Experimentation supports vision

Eric Ries on the experimentation (short term) vs. vision (long term) paradox

The following quote excerpt is from Eric Ries (for the full quote, see below). Ries is renowned for his Lean Startup book and movement, and is now Founder and CEO of the Long Term Term Stock Exchange (LTSE). I heard this listening to Eric’s interview at the Code 2019 conference:

Ezra Klein, the interviewer, asks Ries:

“There’s a very heavy emphasis on tight, measured loops….[At Vox Media, as founder,] there were a lot of things that I cared about which I couldn’t measure….I’m curious how you think about how the cult of measurement and metrics, and [how] managing against metrics connects or conflicts with short-termism.”

Ries answers:

“…Metrics are there to support vision, not to replace it…the purpose of [metrics, minimal viable products, etc.] are that when you’re in the “flat part of the hockey stick” with something new, you need to find out: What are the leading indicators of future growth that help us know we’re on the right track?

My take: how the solution to this paradox relates to work prioritization

I absolutely love Ries’ solution to this paradox. In my own work life, short term and long term almost always appear to be at odds, but Ries’ ideas help bridge that gap. On days when I’m feeling courageous, my preferred workplace posture is to say, “let’s work on the things that will drive business value in the long term, always.”

That’s not easy. And I definitely don’t feel courageous enough to hold to that every day. Most days I feel dragged into short-termism because of board-driven KPIs and targets, lack of product/R&D resources, surrounding company culture, or some combination of factors.

I believe that practically, there are specific decision-points of how teams & individuals do (or don’t) bring vision through experimentation into their work. And that ultimately comes down to prioritization, for example choosing to service a single existing client that’s at risk of churning before working on a marketing campaign that could drive dozens of new clients. Or it might mean prioritizing a user experience oriented project that boosts brand equity, which might translate to future revenue, but can’t be measured in any meaningful way right now.

My hypothesis on this approach—thinking and prioritizing long term over short term; and leveraging experimentation in the present to help guide the long view—is that the business will get rewarded for prioritizing the choices are more likely to show sustained growth over long periods of time. And the short-term growth might be a little more bumpy, but by taking the long and high road, and by making significant investments when required; most short term time periods will be healthy, too.

Example: Abbott & the Blue Plans

The following quote is from Jim Collins’ Good To Great: Why Some Companies Make the Leap… and Others Don’t:

“…One particularly elegant method for [managing short-term pressures] came from Abbott Laboratories, using a mechanism it called the Blue Plans. Each year, Abbott would tell Wall Street analysts that it expected to grow earnings a specified amount—say, 15 percent. At the same time, it would set an internal goal of a much higher growth rate—say, 25 percent, or even 30 percent. Meanwhile, it kept a rank-ordered list of proposed entrepreneurial projects that had not yet been funded—the Blue Plans. Toward the end of the year, Abbott would pick a number that exceeded analyst expectations but fell short of its actual growth. It would then take the difference between the “make the analysts happy” growth and the actual growth and channel those funds into the Blue Plans. It was a brilliant mechanism for managing short-term pressures while systematically investing in the future.”

Full Eric Ries quote from the Code 2019 conference:

“You would think that in a company which was intensely short-term, metrics-driven, quarter-to-quarter, [where] everything was buttoned-down and highly-disciplined, that everything would go fast…

But if you actually study companies, you would notice that those behaviors actually slow everything down. [The highly-disciplined companies] become bureaucratic and slow. Why?

[With] the companies that have a reputation for going the fastest—[for example…], the worldwide cycle time leader is someone like Toyota with the “Toyota Production System”—they have this incredibly long-term oriented philosophy that you would think would make people go slow…

I think the resolution to the paradox is as follows…

If everything has to be measured quarter-to-quarter; if you can only do the things that you can measure; then there [are] two kinds of projects in the world that you need to do:

  • there are projects that fit nicely and neatly into [a] one quarter boundary and can be measured in one quarter,
  • and then there’s “other”

And we know we have to do some “other” projects, [for example…] we need to do a Salesforce implementation…there’s just always one of those monster IT projects going on at any given time…that’s clearly an “other” because we can’t implement Salesforce in just one quarter….

Metrics are there to support vision, not to replace it…the purpose of [metrics, minimal viable products, etc.] are that when you’re in the “flat part of the hockey stick” with something new, you need to find out: What are the leading indicators of future growth that help us know we’re on the right track?

…[Experimentation] tries to help people with hypotheses…

If you don’t have any hypothesis, and you’re [approach is to]…throw whatever at the wall will stick, and whatever will make the metrics go up, you’ll be selling pornography in no time.”

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