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A Startup Inside a Fortune 500 Company? The Nordstrom Innovation Lab

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Commonly, when we think of the word startup, we think of those "two guys in a garage" tinkering, inventing, and changing the world. Big companies, by contrast, are supposedly sclerotic, bureaucratic, and doomed to fail at innovation. I believe this narrative is false, and that companies -- even large, established ones -- can foster disruptive innovation, if they are willing to adopt the right process and mindset. This is one of the claims in The Lean Startup that is most often met with skepticism. Seeing is believing, so rather than try and convince you, take a look for yourself.

Nordstrom is currently ranked #254 on the Fortune 500 (yes, I looked it up) with over $9 billion in revenues. Scrappy startup they are not. And yet they face the same competitive pressures that are causing every modern company to take a long, hard look at the process they use to innovate. Anyone who has read The Innovator's Dilemma knows just how hard it is for a company that has been successful to invest in potentially disruptive innovations.

JB Brown is the manager of the Nordstrom Innovation Lab. He has been working inside Nordstrom to accelerate their process of innovation. Nordstrom sent a camera crew to document the Lab at work. When I saw the rough cut of the videos they were producing, I knew they would be a powerful teaching tool. It's one thing to talk about "rapid experimentation" and "validated learning" as abstract concepts. It's quite another to see them in action in a real-world setting.

Below, you'll find two videos: one about the lab, and one containing a case study of the team at work. Watch as they build a complete app (to help sell sunglasses) in exactly one week. They walk into the store not knowing what would be most useful to build. But with the help of customers, salespeople, managers -- and a healthy dose of experimentation -- they're able to figure out an answer and execute it in a matter of days.

Here are some highlights that I found especially interesting:

  • One-week iterations. One of the hardest things about corporate innovation is breaking through the slowness that is the default speed for most initiatives. The Nordstrom Innovation Lab solves this problem by working in one-week increments. In the second video above, you'll see them build an entire new product in one week end-to-end.

  • Genchi gembutsu. This is one of my favorite concepts from the Toyota Production System. It translates roughly as "go and see for yourself" -- it's the Toyota version of "get out of the building." By talking face-to-face with customers, salespeople, and managers in a physical store, the innovation team is able to identify an opportunity that they can execute against extremely quickly. But they go beyond simply "getting out of the building" -- they actually set up shop physically in a retail store for the entire week. They build products, test new features, and get feedback all out in the open. You really have to see it to believe it.
  • Simple, rapid, experiments. I hear all the time that developing for iOS, with its myriad approval delays and deployment obstacles, means that you can't use rapid development techniques on that platform. Yet in the video you'll see this team overcome that bias with a little ingenuity. They simply brought two iPads with them. While the app is in development, the sales team is using one iPad, and the developers are working on another. At every break, the sales team swaps iPads with the developers -- always using the latest version of the app. (The same technique works with paper prototypes, too.)
  • Have questions for JB and the rest of the Nordstrom Innovation Lab team? Post them as comments, and I'll try to get them answered.

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