Lean Risk Lesson 1 – Understand Risk

80% of company startups fail in their first year – they are born into extreme uncertainty and are usually based on some serious assumptions that are often flawed.

The Lean Startup is a blog that became a book that became a philosophy, guiding startups and also change and innovation within established companies.  It promotes good risk management without ever saying as much – the concepts, however, are the same.  For starters:

#1 – Understanding: you cannot be sure you understand any part of a business problem unless you have witnessed it or have evidence to support your understanding.  This is summed up in the Toyota approach to innovation by the term  “Genchi Gembutsu” which translates as “Go see for yourself”.

The 2004 Toyota Sienna was developed under Chief Engineer Yuji Yokoya.  The main market for the Sienna (a people carrier or mini-van) is North America, and Yokoya had little experience of it.  So, he went on a 53,000 mile road-trip around USA, Canada and Mexico, hiring the existing model of the Sienna in towns and cities, and talking to and observing customers of the product.  He found that kid-appeal was the most important thing – kids use two-thirds of the vehicle and they clearly express what they like and what they don’t like.  So Yokoya spent a lot of the budget on internal comfort for kids.

As a result, the 2004 Sienna boosted market share for Toyota and outsold the previous version by 60%.

Data Source:  Fortune Magazine, The Lean Start-Up – Eric Ries.

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