Handling risk like a startup: Lean project management

We examined risks very closely in our last class and I can’t think of a better example of risk in project management than those experienced at a startup. As an entrepreneur venturing out on your own, or with a small group, building up a business is a process of trial and error. You can become really passionate about an initial idea but once you’re out in the field talking to customers it may become obvious that the idea doesn’t solve their problem. Then it’s back to the drawing board!

Hopefully this realization occurs before you’ve arranged the people and resources needed for the business. Otherwise all the investments you’ve made can become a sunk cost. Many startups today follow a lean model where failure is incorporated into the project. Instead of starting full production on a product, prototypes (or a minimum viable product) are used to get feedback on the product’s functionality. A few, hundreds, or thousands of prototypes may be scrapped in the process. Dyson’s vacuum technology took 5,127 prototypes to get right (Dyson, 2011). Therefore, by testing and retesting ideas before fully going to market, entrepreneurs can mitigate the amount of risk they take on and get to know their customers better.

How can we apply the startup approach to project management?

Some projects, especially event-based, don’t allow for testing or mock runs. It would be extremely costly to simulate a concert in a particular location along with all the vendors that are scheduled to participate. Yet there are a few key elements from startups that can be applied to project management settings.

  • Address risk early and often
  • Monitoring relevant metrics
  • Continual learning and acceptance of failure

First, consider addressing risks early on. Even if this can’t be in the form of a prototype the project should be exposed to risks and tested. For example, does the project have enough designers to complete a new mobile app? Estimates may not be enough in this case. Instead the project manager could have the designers solve a small task (subset of the problem or project) together within a limited timeframe to test their capabilities as a team. Additional risks may crop up as a result of their collaboration together.

Next, identify metrics that relate to risk. Stakeholders are often focused on budget and deadlines but there are other ways to measure a project. Why not tie metrics into risks that were identified at the outset of a project? In class we discussed the case of Futuronics which carried a greater amount of risk due to their industry and future-oriented products. If the company was able to quantify risks, they could better report on them and gain stakeholder and sponsor attention (Feldman, 2012). For Futuronics, metrics could include number of competitors looking to enter the industry, amount of patents into similar technologies, or number of qualified engineers throughout the country.

Lastly a project’s risks should be considered in terms of the overall team and organization culture. If learning and failure are not embraced then it can be harder to have conversations about risk. When the message from the top-down is “We’ve been doing this for years and it’s the right way!” there are natural blockades to identifying and handling risks in projects. Furthermore failure can lead to insights in a project that were not initially considered.

Questions to Consider:

  • What is the most challenging risk you’ve faced in a project? Did you have a contingency plan?
  • Would you be able to put the three elements, mentioned above, to action on projects in your company?



Dyson, J. (2011). James Dyson: In praise of failure. Retrieved from http://www.wired.co.uk/news/archive/2011-04/11/james-dyson-failure

Feldman, J. (2012). Project Management Gets Lean. Retrieved from http://www.informationweek.com/applications/project-management-gets-lean/d/d-id/1102570?

6 thoughts on “Handling risk like a startup: Lean project management

  1. “If learning and failure are not embraced then it can be harder to have conversations about risk.” I think this point is so key! No matter how well you plan you will experience failure at one point or another. There are always going to be things that are out of your control. The power here is in how you recover from it. I work on a volunteer board and, while the first two elements are easy to implement and get everyone on board with, continual learning and acceptance of failure is the hardest sell. It’s hard to break the, “we’ve always done it this way” mentality and it’s also hard to say let’s give it a shot, even if we fail. I believe it takes some seasoned experience, and both prior fails and successes to build up the resistance to learn from the fail and grow. Great thoughts Alecia!

  2. Working in the online retail business, we are constantly dealing with risk and we operate at such a fast pace that mitigating risk can be difficult. The most challenging risk I’ve encountered at my current company is dealing with new development intended for the holiday season – especially Black Friday. In attempts to one-up the “next guy,” we are often charged with creating a new and interactive experience that entices our customers to buy from us, and we are usually not given enough time to complete the project even after providing estimates – it’s just nature of the business.

    Our contingency plan has generally been a stripped down version of the desired experience but if we have to use the contingency plan, we have failed to deliver. So far, we’ve been luckily and not had to resort to our contingency plan but it has meant many long hours and high stress.

    As developers, we address risk as soon as we can and as often as we can. Keeping the lines of communication open is critical to a successful release. We often base our risk metrics on time and functionality – what do they want and when do they want it. But, I think we could do a better job of tying in the industry response and focusing on the core competencies that make an experience a success.

    We do a pretty good job of learning from mistakes but we do not do a good job of accepting failure. It generally is not seen as an option.

  3. I agree with you regarding the importance of addressing risks early, monitoring relevant metrics, and implementing a cycle of continuous learning. By addressing risks early, you may be able to make adjustments without having to learn through failure. While you may not be able to go through a complete dry-run of the project, some sample testing may prove to be valuable in assessing and making adjustments for risk.

    Metrics are critical, especially when the project is very large or spread out amongst multiple sites. Without metrics, a project manager would have no practical method of measuring progress. Picking the right metrics is important. If you monitor the wrong metrics it could lead to bad decision making.

    No matter how much planning you undertake, the nature of projects is such that mistakes will be made. How you respond to the mistakes is what often determines success or failure. Formalizing this process in a cycle of learning ensures you capture and share the lessons so they are not repeated.

  4. In events, we spend a lot of time on risk. While not all risks can be mitigated, we do our best to have a contingency plan for as many as possible. For instance, we have umbrellas for guests in case it rains, we have an ambulance on site for large events, and we have back up speakers in case our main speakers are delayed. However, we cannot account for all risk. If the caterer burns dinner, we don’t have a back-up. As you stated, it would be too costly. I do think your three bullet points are very important. We do think through every element and try to reduce as much risk as possible

  5. When I think of entrepreneur I think of risk. While you might be able to mitigate some of the risks associated with the early stages of the company life cycle, the early stages are the most risky. At that stages there are no guaranteed customers, most of the capital is coming from the the start-up members and friends. Taking on that risk is what could eventually leads to the benefit of owning your own business.

  6. Your post brings back memories of a variety of major risks we have encountered within my company both on projects that have been “done many times before” and on new ventures (for example, entering a newer market with a new service).

    Although we are a mature company in the HR Outsourcing space, I was involved in a project which felt very much like a start-up: we were looking to capitalize on an opportunity that may have been well positioned for our capabilities — the State Health Care Exchanges based on the Obama health care legislation. Since we administer benefits for small, mid-size and large clients, and have well-established relationships with health plan carriers like Blue Cross, Aetna, and others, this was something our leadership team wanted to at least tackle. They formed a small team who worked closely together to “pilot” and sell the idea to prospective clients (i.e., states) who were interested. Ultimately, the management of risk occurred in these ways:

    * Address risk early and often – risk was addressed early on by committing few resources to this matter, and putting the most passionate and best sales people at the forefront of it all to test the market

    * Monitoring relevant metrics – we closely monitored the metric which mattered the most: how many clients have we ‘sold’ these services to.

    * Continual learning and acceptance of failure – we continuously learned from sales debriefs (from client feedback), and looked to apply those learnings as we responded to the next RFP. We knew we’d fail and lose many of the sales chases, but were focused on learning as much as possible what didn’t work.

    In the end, this market opportunity wasn’t the right one for our capabilities, so this small team was discontinued. The risk was managed by committing limited resources and the right amount of time to confirm if this new service offering was viable or not. Despite the fact it wasn’t viable, the people involved in this project learned a lot from it, and took these learnings to their day to day work in our Corporate Exchanges business unit.

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