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Eric Ries on How to Innovate at Scale | Standard Speaker Series
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Standard Industries co-CEO David Millstone speaks with Eric Ries, entrepreneur and author of the bestselling 2011 book "The Lean Startup," about what it means to innovate at scale. This conversation was presented as part of the Standard Speaker Series, which features innovators and thought leaders in business, technology, science, and culture in conversation with Standard Industries co-CEOs David Winter and David Millstone. Learn more about Standard: https://www.standardindustries.com/ Connect with us on LinkedIn: https://www.linkedin.com/company/standardindustries
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Introducing Eric Ries
David Millstone introduces Eric Ries, the author of 'The Lean Startup' and 'The Startup Way.' He highlights the impact of Ries' work on innovation and entrepreneurship, mentioning key terms like Minimum Viable Product and Lean Startup methodology that have become essential in the business lexicon.
"[Applause] okay good evening welcome excited to be here with Eric Ries for our standard speaker series for most of you I think Eric needs no introduction he's the author of the Lean Startup and the st..."
The Catalyst Recruiting Idea
Eric Ries shares a personal anecdote about a failed startup he co-founded in college called Catalyst Recruiting. He reflects on the timing of their idea, which aimed to create online profiles for job-seeking Ivy League students, and discusses the lessons learned from their early failure and the importance of pivoting.
"Silicon Valley and pivot and fail fast and build measure learn are phrases that he really coined originally and and and popularized he's you know quite a brilliant thinker he's an entrepreneur himself..."
Learning from Failure
Ries discusses the stigma of failure in entrepreneurship, contrasting his experiences in Silicon Valley with those in Boston. He emphasizes how failures can provide valuable learning experiences that are often seen as assets in the startup culture of Silicon Valley.
"trapped by the idea that we're trying to create a real business so if we had had the wherewithal to think about pivoting to build Facebook we would've been like no that's just that's good that's not r..."
Challenging Conventional Wisdom
Eric Ries critiques the traditional view of startups as miniature versions of large companies, highlighting the flaws in the manufacturing metaphor of software development. He argues that this approach leads to predictable failures and emphasizes the need for a more iterative and customer-centric approach.
"and when I was in Silicon Valley this is shocking to me in most places like I've never dude that was in a job interview in Boston and I had to kind of like hide the fact that this company had failed a..."
The Flaws of Business Planning
Ries reflects on the ineffectiveness of traditional business plans, sharing his experiences with overly detailed plans that failed to account for real-world uncertainties. He discusses how assumptions often lead to failure and the importance of adaptability in business.
"happening to me over and over again like we had a list Kallstrom we had a really beautiful business plan I don't know if any archival copy still exists anywhere in the world but I think why does it I ..."
The Shift in Startup Culture
Ries describes his journey through Silicon Valley, noting how the startup culture has evolved. He shares insights on how rapid iteration and customer feedback have become essential practices, contrasting them with outdated methods that prioritize secrecy and rigid planning.
"and I was like I my goal had been to apprentice myself to like the best entrepreneurs in Silicon Valley and I was like in retrospect they made the same dumb mistakes we made in our dorm room but it's ..."
Astrology vs. Science in Business
Eric Ries draws a parallel between astrology and traditional business practices, arguing that many companies operate under unfounded assumptions about the future. He emphasizes the need for scientific rigor in business decision-making and the importance of testing hypotheses.
"we'll try it your way and of course like it was like a very green eggs and ham thing like what you tried a new way no one goes back so like I gotta skate by on that for a while and people get converte..."
Defining Business Use Cases
Ries discusses the challenges of defining business use cases in corporate settings, highlighting the disconnect between product development and actual user needs. He critiques the reliance on assumptions made by business professionals who may lack firsthand experience with the end users.
"like you know confidently projecting that you know the say do ratio all this wave looks like incredible apparatus around you know and and and something so kind of like a great man theory of business a..."
Innovation at Scale
In this segment, Ries addresses the complexities of innovation at scale, questioning whether the fundamental principles of innovation differ between startups and larger organizations. He explores the unique challenges faced by established companies in fostering innovation.
"because like the research is be defined by business use cases but like who decided the business use case so I'm adding to you likely always hilarious stories of like they're designing this thing that ..."
The Fruit Flies of Business: Startups
Ries likens startups to fruit flies in the business world, emphasizing their role in rapid experimentation and innovation. He explains how startups, through trial and error, develop effective practices for managing innovation, which contrasts with the more structured approaches of larger organizations.
"new things yeah this is something that nobody believes like I was kind of surprised when I found this out I stumbled into this I didn't expect to become like an innovation consultant to big companies ..."
The Challenge of Scaling Innovation
Ries reflects on his experiences consulting for various organizations, noting that the fundamental issues of innovation remain consistent across different company sizes. He discusses the importance of adaptability and the need for new organizational forms that can handle modern challenges.
"Weiner you when you you go through the like security like cordon and mi6 and like it's freaky and those guys we've got like everything about it is very strange but when you finally get to the actual c..."
From Startup to Corporate: The Transformation Dilemma
In this segment, Ries addresses the irony of entrepreneurs who start companies to escape corporate structures, only to replicate those structures as their businesses grow. He discusses the challenges of maintaining innovative practices as companies scale and the need for a new governance paradigm.
"of figured it out through trial and error and you're right the reason we can do that is because when startups begin they have nothing to lose and so liability containment is automatic whereas in corpo..."
Legacy Companies and Innovation
Ries compares legacy companies to grown-up startups, highlighting the similarities in their struggles with innovation. He discusses how both types of organizations can benefit from leveraging their historical knowledge while also needing to adapt to new market realities.
"okay if I reanimated the go of Alfred Sloan who created that who invented this system in the 1920s for General Motors and he brought it back to life and I showed him your org chart he'd be like you're..."
The Role of Founders in Corporate Culture
Ries emphasizes the importance of founders in maintaining a company's innovative spirit as it grows. He contrasts companies with active founders who can inspire creativity with those where founders are long gone, leading to a disconnect in the organizational culture.
"the point where like I'll have the same I have that exact same meeting with two different companies on the same day and I'm like disoriented if I didn't it's like the furniture wasn't real I wouldn't ..."
Misalignment of Incentives in Corporations
Ries discusses the detrimental effects of misaligned incentives in large corporations, particularly how short-term stock price focus undermines long-term innovation efforts. He reflects on his experiences at GE, illustrating the disconnect between boardroom decisions and ground-level operations.
"think about the like go Learning and Development and training and orientation like all of those skills and tools are incredibly valuable if you can repurpose them for this and startups tend not to hav..."
The Long-Term Stock Exchange: A New Paradigm
In this segment, Ries introduces the concept of the Long-Term Stock Exchange (LTSE), which aims to align the interests of long-term investors with those of companies. He discusses the need for a new social contract in corporate governance that prioritizes sustainable practices over short-term gains.
"it's very pernicious you don't really understand it in the moment of me i only only just got see it in retrospect now like the quarterly focus and it's just like the absolute focus on short term stock..."
Redesigning Corporate Governance
Ries elaborates on the mission of the LTSE to transform corporate governance by creating rules that support long-term thinking. He emphasizes the importance of changing decision-making processes at all levels to foster a more sustainable and equitable business environment.
"sec license and registered yes congratulations thank you very much tell us about the long-term stockings George called the long-term stock exchange LT se and it has been a I started out it's just kind..."
The Financial System's Flaws
Eric Ries discusses the inherent flaws in the financial system, particularly how transaction fees drive trading volume at the expense of company stability. He highlights the mystery behind regulatory changes that favor increased trading volume over sustainable business practices, questioning the motivations of those in power.
"have that grant we take it very seriously but the way that stock exchanges and the broader financial system historically have been run is through transaction fees so trading volume drives the financia..."
Redesigning Corporate Governance
Ries emphasizes the need for a new approach to corporate governance that prioritizes long-term sustainability over short-term market expectations. He argues that the current quarterly treadmill of meeting market demands leads to systemic issues like inequality and environmental degradation, advocating for a multi-stakeholder perspective.
"NASDAQ and do you see that fixation on and we talk about you know being a private company that it is an advantage but and that you know cuz of the facilities of the public markets but do you see overc..."
The Purpose of Corporations
In this segment, Ries explores the evolving purpose of corporations, questioning their obligations to various stakeholders, including employees, shareholders, and communities. He references historical ideas from the lean revolution, stressing that a corporation must not exploit its suppliers or employees to succeed.
"corruption seeps in so if we can change that decision-making just a little bit to be more sustainable more long-term but also more multi-stakeholder so we're having like a massive debate in our societ..."
Shifting Corporate Mindsets
Ries reflects on the recent shift in corporate mindsets, particularly the Business Roundtable's statement on multi-stakeholder governance. He expresses surprise at this change, noting that it marks a departure from the traditional shareholder-centric view, and discusses the implications for corporate accountability.
"so what could what could the shareholder value do for all that so so like it has this kind of like basic errors I think that I've kind of seeped into corporate thinking that are reversible like they'r..."
Long-term vs. Short-term Governance
Ries addresses the challenge of balancing short-term pressures with long-term goals in corporate governance. He critiques the extremes of governance models and advocates for a more balanced approach that incorporates political philosophy to create sustainable business practices.
"CEOs are doing it but on the other hand with a lot of these pledges and groups and stuff there's also this question like well so what like what are they gonna do okay fine it's ledge but then like wha..."
Innovative Governance Models
In this segment, Ries introduces the concept of a new governance model that emphasizes principles over rigid rules. He explains how this model aims to ensure accountability and operational impact while allowing companies to align with stakeholder interests.
"what you might call long tourism right so Silicon Valley sometimes gets criticized for you know doula you know empowering puts so much power in the hands of a single individual that they are in some w..."
Unexpected Support for Change
Ries shares his experiences of garnering unexpected support for his governance ideas from various stakeholders, including pension funds and sovereign wealth funds. He reflects on the initial skepticism he faced and how perceptions have shifted over time.
"tourists it's just like citizens and tourists are two different categories of people and that's perfectly fine and that doesn't mean that we should treat either of them disrespectfully but just the ru..."
The Journey of a Startup Founder
Ries discusses his return to startup life after writing extensively about entrepreneurship. He reflects on the challenges and expectations he faced, contrasting the nostalgic view of startup struggles with the reality of navigating a new venture.
"voting rules for corporates like a very very polarized world of ideological people tell a micelle we we've tried to go peacefully in that in that rule and I cannot said like unless people want to know..."
Tech's Role in Innovation
Ries provides a broader perspective on the role of technology in driving innovation and societal progress. He acknowledges recent challenges in the tech industry but maintains an optimistic outlook on long-term trends in health, literacy, and global inequality.
"this you can imagine them people I talk to you before I decide to start this company for real were like a very negative I mean people and especially people out here I mean in San Francisco like this i..."
Nostalgia vs. Reality in Entrepreneurship
Eric Ries reflects on the challenges of entrepreneurship, contrasting the nostalgic memories of past struggles with the harsh realities of current experiences. He discusses how the pain of pivots and failures can become romanticized over time, leading to a disconnect between the idealized past and the present challenges faced by entrepreneurs.
"thing was it's one thing to write about these ideas but in your mind's eye your memory they'd become nostalgic so I've been writing about how hard it is be an entrepreneur and the pain a difficulty ab..."
The Evolution of Technology's Role
Ries discusses the initial optimism surrounding technology and innovation, recalling the early days of the internet. He highlights the shift in perspective regarding the impact of technology, questioning whether the rapid pace of innovation is always beneficial and emphasizing the need for introspection in tech development.
"like to be back in the midst of it that was actually it's very bracing but I think it's gonna tell feel yeah you just become someone who just talks about something all the time like you eventually lik..."
The Dark Side of Innovation
In this segment, Ries expresses his concerns about the irresponsible use of technology, particularly by major companies like Facebook. He reflects on the consequences of unchecked innovation and the moral responsibilities that come with technological power, urging for a more thoughtful approach to tech development.
"yeah I mean yeah it's been it's been a bad a bad few years for tech what so I mean so zooming way way way out I'm still very optimistic because like as darkest things seem at the moment like if you lo..."
The Need for Accountability in Tech
Ries critiques the lack of accountability in tech companies, particularly in light of Facebook's past actions. He emphasizes the importance of having systems in place that ensure the ethical implications of technology are considered, advocating for a culture of responsibility among tech leaders.
"grow up mm-hmm which has become more mature as we come to grapple with the effects but even still and I'm like I'm not an especially idealistic person like I don't you know I don't expect a lot from o..."
Concerns About Artificial Intelligence
Ries shares his thoughts on the emerging field of artificial intelligence, expressing concerns about its potential misuse. He argues that the focus should not be on hypothetical scenarios of AI gaining consciousness but rather on the current implications of empowering humans with AI tools, especially in authoritarian contexts.
"know it's like the tobacco companies all over again they knew and they didn't care that's very disappointing do you have I mean we're sort of at the beginning of artificial intelligence and we've talk..."
Reinventing Civic Institutions
In this segment, Ries discusses the transformation of traditional civic institutions in the face of technological advancements. He argues that many institutions have lost their relevance and emphasizes the need to consciously design new systems that incorporate civic virtues to avoid societal pitfalls.
"like we have to get serious about this like if you think about like the major Civic institutions that govern our lives like what what are the following institutions have in common right hotels schools..."
Breaking Habits for Innovation
Ries shares a story about a corporate executive who learned to foster innovation by changing his approach to team reviews. He emphasizes the importance of asking the right questions to encourage learning and adaptation, illustrating how small changes can lead to significant shifts in organizational culture.
"even get into political parties but like we don't have them anymore we don't need them except in every one of these examples like when we replace political parties with whatever we have now when we re..."
Learning from Market Misalignment
Eric Ries shares a story about a sales manager who faced disappointing quarterly sales numbers in a new European market. Instead of reprimanding him, the manager learns valuable insights about the market's unique characteristics, emphasizing the importance of understanding local conditions and adapting strategies accordingly. This segment highlights the necessity of learning from failures and the critical role of market research in innovation.
"product that they've just introduced to the market this European market and he's calling with bad news sorry boss we've missed our numbers and the guys like well I knew what to do I might why are you ..."
Transforming Meeting Dynamics
In this segment, Eric Ries discusses how changing the way meetings are conducted can lead to better communication and information sharing. He reflects on the importance of asking the right questions and creating an environment where team members feel comfortable sharing critical insights. This approach can transform organizational dynamics and foster a culture of openness and innovation.
"from the start and you then he was like well how do you know and you don't think I've been biessing him he was sniffed it out he's like I got reams of data for you're like this is what customer and he..."
Accountability in Innovation
Ries emphasizes the significance of accountability in fostering innovation. He suggests that individuals should establish commitments with peers to report on their progress with experiments and new ideas. This segment underscores the need for a structured approach to innovation, where inspiration is coupled with accountability to ensure that ideas are acted upon and not lost in the busyness of corporate life.
"you down a path to good stuff and then the other thing is that if at any moment including now or any other time you find yourself to be inspired to try one of these new things the critical thing inspi..."
Mentorship and Learning from Mistakes
Eric Ries reflects on the mentors who influenced his entrepreneurial journey, highlighting the importance of learning from others' mistakes. He discusses how great management thinkers have shaped his understanding of innovation and transformation. This segment illustrates the value of mentorship in navigating the complexities of entrepreneurship and the continuous learning process involved.
"it up to questions from the audience as well hey Eric so as an entrepreneur and an author yourself is there a particular author entrepreneur that inspired you in your career in your Altima trajectory ..."
The Challenge of Product Development
In this segment, Ries addresses the challenges organizations face when developing new products. He discusses the need for a clear understanding of market demands and the pitfalls of assuming that existing success will translate to new products. This highlights the importance of aligning product development with customer needs and the iterative process of innovation.
"like really the student of like taiichi ohno those who know Toyota Production system and history of Toyota you know Deming I was talking about before people who had faced kind of historical moments li..."
Balancing Top-Down and Grassroots Innovation
Eric Ries explores the delicate balance between top-down directives and grassroots innovation within organizations. He explains that successful transformation requires both executive support and grassroots experimentation. This segment emphasizes the interplay between leadership and employee engagement in driving meaningful change and innovation.
"full again and I was like now we're gonna get to the one topic I'm actually interested in this topic how do you know what the new product should be to keep them back to refold and I like turn the page..."
Incentives and Organizational Change
Ries discusses the role of incentives in driving organizational change, emphasizing that financial incentives alone are not sufficient. He highlights the importance of creating a culture where employees feel they have a stake in the outcomes of their work. This segment delves into the complexities of incentive design and its impact on fostering a culture of innovation.
"program or something like that to something that's maybe more organic if I could of course to the organization it's a really it's actually a really good question and it's easy to get it wrong like I'v..."
The Role of Organizational Structure
In this segment, Ries addresses how organizational structures can hinder or facilitate innovation. He argues that traditional hierarchies often stifle entrepreneurial activities and suggests that companies need to adapt their structures to support innovation. This highlights the need for organizations to rethink their frameworks to encourage creativity and responsiveness.
"and it's eradicated so if you go too long just in the grassroots level it's not effective so the way I conceived it and I try to make this framework more formal in this sort of way is that in the firs..."
Creating a Culture of Entrepreneurship
Eric Ries emphasizes the necessity of recognizing entrepreneurship as a legitimate function within organizations. He discusses how current structures often marginalize entrepreneurial efforts, leading to a disconnect between innovation and corporate goals. This segment advocates for creating pathways for entrepreneurial activities to thrive within corporate environments.
"that's a really big question that's very difficult to answer quickly I'll do my best so there's there's a couple pieces to this the first is incentives really matter but incentives are not just financ..."
The Importance of Psychological Ownership
Ries explains that true engagement in innovation comes from employees feeling a sense of ownership over their work. He discusses how psychological ownership can be fostered through various means, including equity structures and recognition of contributions. This segment highlights the critical role of employee motivation and agency in driving successful innovation.
"transmission can't stick the organizational structure change yes yes I think I think we have to build a new org chart because today in most corporations entrepreneurship is not a recognized function s..."
Integrating Agile Practices Across Silos
In this concluding segment, Ries discusses the need for integrating agile practices across different organizational silos. He illustrates how each department may have its own iterative processes but emphasizes the importance of cohesive collaboration for overall corporate success. This segment underscores the necessity of breaking down silos to enhance customer-centric innovation.
"you that's a good question thank you very much for your time really interesting one thing I think a couple days ago you spoke about agility in Germany that's true but you didn't have any voice my voic..."
Overcoming Silo Mentality
In this segment, Ries addresses the internal conflicts that arise within organizations as different departments vie for control. He discusses the need for a unified approach to innovation that transcends departmental boundaries, emphasizing the importance of collaboration over competition.
"design decisions but then you zoom out again you're like but wait a minute how does work product flow from silo to silo oh no it's just a straight line from here low the design thinking people build a..."
Redefining Progress in Innovation
Ries critiques traditional metrics of progress in software development, arguing that focusing solely on lines of code can lead to wasted efforts. He advocates for a broader understanding of progress that includes validated learning and financial impact, which can unify diverse teams under a common goal.
"know that so I think that like and when I when I give a talk to like a group of designers sometimes I'll get the question the audience isn't this just design thinking but repackage for the engineers w..."
The Human Element in Modern Work
Ries reflects on the historical shift from craft production to mass production, emphasizing the loss of worker connection to their work. He argues that as society moves towards automation, the focus should shift to harnessing human creativity and ensuring that jobs are meaningful and collaborative.
"franca that can work across the whole organization it has to be denominated in what you know insert terms we would call validate learning which is a way of of translating these abstract ideas like lea..."
Creativity in the Age of Automation
In this thought-provoking segment, Ries discusses the impending societal shift where routine jobs are automated, leaving roles that require creativity. He stresses the importance of leveraging this creativity to address societal challenges and warns of the potential unrest if this opportunity is not seized.
"I haven't I mean I'm thinking about it right now I do think that's right I think there was something really essential that was lost in the transition from craft production to mass production and it ha..."