There have been many voice criticizing GE for investing in Fastworks. More so with the recent news of the company’s stock being at a historical low.
Essentially, GE Fastworks was the first time a legacy blue chip company fully committed to doing lean innovation at scale. And sceptics of the lean startup methodology together with ‘conservative Wall Street analysts’ now have the best reason to say: “Look! This whole lean thing is not working. Especially in large companies”.
Many justifications can be given to GE’s poor stock performance. Stanford professor Steve Blank though, made one of the most eloquent. Blank concluded, in his HBR article, that: “In hindsight, GE Fastworks wasn’t the problem at GE. And while Predix Cloud has had a painful birth, GE’s investment in the industrial internet of things and lean methods will pay off in the future. But the impact of future innovations couldn’t compensate for poor execution in its traditional businesses. GE’s board was not happy with the company’s margins and stock price, or how Wall Street viewed its future. The immediate threat of a proxy fight with an activist investor forced a decision on the future direction of the company.”
The entire ‘lean in the enterprise is not working’ is false narrative or an excuse to justify complacency in the face of change. Finding a scapegoat for poor stock price performance in a company’s innovation program is like saying you would need to cut on your health insurance contribution because you want to have more money in your checking account at month’s end.
Measuring the success of innovation programs
A better conversation about GE, Fastworks, stock prices and, in a wider context, the corporate startup movement would be to talk about measuring a company’s ability to create options for long term growth.
Eric Ries already made the case for a long term stock exchange.
But I would like to talk about how we measure an innovation’s program impact and a corporation’s ability to create sustainable growth.
Corporate innovation sceptics say that ‘lean is not working’. I can’t help but asking how can one tell if a lean innovation program is working or not without looking at:
- What was the number of ideas the company launched before the program was in place and after?
- How many ideas made it to market or were adopted by the business units before before the program was in place and after?
- What was the company’s cost of innovation before the program was in place and after?
- What was the company’s new ideas’ time-to-market before the program was in place and after?
- What was the company’s learning (and experiment) velocity before the program was in place and after?
- What was the company’s revenue from ideas launched in the previous 3 years before the innovation program was launched? how does that compare to revenue generated by the ideas that graduated from that respective program?
Before one has answers to the above it will be hard to conclude if lean innovation management is actually failing or not.
And this is not the end of the story.
Ecosystem, indicators and ambidexterity
Gone are the days where a company’s growth was hanging on the success of one product. Growth in a company of GE’s proportion is not a single individual’s job or a single entity’s responsibility. We need to talk about corporate ecosystem design. If Fastworks did everything right and the growth needle didn’t move; maybe the questions need to revolve around GE’s ability to capitalize on the opportunities the program delivered. And this conversation should touch on corporate governance and a process of ‘cashing in’ innovation options.
This brings the conversation to the topic of growth indicators and formulas. Despite our society’s technological and know-how advancement we still seem to be quite conservative when it comes to measuring growth.
The most commonly used indicators are still very much focused on a company’s ability to exploit existing business models. Totally neglecting its ability to search and capitalize on new growth avenues. Looking at Tesla, it’s becoming apparent how outdated are some of our traditional business metrics.
In summary, growth is a ecosystem task and failure to move the needle should not rest solely on the shoulders of a department/program. Likewise, traditional business metrics shouldn’t be discarded. But their bias towards exploitation should be acknowledged. Hence, complementary new metrics need to be developed and adopted.