Is Your Nonprofit Really Ready to Use the Lean Startup?

So, you’ve read The Lean Startup by Eric Ries. You’ve been following Beth Kanter’s outstanding blog. And you recently attended a Lean for Impact gathering in your community. You may have even read my SSIR piece on what it really takes to achieve scale in the social sector. You’re fired up, and ready to radically transform your nonprofit into a living embodiment of lean principles and to conquer breakthrough change. YOLO!

You arrive at work with 10 copies of The Lean Startup book and ask your team to read it. You then convene a series of meetings to talk about how the transformation will begin now that everyone understands what a minimum viable product is, and how important it is to practice rapid iteration and validated learning.

And then … nothing really changes.

In fact, your organization may be even less productive. People may struggle through this new way of working to satisfy your request, while they simultaneously pursue their old work style.

If this has happened to you, take heart: You certainly are not alone. Yet a disappointing start is no reason to abandon lean principles as a way to get better at doing good. Understanding the methodology is the easy first step. The hard part requires that leaders foster the culture, competencies, and systems that truly lean-driven enterprises need to leverage the value of this approach to work.

The lean methodology is quite simple. You establish a hypothesis about how to solve a problem and build the most minimally viable way to test that hypothesis. Taking a lean approach to work means that you continually learn from constant iteration toward a solution that really works—even if that means starting over.

This approach allows you to invest as little as possible in early, often faulty attempts at solving problems. By failing as quickly and as cheaply as possible, you get to the right answers more quickly and cost effectively. This provides a massive opportunity to expand the impact and efficiency of the social sector.

But be warned: It's hard to do this well. Truly embracing and using the lean principles requires strategic clarity, tremendous discipline, and the trust of everyone involved.

We have embraced the lean principles at our own nonprofit, EARN, with the aim of scaling our work from serving thousands in our first decade to serving 1 million in our second 10 years. I also teach these principles in my class on social sector strategy at Haas School of Business. These experiences have illuminated four critical questions that organizations considering this methodology should answer thoughtfully:

1. Will your team, funders, and board be excited about failing forward?

   Can you afford to fail?
   
   Quickly discovering that your approach to solving a problem is wrong is cause for full-fledged celebration. This discovery lets you pivot toward the right answer faster. The idea of “failing forward” always sounds like a good idea when someone else does it, but it can be a different story when you and your colleagues are the ones failing. Honestly assess whether your board, team, and funders can embrace this way of working. Even if they seem to agree intellectually, not everyone will welcome it in practice. Many traditional streams of revenue, such as government funding, can present challenges as you integrate lean principles; governments generally don’t provide funds that allow for the sort of flexibility required to take a lean approach to problem solving. Boards also, as a rule, don’t love “failure.” EARN’s board grasped the value of this new approach, but getting their buy-in was a challenge at first; it required that we clearly articulate how the lean principles would make us more effective at achieving our mission.

2. Does your organization have the right systems in place?
   
   Using this approach requires that management information systems capture and process data clearly and quickly. It needs to be very easy for end clients to provide data and for your staff to access clean data fast. Organizations need this feedback to assess whether the assumptions undergirding its work are valid, need adjustment, or are way off base. If capturing data, for example, requires that your clients and staff manually complete forms and enter that data into a database, you should consider it a red flag.

3. Will a lean approach work in your organizational culture.
   
   You may devise a brilliant strategy to cleverly, inexpensively test a new program or product. You may invest in state-of-the-art management information systems that will quickly produce actionable data. But you may still fall short—culture eats strategy for breakfast seven days a week. Have you established norms that will support a lean approach? For one thing, you need a staff comprised of curious, relentless problem solvers who can embrace failing forward and not fall prey to measuring bogus “vanity metrics,” as Ries calls them. Focus on building the culture you need before investing in the other elements that bring lean to life.

4. Can you stand the heat?
   
   Are you really ready to drive change and take risks? If you plan to lead this kind of transformation, take stock of your capability and willingness to make the full investment of time, emotion, and leadership that it will require of you. How will you handle losing some big funders who won’t fail forward with you? How will you feel if—or rather, when—you have to let go of long-tenured team members who can’t adapt? Tread carefully if you aren’t willing to face these sorts of possibilities.

After a decade as one of the largest US microsavings providers, we at EARN decided that our impact was out of whack with the size of the American economic security problem and that we needed to expand the number of lives we changed for the better. It has taken two full years to transform our organization—culturally and structurally—from a mostly in-person service and product delivery organization, to one that strategically leverages technology and lives the lean principles every day.

Our reward, however, has been well worth the challenge. EARN just launched a new online Firefly Savings Account, which helps low-income workers build a habit of saving in 6-12 months. Using the lean principles, we plan to test our ideas about what it takes to get people to save regularly and pivot accordingly. I look forward to sharing our adventures in failing forward and hope you’ll consider doing the same.

Read more stories by Ben Mangan.