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Chapter 2
Eric Ries, often encounters general managers from large companies who are tasked with creating new ventures or product innovations. These managers are skilled in organizational politics and are able to form autonomous divisions with separate profit and loss statements. They are also visionary and willing to take bold risks to find innovative solutions for their company's challenges.
One of those managers is Mark, who leads a division in a large company responsible for developing new products to embrace the Internet era. Mark is well-versed in the concepts of innovation, but he is looking for guidance on how to turn innovative ideas into tangible successes. The standard management theories focus on forming internal startup teams, but Mark finds himself inside the "black box" of innovation, needing guidance on the process of turning raw ideas into breakthrough achievements.
IF I’M AN ENTREPRENEUR, WHAT’S A STARTUP?
The Lean Startup defines a startup as a human institution designed to create a new product or service under conditions of extreme uncertainty. This definition does not depend on the company's size, industry, or sector. It includes anyone who is developing a new product or business under conditions of uncertainty, whether in a government agency, a venture-backed company, a non-profit, or a for-profit company with financial investors.
The term "institution" may imply bureaucracy and processes, which might seem contradictory to a startup's agile and dynamic nature. However, successful startups do involve building an institution in the sense of coordinating activities, hiring employees, and creating a company culture that delivers results. Startups are more than just the sum of their parts; they are profoundly human enterprises.
Another crucial aspect of the definition is the innovation in the product or service. The term "product" is used broadly to encompass anything that provides value to customers. This can include a variety of interactions, experiences, or services that customers receive from the company. Whether it's a grocery store, an e-commerce website, a consulting service, or a non-profit social service agency, the organization is focused on delivering a new source of value to its customers and caring about its impact on them.
SnapTax Story
The SnapTax story showcases an audacious innovation undertaken by Intuit, a well-established company known for finance, tax, and accounting tools. In 2009, Intuit aimed to simplify the tax-filing process for taxpayers by automating the collection of W-2 form information. The initial challenges led them to create SnapTax, allowing customers to take a picture of their W-2 forms with their phone, and the technology compiled and filed most of the 1040 EZ tax return. This innovation led to SnapTax's success, despite competing with Intuit's flagship product, TurboTax.
What makes this story remarkable is that the team behind SnapTax was composed of Intuit employees, not external entrepreneurs. They were supported by executive sponsors who allowed them the freedom to experiment and create in an "island of freedom." Contrary to the common notion that large companies struggle with disruptive innovation, Intuit embraced a new management paradigm that facilitated bottom-up, decentralized, and unpredictable innovation.
The success of SnapTax demonstrates that innovation can be managed and nurtured, even within established companies. Cultivating entrepreneurship becomes the responsibility of senior management, who must support and hold innovation teams accountable. Intuit's realization of this need for a new management discipline allowed them to achieve cutting-edge success, showcasing that established companies can foster disruptive innovation and sustain growth through innovative practices.
Lessons from Intuit
The story of Intuit exemplifies how a large, established company can embrace entrepreneurial management and Lean Startup principles to foster innovation and achieve sustainable growth. Founded by Scott Cook and Tom Proulx in 1983, Intuit initially aimed to revolutionize personal accounting with computer-based solutions. Over the years, Intuit faced challenges, went public, and successfully diversified its product offerings.
However, by 2002, Scott Cook was dissatisfied with the return on investment in new products at Intuit. He realized that the prevailing management paradigm was not conducive to continuous innovation in the modern economy. Seeking change, Cook came across the Lean Startup methodology and invited Eric Ries to give a talk at Intuit.
The Lean Startup principles found application in Intuit's flagship product, TurboTax. Instead of following the traditional approach of one major initiative rolled out for tax season, TurboTax started conducting over 500 tests during the tax season, making up to seventy changes per week. This approach fostered an environment of learning, entrepreneurship, and rapid experimentation.
Intuit's leadership recognized the need for a new management paradigm that embraces risk-taking and innovation. They measure the success of their innovation efforts by tracking the number of customers using products introduced within the past three years and the percentage of revenue from such offerings. By short-circuiting the innovation ramp, Intuit has seen promising results, generating $50 million in offerings that didn't exist twelve months prior.
Intuit's leadership acknowledges that creating conditions for experimentation is essential, requiring investment in systems that facilitate rapid testing and analysis. They emphasize that this transformation is the responsibility of senior management and involves fostering a culture of innovation and providing the necessary systems for experimentation.
Overall, Intuit's journey serves as an inspiring example of how a large company can adopt entrepreneurial management principles and cultivate a culture of innovation to thrive in an ever-changing market.
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