Thursday, August 1, 2013

On Goals That Matter

Defining your goal is the first significant waste-avoidance measure of any start-up.

Part of my effort to catching up the full chain of thought behind the Lean Start-up philosophy, I am reading just now an older book, "The Goal" by Dr. Eli Goldratt.

The book, written as a novel from a main character's perspective, addresses the problem of defining overarching goals for an enterprise so that they immediately relate to everyone in the organization.

The main character's conclusion is that those goals are (in a manufacturing context, in the book):
- maximization of throughput
- minimization of inventory
- minimization of operating expenses (i.e. overheads)

While I'd argue that an overarching goal would be to maximize shareholder value (or stakeholder value, if you're more into the modern theories), I agree that this set would be a common-sense proxy for shareholder value maximization.

+Ash Maurya (my favourite Lean author) is about to publish a new book called "The Customer Factory" (I am really looking forward to this!) and one of the striking statements there is the following:

"Everyone is in the manufacturing business"

I love this quote - the goal of any value-chain process is to manufacture happy customers:
Customers pay you - they bring revenue.
Satisfied customers pay you more - they bring a healthy margin.
Happy customers pay you most and refer you to others - they are your growth engine.

So how do you translate the three manufacturing goals to a service business in a lean start-up philosophy?

Here's my take:
- minimization of customer friction: make it easy and fluid for your customer to use and get benefits from your service, automate your client workflows - this way you use your servicing capacity faster and increase your throughput;
- minimization of waste: write the minimum amount of code, iterate (instead of plan) your business model scientifically (make intelligent assumptions about what drives your customers happy and validate them through experiments), maintain a minimum batch of work to focus on what matters most to the customers.

More to come :-)

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