Using Lean Startup to Prioritize New Ideas at Ericsson

By Steven Melendez |  June 24, 2016

Some big companies wrestle with ways to get employees to generate new ideas, but that’s not the issue at Ericsson, says Ken Durand, the Head of Innovation at the telecom tech giant’s Atlanta Idea Factory.

Instead, the challenge is deciding which ideas to prioritize based on their economic viability — something the company has been approaching with the lean startup methodology, with its emphasis on talking early to potential customers and testing prototype products with them.

“We have way more ideas than we can possibly implement, so one of the reasons that we’ve really focused on the lean methodologies was because we need a way to evaluate whether an idea was worth doing.”

Here’s a slide that Durand uses in explaining to colleagues what the lean startup metholodogy is:


Searching for ‘Smart City’ Opportunities

One recent example began about a year ago, at an initial whiteboard session planning a possible push into “smart city” technology, using Internet-linked sensors and other devices to improve municipal services.

“We said, ‘Everybody throw out some things where you think the municipal or city space is woefully behind technologically,'” says Durand. “So we just threw on the board [everything] from traffic and parking and waste management to energy and air quality.”

But to decide which ideas to further develop, Durand and his colleagues looked for thematic areas where they already had contacts who might serve as initial customers. That ultimately led to a water-quality monitoring project where Ericsson was able to work with a local environmental group to quickly roll out a prototype wireless monitoring tool. The project, with wireless connectivity provided by AT&T, began testing earlier this year. (See the video below.)

“You approach your projects based on which ones can you do the fastest, cheapest, and with the least amount of time and resource effort, because you want to get through the process of understanding whether it has merit as quickly as possible,” Durand says.

Focusing on 30-day Outcomes

Ericsson may be a tech-focused company, but it’s also a 115,000-employee business with about $29 billion in revenue that traces its history back more than a century, and its employees are often accustomed to thinking in long timeframes, compared to Silicon Valley startups. But for the projects he oversees, Durand wants to teams producing testable results in faster periods.

“We try very hard to focus people on thirty-day outcomes: what are you going to do in the next thirty days, and at the end of that thirty days, how are you going to prove to me that you’ve progressed?” he says. “And we look at it from, you’ve either progressed, you’ve stayed neutral, or you’ve regressed, every 30 days — and you can only regress so many times before the project will be canceled.”

The most critical first steps are establishing that there’s authentic demand for a potential innovation, then finding a smallest viable market where the product can be tested and refined, Durand says. While those may sound simple on paper, Durand says there can be a tendency in a big organization to rely too much on internal research and institutional knowledge, rather than gathering input and doing reality checks with the outside world.

“What we found is that we were actually creating our own facts based on our knowledge and internal research, as opposed to gaining evidence-based facts out in the marketplace,” he says. “Understanding the difference between what we know and what we think we know is critically important.”

Below, a slide from Durand emphasizing the importance of facts instead of opinions and other key principles of lean startup.

Use the Tools that Work Best for You

Certain lean startup tools like the business model canvas—a worksheet for laying out the working hypotheses of a project team—proved not to be a good fit for Ericsson, since employees spent too much time worrying about how to fill out each of the form’s boxes.

“We intentionally took that tool away in order to create more chaos,” Durand says. “I know that sounds crazy,  but in a process-centric enterprise that has 140 years of history… everybody kind of thinks about the step-by-step process that they need to take and they work very hard to complete the process, which in a world of the entrepreneurial, it’s not about completing the process, it’s about doing the steps so well that you actually  get the demand and the sales you’re looking for.”

Similarly, getting Ericsson staff comfortable with building minimum viable products—working versions of ideas with the most basic feature set necessary for potential customers to use—has been trying, since Ericsson’s employees are used to the complex and quality-oriented product development processes of a big enterprise company, says Durand.

Durand brings up a quote from LinkedIn founder Reid Hoffman. “He is famous for saying, ‘If you aren’t embarrassed by the first release of your product, then you’ve launched too late,’ and that’s something that we evangelize internally a lot. We have to be okay with the fact that the product isn’t going to be perfect [and] as long as we communicate that with the customer up front, that’s not a problem,” he says. “I’ve never run into a problem where a customer was communicated with, upfront, and agreed that they were taking something in an early release fashion and then they got mad that something didn’t work.”

The Dangers of Scaling Too Fast

Similarly, there’s a tendency to want to scale new inventions quickly, when the company would be better off starting with a small market, and developing the customer base organically without massive marketing or sales support.

“This is something that takes a tremendous amount of discipline—to force the company into a smaller box than what it wants to be in,” he says. “The inherent problem with scaling too fast is you end up trying to [introduce new] features well beyond the ability of your customer base to desire or pay for them, which leads to projects that have millions of dollars worth of expenditure and very small amounts of revenue, so we do everything we can to avoid that.”

Idea Lab Staffers: Practitioners who Also Train

Durand leads a team of seven core employees at the Idea Lab—it’s currently part of the company’s global services organization, though that may change after a July company-wide reorganization—developing projects internally and working with teams working on their own projects throughout Ericsson’s business units. He takes pride in the fact that nobody is training others in techniques they haven’t practiced themselves.

“We’re not only mentoring other people around the company, at the same time we’re also practitioners, which means that we do generate our own ideas and our own projects internally, so no one from the Idea Factory organization ever goes out and works with another team that hasn’t already used the tools and methods and processes themselves,” he says. “It’s not a consulting organization—it’s very much a practice organization, where we deal with these things on our own, and in that way we’re better able to help other people work with them as well.”

If projects build momentum and prove successful, there’s a question of finding the right place for them in the company—or if they’re not a good fit, deciding to spin or sell them off, or simply shut them down. Right now, there’s a mostly ad hoc process where innovation leaders look to stay in touch with internal stakeholders, like leaders of divisions where those projects could find a home, so they’re ready to make the transition when the time comes, Durand says.

“That’s a balancing act, to be honest,” he says.  “Getting too many people involved too early just creates a whole bunch of people that want to say no, so you’ve got to have that balancing act of kind of knowing when you have the proper amount of momentum where somebody will be happy to be pulled in, as opposed to not thinking it’s worth their time.”