Lean Enterprise - by Joanne Molesky, Barry O'Reilly and Jez Humble - Part I
Posted on July 15th, 2016
This book covers a lot about transforming a traditional enterprise into a newer, more suited Lean based company. It covers from finances to portfolio management going throught adoption, technical practices and lot more.
The book is long. And tiring. But full of very valid useful bits of knowledge.
Broken down in 4 parts, it starts by covering culture, strategy and how innovation starts and evolve in a group of people. Part I is probably the most interesting and exciting one even though it’s not the one that brings the most novelty. The concepts in there are essentially the same as the ones found in Mary Poppendieck’s books and in Eric Ries’ Lean Startup. A bunch of the stories, like the, now traditional, joint venture between Toyota and GM at NUMMI factory are also shared. Despite that, some of the conclusions formulated in this book are easier to grasp here rather than in other books. Since the book is quite long and there is a lot of learning in it, I’m gonna break down the review for each part of the book.
For Part I, the most important learnings are:
- The Principle of Mission is meant to replace the old Command and Control.
This comes from warfare knowledge and a few modification for the enterprise from The Principles of Product Development Flow by Donald G Reinertsen. The idea is that, in realms of high uncertainty, it is best to specify the desired end state, its purpose and as few constraints as possible. The people on the ground close to the action are best suited to make the best decisions to achieve that goal because they can react to the existing conditions much faster than any chain of command can.
- Portfolio management needs to account for the high variability of looking for new ideas.
The key idea here is the concept of an option that is pretty common in financial markets. Essentially, you’re paying now for a chance of finding a great deal or minimizing your losses if you don’t. In that mindset, the authors advocate for a portfolio management process that allows for some investment in innovation while minimizing the risks for the company. They break investments down in three categories. Horizon 1 focuses on the currently established and explored opportunities. This is your current business and needs to bring value within the year. Horizon 2 is looking at tomorrow’s cash flow. It’s businesses that are growing well and steadily and may become your companies’ cash flow in 2 or 3 years from now. Finally Horizon 3 is looking at the following 3 years for options on the future businesses that your company might want to invest then.
And I’ve since published Part II.