Why Big Corporations Need Lean Startup Techniques: A Path to Innovation and Growth

Rui Lourenço

24 November 2023

In the rapidly evolving business landscape, the mantra “adapt or die” holds more weight than ever. 

Blackberry and Yahoo serve as a stark reminder: failure to innovate can lead to obsolescence. Regardless of size.

In the meantime, it has become increasingly common to witness a startup, now and then, completely revolutionise an industry. Spotify. Netflix. Tesla.

Historically, large companies enjoyed a lifespan of around 61 years, a figure now drastically reduced to less than 18 years

This trend signals an alarming rate of corporate mortality, with entities like Enron and Lehman Brothers serving as cautionary tales of stagnation and collapse​.

More than 50% of established corporations are now expected to leverage lean startup techniques at the business level to increase the pace and success of business transformation. 

Which is no surprise to me. At Altar.io, we’ve witnessed a surge in interest from major corporations eager to imbue their operations with startup agility and efficiency. 

This pivot towards Lean Startup methodologies, famously articulated by Eric Ries, emphasises validated learning, iterative development, and customer-centric strategies. 

While these principles are synonymous with startups, their relevance and potential benefits for established corporations are undeniable. 

In an era marked by digital disruption and fiercely heightened competition, this strategic adaptation is not just prudent but critical for survival and growth.

The consequences for companies that don’t embrace adaptability are stark. And even probable; McKinsey predicts that by 2027, 75% of companies currently quoted on the S&P 500 will have disappeared, succumbing to buyouts, mergers, or bankruptcy. 

Lean innovation, characterised by a focus on efficiency, customer feedback, and minimising waste, empowers companies to rapidly develop, prototype, learn, and iterate on their product offerings. 

This approach centred on a “build, measure, learn” feedback loop, allows for quick discovery of what works and what doesn’t, leading to the creation of products that customers truly want. 

All of this to say, while lean methodologies are commonly perceived as the modus operandi exclusively for startups, this approach holds immense value for large corporations as well.

Here’s a full exploration into why…

Contents

A Special Thank You…

…To Adil Kurt-Elli for his contributions to this article. His insights have been a valuable addition, enhancing both the depth and clarity of this topic. It's been a pleasure collaborating with him on this piece.

Iteration vs Reputation

For startups, the concept of iteration runs to the core of the business strategy. Without the overhang of a legacy business and a brand reputation, it is relatively risk-free to pull at the various threads of a product’s development and see what unravels.

The equation is somewhat different for established companies. Here you have a loyal customer base with clearly defined expectations on the product quality and value. If a new product launch is subject to rollback, there is usually some form of retention risk. 

Take for instance the approach of Tesla. There is an active program of both software and hardware iteration. The first release is often buggy or lacking some qualitative elements resulting from manufacturing defects. 

These should not be seen as the same as recalls for single issues that are seen from time to time with all automotive manufacturers. These are sometimes fundamental issues.

However, Tesla has put itself out as a disruptor and developed an almost cult-like status around early adoption and the necessary “shared pain” of iteration. 

Now compare that with VAG (the parent company of brands such as Volkswagen and Audi). The solid, conservative brand reputation for quality underpins its entire business. To iterate to the same extent runs reputational risk which can cost market share.

It now becomes a nuanced discussion on whether a company should iterate or adopt an incremental development strategy. Both are agile models, but incremental development is more conservative by its nature. It builds on a previous version and can allow for a more stable product outcome at each new release.

A prime example of this strategy is Apple. The tech giant epitomises the essence of incremental development in both its software and hardware realms. 

Apple’s approach, characterised by evolving its product lines with meticulous, step-by-step enhancements, exemplifies a masterful application of incremental improvements over sweeping overhauls. 

This is evident in the successive iterations of every product in their lineup, where each new release is a refined version of its predecessor, focusing on enhancing user experience, boosting performance, and fine-tuning design.

In the realm of software, Apple’s incremental strategy of their various operating systems is also clear. Regular updates, while not radically altering the core, gradually introduce new features, security improvements, and performance optimisations. 

This method ensures that changes are manageable and risks are minimised. It’s a testament to the power of building upon a stable base rather than reinventing the wheel with each update.

Apple’s incremental development is also largely driven by user feedback – another core aspect of the Lean Methodology. 

This feedback loop enables Apple to align its improvements with users’ needs and preferences, ensuring that each new version resonates with its customers.

It’s a strategy that not only mitigates risk but also maintains a consistent and familiar user experience across its product ecosystem. This consistency is crucial for user retention and satisfaction.

Adopting an iterative approach must be measured in context with the culture of the original business. It needs to build on the current status quo rather than a full strategic pivot.

However, as we can see from the example of Apple, big corporations can still benefit from implementing Lean Startup strategies in their day-to-day operations. 

Fostering a Culture of Innovation

Innovation is the lifeblood of any organisation, and Lean Startup principles can help facilitate a culture of innovation within large corporations. 

A prime example of this can be found in the transformation of Adobe Systems, a software giant with a history of traditional product development. 

In 2012, Adobe shifted its model from selling boxed software to a subscription-based service, Adobe Creative Cloud. While not a startup in the conventional sense, this move required a startup mentality. Adobe adopted Lean principles and reimagined its business model. Their teams embraced rapid experimentation, short release cycles, and most importantly, the readiness to pivot.

The results were astounding. Adobe was able to increase its innovation pace and bring cutting-edge features and products to market much faster. 

The subscription model also enhanced customer engagement. This transformation, stemming from Lean principles, illustrates that even the largest and most established corporations can benefit from Lean Startup techniques to foster a culture of innovation.

Rapid Product Development

Lean principles drive rapid product development. 

Airbnb, the peer-to-peer vacation rental platform, is an exceptional example of how a startup, leveraging Lean methods, turned an idea into a global business phenomenon. 

When Airbnb began in 2008, the founders tested their concept by creating a simple website and renting out air mattresses in their living room. 

This initial MVP allowed them to gather feedback and learn about user preferences. They continued to iterate and expand their offerings. Airbnb’s Lean approach enabled the company to enter new markets quickly and offer a highly personalised customer experience, resulting in its current status as a global giant in the hospitality industry.

Large corporations, like General Electric (GE), have applied similar principles. In 2012, GE initiated its “FastWorks” program, directly inspired by Lean methodologies. This program shortened product development cycles, eliminated unnecessary processes, and improved cross-functional collaboration.

The outcome was impressive: GE brought a new product, the Durathon battery, from concept to market in just two years, half the time it would usually take. It’s a testament to how Lean principles can expedite product development, even for established conglomerates.

Daniel, CEO of Altar, Product and Software development company specialising in building MVPs, full custom software development projects & creating UX/UI that is both functional and beautiful
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Resource Efficiency

Startups, with their constrained budgets, know the value of resource efficiency. 

A case in point is Dropbox, a cloud-based file-sharing service. Dropbox initially created a demo video showcasing the product’s functionality before building the full platform. This video not only attracted interest but also provided early user sign-ups to validate the concept. This allowed Dropbox to gauge demand, reduce the risk of resource waste, and make more informed decisions about product development.

Large companies, too, can apply these resource-efficient methods. Procter & Gamble (P&G), a consumer goods giant, adopted Lean Startup principles in product development. 

When creating the Swiffer, a revolutionary cleaning product, P&G launched it in test markets and gathered customer feedback. This approach enabled them to make adjustments and refine the product according to user preferences. The result? A product that swiftly gained widespread popularity.

Customer-Centric Approach

Being customer-centric is a mantra of Lean Startup methodologies. For large corporations, shifting to a more customer-focused approach can be challenging, but the potential benefits are immense. 

One remarkable example is General Motors (GM). GM was struggling with a decline in sales and an ageing customer base for its Cadillac brand. By adopting Lean principles, GM reimagined the Cadillac CTS. They listened to customer feedback, involving them in the design process and making adjustments based on their preferences.

This customer-centric approach led to the development of a vehicle that not only appealed to existing customers but also attracted new, younger buyers. By heeding their customers’ input, GM was able to rejuvenate the Cadillac brand and regain lost market share.

Risk Mitigation

Startups inherently operate in a high-risk environment. This risk can be managed by applying Lean principles emphasising iterative development and learning from failures. For example, Dropbox’s Lean approach, as mentioned earlier, helped mitigate the risk of developing a product without a confirmed demand.

Large corporations that adopt similar practices can reduce risks associated with launching new products. 

Toyota, a massive multinational corporation, is known for its application of Lean manufacturing principles. By focusing on iterative development and fostering a culture of continuous improvement, Toyota can minimise the risk of producing vehicles that don’t meet market demands or suffer from quality issues.

Agile Decision-Making

The data-driven decision-making advocated by Lean principles is an invaluable asset for big corporations. 

Google, a renowned giant in the tech industry, illustrates the significance of this approach. 

Google encourages its employees to experiment, and many successful products, including Gmail and AdSense, emerged from employees’ 20% time. This policy allowed employees to dedicate 20% of their work hours to projects of their choice, fostering a culture of experimentation.

By analysing data gathered from these projects, Google made informed decisions about which products to develop further. They adjusted their strategies based on user feedback and market data, which was vital to their growth and ongoing success.

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Implementing Lean Startup Strategies in Big Corporations

Lean Startup techniques present an advantageous framework for established corporations looking to innovate, develop products efficiently, focus on customer needs, and mitigate risks. 

The examples of Apple, Adobe, Airbnb, General Electric, Dropbox, Procter & Gamble, General Motors, Toyota, and Google emphasise the transformational power of Lean principles when applied to large-scale enterprises. 

The message is clear: Lean Startup techniques offer a powerful route for big companies to adapt, innovate, and secure their futures in a rapidly evolving business environment. 

By adopting Lean methodologies, these corporations can ensure they are not only adaptable but leaders in the industries they operate in. This transformative approach is not about reinventing the wheel but about embracing agility, data-driven decision-making, and a customer-first mindset to stay competitive and drive growth.

To implement Lean principles within a large organisation effectively, here are some key strategies:

Embrace Cross-Functional Collaboration

Large companies have the advantage of cross-functional teams and resources. Encourage collaboration between departments to break down silos, share insights, and swiftly pivot when necessary. For example, Procter & Gamble brought marketing, engineering, and design teams together to develop Swiffer effectively.

Dedicate Resources to Innovation

 Allocate time and resources to experimentation and innovation. Google’s “20% time” policy allowed employees to explore ideas freely, leading to innovations like Gmail and Google News.

Create an Iterative Culture

Foster an environment that values experimentation and rapid iteration. Encourage teams to test ideas, gather feedback, and use data to make informed decisions. The Lean principle of Build-Measure-Learn should be a central aspect of your development process.

Listen to Customer Feedback

Actively gather and utilise customer feedback to refine products and services. General Motors, as mentioned earlier, reinvigorated its brand by listening to customer preferences and making the necessary adjustments.

Minimise Bureaucracy

Lean Startup methods prioritise efficiency and minimise bureaucracy. Streamline decision-making processes to adapt to changes quickly. Toyota’s success in the automotive industry is partly attributed to its dedication to Lean manufacturing principles, which emphasise eliminating waste and enhancing efficiency.

Data-Driven Insights

Invest in data analysis and tools to gather insights into customer behaviour and market trends. Google’s success can be partly attributed to its commitment to data-driven decision-making.

Encourage Intrapreneurship

Support employees who have innovative ideas and create avenues for them to explore these ideas. Internal entrepreneurial ventures can lead to significant innovations.

The Future of Lean in Large Corporations

As the business landscape continues to evolve rapidly, Lean Startup techniques provide a reliable roadmap for established companies to navigate this transformation. By adapting and integrating Lean methodologies, large corporations can continue to be drivers of innovation, customer-centricity, and efficiency.

Incorporating Lean principles into the corporate framework is not merely an option; it’s a necessity for survival in an increasingly competitive and agile business environment. To stay relevant and thrive, big companies must not only adopt Lean methodologies but also foster a culture that values experimentation, embraces change, and continuously learns from customer feedback.

The success stories of Adobe, Airbnb, General Electric, Dropbox, Procter & Gamble, General Motors, Toyota, and Google underline the pivotal role of Lean principles in fostering innovation and driving growth. These organisations serve as living proof that established corporations can employ Lean Startup techniques to innovate, create, and flourish in the face of change.

In conclusion, Lean Startup principles have transcended their startup origins to become a beacon of transformation for large corporations. By implementing Lean methodologies, these companies can navigate the ever-changing business landscape, remaining agile, innovative, and customer-centric in a world where adaptability and innovation are the keys to enduring success. The Lean revolution knows no bounds, and big companies that embrace it are destined to shape the future.

Thanks for reading.

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Rui Lourenço
Partner & CMO
Rui is a partner and CMO at Altar.io. He’s been dedicated to B2B marketing for his entire professional career. After spending eight years honing his craft at Portugal’s first B2B marketing agency, he joined Altar, where he leads both the marketing and sales department under the same umbrella. His current focus is on business strategy, getting to know Altar’s customers and occasional early-stage strategy discussions with the entrepreneurs we work with.

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