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Peter J. Sherman

Lean

What You Can Learn From Startups

As your business grows, don’t throw out the innovation with the uncertainty

Published: Wednesday, August 17, 2016 - 13:20

As organizations become successful and grow, uncertainty is generally the enemy. Thriving organizations seek to eliminate variation and increase efficiency. They identify best practices and policies, and design standard operating procedures. Such efforts can make a business wildly efficient at what it does, but they can have a serious downside as well: a dearth of variation, creativity, and innovation.

As a lean Six Sigma Master Black Belt working for several large and medium-sized organizations, I’ve always been taught to strive for efficiency, standardization, and predictability. These were my guiding principles, and it made perfectly good sense to follow them in that environment. But now that I’ve started my own process improvement consulting practice, I find these principles don’t readily apply. Instead of seeking stable, predictable processes, I’m actually embracing the uncertainty that’s required in a startup. How ironic! The ability to create, improvise, adapt, and innovate is proving to be my best ally. I’m learning to embrace uncertainty in terms of how I develop my service offerings and grow the business.

Launching a new business involves creating something new and valuable. It’s inherently uncertain. There are no regular work routines or paychecks, and very little structure. But when this startup uncertainty is eliminated as the business grows, the windows of opportunity can be overlooked. I saw this firsthand with my previous employer. We became so efficient at provisioning T1 circuits that we missed the bigger opportunities of broadband and the cloud that customers were expecting.

In my startup, I’m consciously creating variation, not eliminating it. I value diversity, adaptation, and flexibility over the relentless pursuit of efficiency. There’s something pure and more direct about surviving as a startup in the business world. Whether it’s in-person meetings, impromptu conference calls, hand-delivered letters, or late-night emails, you’re connected directly to your customers in ways most employees of larger organizations never get an opportunity to do. Nothing cuts through the noise better than direct customer contact to understand the voice of the customer. Although exhausting at times, it keeps you mentally sharp. I know that I must continuously provide value to my customers—value they’re willing to pay for.

So what types of uncertainties have I embraced as a new business owner?

Cognitive ability is more important than IQ

I’ve discovered that my ability to learn on the fly, quickly process information, and pull together disparate ideas and trends are what count.

Let’s face it: No one is an expert in everything. For example, healthcare is a new industry for me and seemed out of reach. After attending an ASQ workshop on the “Future of Healthcare,” reading the Affordable Care Act (all 957 pages), and visiting some local hospitals, I put together a credible training program and was able to secure a couple of hospital contracts. Recognizing that many of my clients are part of a supply chain and not focused exclusively on Six Sigma, I joined APICS and became a Certified Supply Chain Professional. Now I’m able to speak and understand their language of demand forecasting and inventory management, and appreciate what a “resilient” supply chain really means.

Follow the Golden Circle

The Golden Circle, developed by Simon Sinek, offers a nontraditional approach for creating demand by focusing on the why, how, and what, in that order. Historically, I would focus on the what and how first (and skip the why) when proposing a new improvement project, developing a new service, or going after a new client. In retrospect, this approach hindered me more often than not because I was looking at the world from my perspective, not the client’s. “Why” provides context to your audience and helps to motivate them. I generally frame the “why” in terms of the cost of doing nothing, which is the cost of sitting on your hands and allowing a problem to persist (aka, business as usual). “How” is walking your audience through the approach or process to get to their goals. For me, “how” is establishing the link between training and projects to get the most value. Only after I have gone through these first two steps do I describe the “what”—our specific product offering (see figure 1). This nontraditional approach really works.


Figure 1: Golden Circle framework. Click here for larger image.

Fail fast, but fail cheaply

I’m constantly experimenting in my business, whether it’s the product, how we promote it, where we target opportunities, or how we price our services. It’s the only way to learn. For example, I started out trying to get consulting contracts the traditional way—responding to requests for proposals and networking with other consultants. I quickly learned that “teaching customers to fish” (i.e., training) resonates better than traditional consulting. Another example: I was convinced that personalized letters to CEOs would be the best way to get business. Wrong. It turns out that middle management is our best target audience.

I also learned that traditional lean Six Sigma training curriculum geared for manufacturers doesn’t resonate with technology, healthcare, or service organizations. Accordingly, I’ve designed customized curriculums for those audiences. In marketing, I’ve learned how to conduct A/B tests to determine which drip marketing campaign is more effective in terms of unique click rates. I also learned that 40 percent of my success could be attributed to my offering, another 40 percent to the quality of the target customer list, and only 20 percent to things I thought were critical like wording, font size, and graphics. I learned that the best promotion can come from the most unlikely sources, like volunteering in a professional organization in the community, or inviting individuals who are in job transition to attend our training at no cost.

Collaboration is not an option—it’s a necessity

Few startups have the resources they need, neither can they do everything in-house. Recognizing this fact, I’ve forged relationships with key constituents to help scale my operation. Examples include professional organizations like the ASQ, APICS, and the Technology Association of Georgia. Fortune 500 companies with which I’ve partnered include Bank of America, Coca-Cola, GE Power & Water, Siemens, Synovus, and UPS. Local government partners include school systems, chambers of commerce, and economic development offices. Sure, it means giving away a portion of the revenue, but the pie is getting bigger.

Volunteerism really works

Volunteering means spending a lot of time without financial compensation. But the rewards come in different forms. Volunteering to train nonprofit organizations like the American Cancer Society and Georgia’s Newton County School System in lean Six Sigma is a way to connect with my community. It gives me an avenue to serve others. I generally make a practice of inviting a couple of individuals in the community to our training events at no cost (e.g., people who are in job transition or those who deserve to be recognized for their performance in our community).

Final words

If uncertainty offers so many advantages, does this mean there’s no role for stability and predictability in business? Clearly, there’s a need to balance both traits. The danger lies in focusing on one to the exclusion of the other. As a realist, I know my own business will ultimately reach a point where efficiency plays a larger role in managing growth. I also wonder whether creativity is a matter of nature or nurture. Is it genetic, or can it be learned? Certainly Albert Einstein and Akio Morita are proof that some people are naturally born with the ability to innovate and create.

As for me, I’m convinced it can be learned. The most radical way I embrace uncertainty is by thinking like 8-year olds who don’t carry around the mental baggage of adults. They have no preconceptions of how things work. They are direct, ask lots of questions, and are naturally curious. They tell you what’s on their mind and freely admit what they don’t know. This sets them free. Adults can have a hard time admitting what they don’t know, and that mentally hijacks us. Learning to admit what I don’t know has set my mind free. It allows me to focus on my true passion—helping individuals and organizations learn to think differently and grow. 

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About The Author

Peter J. Sherman’s picture

Peter J. Sherman

Peter J. Sherman is a managing partner of Riverwood Associates, a lean Six Sigma certification training and consulting firm based in Atlanta. Sherman brings more than 20 years experience in designing and implementing process improvement programs. Sherman is a certified lean Six Sigma Master Black Belt, an ASQ-certified quality engineer, and an APICS-certified supply chain professional. He holds a master’s degree in engineering from MIT and an MBA from Georgia State University.