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  • Writer's pictureJohn Welsh

Eric Ries on the difference between an old-fashioned and a modern company

Updated: Feb 7, 2018

The Lean Startup author turns his attention to how corporates can grow by learning the entrepreneurial principles of a startup in his new book The Startup Way. In this excerpt, the crucial differences...

"AN OLD-FASHIONED COMPANY is founded on steady growth through prescriptive management and controls and is subject to tremendous pressure to perform in short-term intervals such as quarterly reports.

"A MODERN COMPANY is founded on sustained impact via continuous innovation, and focused on long-term results."

"AN OLD-FASHIONED COMPANY is made up of experts in specialised functional silos, between which work passes in a stage-gate or waterfall process that sends projects from function to function with specific milestones tied to each handover.

"A MODERN COMPANY is made up of cross-functional teams that work together to serve customers through highly iterative and scientific processes."

Book launch: Eric Ries in conversation with Techcrunch journalist Ingrid Lundgren and signing my copy of The Startup Way at a Tech Nation Talk , London, November 2017.

"AN OLD-FASHIONED COMPANY tends to operate huge programmes.

"A MODERN COMPANY operates rapid experiments."

"AN OLD-FASHIONED COMPANY uses internal functions, such as legal, IT and finance, to mitigate risk through compliance with detailed procedures.

"A MODERN COMPANY uses internal functions to help its employees meet their goals of serving customers, sharing the responsibility to drive business and results."

"AN OLD-FASHIONED COMPANY prioritises even highly uncertain projects based on ROI, traditional accounting and market share. To measure success, project teams track and share numbers designed to look as good as possible ("vanity metrics") - but not necessarily to reveal the truth.

"A MODERN COMPANY attempts to maximise the probability and scale of future impact. Project teams report and measure leading indicators using innovation accounting. In a for-profit context, this goal often follows Jeff Bezos' advice to "focus on long-term growth in free cash-flow per share" rather than traditional accounting measures."

"AN OLD-FASHIONED COMPANY is full of multitasking: meetings and deliberations where participants are only partly focused on the task at hand. There are lots of middle managers and experts in the room to give their input, even if they don't have direct responsibility for the implementation. And most employees are dividing their creativity and focus across many different kinds of projects at the same time.

"A MODERN COMPANY has a new tool in its arsenal: the internal startup, filled with a small number of passionate believers dedicated to one project at a time. Like Amazon's famous 'two-pizza team' - no larger than you can feed with two pizzas - these small teams are able to experiment rapidly and scale their impact. Their ethos: 'Think big. Start small. Scale fast.'"

Here's the whole interview with Eric Ries by Ingrid Lundgren at the Cass Business School.

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