Fortune

TEACHING A GIANT TO THINK LIKE A STARTUP

To stay competitive, Fortune 500 companies need to be as nimble and creative as Silicon Valley unicorns. In an exclusive excerpt from his new book, Eric Ries, the bestselling author and consultant, describes how he taught 125-year-old General Electric to embrace “The Startup Way.”

Entrepreneur Eric Ries rose to prominence by teaching startups how to adopt the best practices of big, global companies. Today he’s also teaching huge companies how to behave more like the upstarts.

He began his entrepreneurial career while still a Yale undergrad, and his mixed track record at multiple companies stoked his curiosity about what ideas separated the winners from the losers. His exploration of that topic led Ries to embrace “lean management”—the concept, made famous by Toyota and other Japanese manufacturers, that any business process that isn’t focused on delivering value to the customer is, ultimately, a waste of resources.

In his 2011 book, The Lean Startup, Ries applied lean-management thinking to entrepreneurship. He urged founders to spend less time chasing funding and building epic-scale business plans, and more time soliciting feedback and harvesting data to make sure the product they were building met a real need that would drive customer demand. Ries also went a step further—arguing that big, bureaucratic companies needed to adopt similar approaches to evolve and sustain their own growth.

The Lean Startup became a business-school staple and a blockbuster—it has sold more than a million copies—and Ries has gone on to advise dozens of companies of all sizes. In a new book out this month, The Startup Way (Currency/Penguin Random House, $30), Ries draws on his experience to describe how Fortune 500 companies can adopt a culture of “entrepreneurial management.” In this edited excerpt, he recounts how he persuaded managers at General Electric, a 125-year-old, 300,000-employee behemoth, to embrace a different kind of thinking.

ON A SUMMER AFTERNOON, a group of engineers and executives at one of America’s largest companies met in a classroom deep in the heart of their sprawling executive training facility to discuss their multi–$100 million, five-year plan for developing a new diesel and natural-gas engine. Their goal was to enter a new market space; excitement was running high. The engine, named Series X, had broad applications in many industries, from energy generation to locomotive power.

All of this was very clear to those assembled in the room. Except to one person, who had no prior knowledge of engines, energy, or industrial product production and was therefore

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