Principle 3: Efficiency!

Lean = Efficient. Lean’s origins are in companies where you have to make big change with very little money. Which means you have to do everything else we’ve covered in this chapter—test hypotheses, engage customers, develop iteratively—as efficiently as possible, or else you’ll run out of money before you’ve discovered how to grow and sustain your innovation, and then you will go out of business.

But efficiency is even more important to lean startups in the social sector because there’s often more at stake when a social innovation fails than when a business one does. In 1991, I was director of environmental quality for the City of New York. The agency’s budget regularly exceeded $2 billion per year, and that same year the agency was fined $750,000 (less than 0.05 percent of our total budget) by the state for the pollution we’d imposed on the Greenpoint/Williamsburg community through delay in cleaning up a major sewage treatment plant.

Fines against the city were usually left with the city to be spent on vanity projects that staff at agencies picked out. In a major departure from this practice, we convinced the state to force us to spend the money for the benefit of the same community we had polluted. In effect, we would empower the community with its own capacity to understand environmental conditions and independently verify the city’s compliance with environmental laws and standards: we would conduct the first comprehensive, community-based, cross-pollutant environmental assessment in the United States.

We were pretty scared—because failure was not an option. At the end of the project, the community had to be better off, and the only other option on the table was to rebuild a billion-dollar sewage treatment plant from the ground up. Customer development hadn’t crystallized as a widespread practice yet, but that’s pretty much all we did. We met with community members, we made educated guesses about what they needed, we implemented them, and then we started that process all over again based on their feedback.

Despite the fact that we were one of the largest city agencies, we were aware from the beginning that we had to be super-efficient to pull this project off. The competing pressures of the project—diverse community demands, regulatory pressure from the state, budget constraints from City Hall, and the fact that several of the most egregious polluters were other state and city agencies as well as our own agency—meant that we had to show results despite limited time and money.

As nonprofit and government practitioners of lean startup iterate their way toward solutions, they face a number of pitfalls that a steady focus on efficiency can help them avoid. First, rather than being distracted by all the competing demands for innovation that arise in situations like the one I faced, the principle of efficiency forces teams to keep the discipline of building and testing to the smallest possible goal that will advance the innovation. Efficiency means making the leanest possible solution work, and the minimum viable product and customer development are tools for efficiently testing an innovation.

Second, as lean startup projects iterate and pivot based on what they are learning, they face budgetary and political/social constraints on how much they can really experiment. Keeping efficiency front and center kills these two critical birds with one stone.

Efficient spending on the smallest useful tests extends the financial runway for the innovation, giving change-makers more chances to innovate repeatedly on the limited budgets available for new initiatives in government and nonprofits. A focus on efficiency makes it easier to keep stakeholders like foundations, oversight committees, and the public in the loop on why you’re making the choices you are.

Time is the enemy of all great innovations, and efficiency buys you the time needed to pivot until you’ve found the engine of change you’re looking for. In the private sector/lean startup world, small companies use a tool called innovation accounting that tracks how much each experiment costs and seeks to drive down the very cost of experimentation itself. A truism that applies to governments and nonprofits as well is that the only real limit to making your vision come true is the number of pivots you have left.

One early finding in our work in Greenpoint was a potentially elevated level of stomach cancer. A local Hasidic rabbi in fact simply ordered his congregation not to procreate for fear of bringing children into its risk-laden environment. As I mentioned earlier, running out of pivots in Greenpoint/Williamsburg was not an option.

The Greenpoint/Williamsburg Environmental Benefits Project, as it would come to be called, eventually succeeded in addressing many community concerns and, more important, giving residents a sense of real control over their hazardous environment. It developed a comprehensive, community-based monitoring and assessment system that led to a number of further innovations in urban sustainability across that community and the country.

When you’ve got an impossibly big goal with impossibly small resources, efficiency in design, in experimentation, in spending, and in myriad other dimensions is absolutely essential to achieve success.