), the cycle does not change at all. I think the fundamental flaw in your cycle is you infused money into it. Of course nonprofits are strapped for cash, so are start ups. The point of building lean is you focus on developing a product or service the market needs/wants and when you do that it can be monetized/funded. Conversely, if funders adopt and advocate lean principles, nonprofits might be able to secure small seed funding to develop a minimum pilot program (MPP) without the pressure of delivering outputs and outcomes, rather focus on learning points and developing an MPP.
building on the comment above, it seems to me that you have a hydra sort of problem here. You have separated the consumer of services from the payer for services (sort of like the 3-headed medical model in the US of consumer/provider/payer)… now you need to run a lean canvas -based build measure learn cycle against each side, simultaneously, being careful at each step that changes to one side do not invalidate what you are doing on the other. so yo’ve more than doubled the complexity of the challenge (squared maybe?) while retaining all of your other startup characteristics.
Malcolm, I agree it feels like a square of the problem in terms of complexity!
I’ve worked for the World Bank and for the Inter-American Development Bank (Multilateral Development Non-Profit Organizations, and essentially, the process you described is how it’s supposed (I’ll expand on this) to work right now. An investment project or technical cooperation (grant) proposal is written. The project or technical cooperation is executed and it’s actually a mandatory requirement for the team leader to prepare a “Project Completion Report” and “Impact Evaluation” report. Both of them must contain lessons learned and must document what went well and why, and also, what went wrong and why. These reports are then published in the Intranet and Internet. In theory, this is how these organizations have designed their processes. However, in practice, is not functioning correctly. First, the incentives are wrong. Team leaders are afraid of documenting failure. In theory, they are encouraged to do so. But in practice, failure is frowned upon. Second, the weakest link is the last one: team leaders write a new proposal without taking into account lessons learned from previous interventions! Why? I believe there are several reasons for this: (i) lessons learned are not easily accessible (IMHO) even for internal employees (could be easily resolved); (ii) the definition for innovation is wrong, team leaders don’t want to incorporate lessons learned from other team leaders as this would not be considered innovative and can be considered ripping off their work (issue with internal culture and again, wrong incentives); (iii) checks & balances to make sure new intervention proposals have taken into account lessons learned from previous experiences are not working (it is mandatory to write a section in a new proposal about lessons learned from similar past projects, however, both the team leader and reviewing committees don’t take this section seriously).