Rapid, iterative experimentation process – A ‘Lean Startup-style’ approach to innovation

By: Courtney Wood, Ron Jonash & Mick Simonelli

 

The emergence of disruptive digital technologies and changing customer expectations has made innovation an imperative for companies to remain sustainably competitive and stimulate growth. Realizing the benefits of innovation requires a systematic approach to not only generating novel ideas but converting them to meaningful business value. Rapid, iterative experimentation is critical to effective conversion in that it helps organizations ‘test the goodness’ of their ideas by turning hypotheses into facts and assumptions into validated conditions, thereby weeding out the bad ideas from the good and turning the good ideas into better, high-impact innovations.While many organizations are able to generate ideas, most are not equipped to conduct ‘Lean Startup-style’ experimentation, that is, they are unable to rapidly create solution prototypes and simulate and test outcomes from a customer, competitor, and partner perspective. We recommend organizations establish a ‘Rapid, Iterative Experimentation Process’ to allow them to quickly improve an innovative idea’s probability of achieving its expected outcomes by generating the information needed to iteratively pivot or remain confident in persevering.

The majority of innovation efforts are unsuccessful

Innovation has become the Holy Grail for executives in the 21st century. The advent of technological changes, such as the digital five forces (mobility and pervasive computing, big data and analytics, social media, cloud, and artificial intelligence and robotics), means that companies need to innovate continuously with agility and efficiency if they are to sustain themselves competitively. However, our numerous client interactions, as well as research from a broad array of sources, indicate that a majority of innovation efforts are unsuccessful. The challenge, more often, is not the generation of creative ideas but their conversion into meaningful innovations that stimulate growth in revenue and profitability. Primary reasons for failure include an inability to rapidly and iteratively experiment, by prototyping new solutions and determining business outcomes through simulation and testing of novel concepts.

Innovation is vital to growth

The emergence of digital technologies has made the current business environment one of the most dynamic in history. Figure 1 depicts the changes due to which most executives around the world have made innovation one of their strategic priorities.

ixl-center-innovation-strategic-priority

Companies seeking to expand their market share, enter new product or customer segments, or use emerging technologies to create more compelling customer experiences need to generate and launch innovative solutions faster than their competitors. These solutions may include differentiating services, breakthrough business models, or re-imagined business processes. To do this successfully they need to build the capability to continuously ideate, experiment, and monetize their inventive solutions. Innovation, therefore, requires a systematic yet flexible process to handle its associated ambiguity and uncertainty.

Conventional approaches to innovation fail

Many organizations have increased funding and are putting ‘people, processes, and technology’ in place to create their own engines of innovation. However, they struggle with generating enough of the right kind of ideas, and, perhaps more importantly, quickly and effectively converting them into bigger, bolder, faster, and cheaper innovations that drive significant value creation.

A key reason for this failure is the application of traditional product and technology development, as well as large program management methods, to innovation. These methods involve lengthy sequential processes designed to guarantee results. As such, they are too slow for today’s dynamic marketplace and often reject outright and/or strip from the inspired ideas the very essence that could change the game and contribute most to the top and bottom lines, that is, their ‘innovativeness.’ As a result, companies often fail to swiftly monetize their innovations and maximize overall innovation-driven returns.

The need for rapid experimentation

Generating new ideas and converting them into meaningful business value to support competitive sustainability requires a scalable Lean Startup-style approach. One that quickly and cost-effectively identifies the better ideas in the enterprise’s pipeline and evolves them into great innovations that significantly improve business performance. This approach or ‘Rapid Iterative Experimentation Process’ (RIEP – pronounced ‘reap’) involves the use of solution prototyping, concept simulation, and testing (for example, piloting) to assess and improve the potential of the proposed innovations. RIEP can be used to analyze and convert novel concepts along multiple dimensions such as customer attractiveness, market viability, and technical feasibility. By adopting this Lean/Agile and design thinking-based approach to assessing the value expected to be generated by their new ideas, enterprises can ‘learn fast and cheap’ and thereby optimize their overall investment in innovation.

The RIEP solution

RIEP deploys a combination of people, processes, and technology to practice Lean Startup-style experimentation to improve innovation driven business performance. It features a series of activities to generate the insights and information needed by the investors in innovation (for example, the CEO and Business Unit Heads) to make better decisions about whether to ‘pivot, halt, or persevere.’

ixl-center-innovation-experimentation-process

1) The process begins with identifying the critical value and growth assumptions and risks of the early stage idea or novel concept. These become the hypotheses to prove or disprove using some combination of solution prototyping, concept simulation, and testing. These hypotheses, for example, may relate to the customers’ perceived need for the innovation, the company’s ability to build and monetize the innovation at a reasonable cost, and the competitive response to the innovation’s launch/implementation which affects its sustainability. A major grocery and pharmacy retailer seeking to expand its market into a new community is a case in point. Key hypotheses related to the community’s purchase and use behavior as well as methods to source ‘ambassadors,’ that is members of the local community willing to conduct personal demonstrations relevant to the nutrition, pharmacy, and personal care programs organized by the retailer.

2) After identifying the ‘20 percent of the hypotheses that drive 80 percent of the uncertainty,’ these are broken down into smaller elements (akin to ‘user stories’ in Agile development) around which a detailed experimentation approach and resource plan is drawn up. This experimentation plan typically includes one ‘sprint’ for every element to determine whether that component of the innovative idea as currently envisioned will deliver the expected value. Each sprint lasts one to four weeks and involves a series of ‘value tests’, each taking one to five days. The value tests are designed to deliver the maximum possible data, or insight and information, with the least amount of effort.

3) Some of the sprints may involve solution prototyping to prove technical feasibility and/or to provide the ‘object’ needed to conduct the simulations and tests of the concept’s customer attractiveness and market viability. When IT-driven solution prototyping is used, outputs range from visual mock-ups (for example, PowerPoint presentations) to illustrative software (such as clickable apps to demonstrate the look and feel of a solution) to working software (including functional programs). IT-driven solution prototyping can incorporate any of the following technologies: UX and mobility extensions, workflow and data flow enhancements, heavy analytics, and enterprise software and hardware integration.

4) Most of the sprints involve simulation and testing focused on one or more of the four general areas related to the innovative concept using different techniques and tools:

ixl-center-innovation-4th-point

For example, when considering a new healthier product segment, a major beverage company used concept simulation to better understand customer purchasing behavior, determine distribution channel response, and assess the likelihood of collaboration and preferred relationships with other key players in the ecosystem.

5) The construct of an innovative concept’s unique experimentation plan determines the composition of the RIEP team required. This may include not only internal but external resources such as customers, value chain partners, innovation providers (for example, emerging technology startups), and other ecosystem players such as competitors. Ideally, all RIEP teams execute their specific experimentation plans using a shared technical platform and process playbook designed for distributed and iterative collaboration. While the composition of every RIEP team varies, common internal roles include those of an ideator, idea sponsor/investor, innovation coach (interface between idea sponsor/investor and RIEP team), rapid prototyping specialists (architects, designers, and developers), concept simulation and testing specialists, and other domain and functional experts.

Keys to success

An efficient and effective RIEP implementation requires individuals with an entrepreneurial mindset and competency in solution prototyping and concept simulation and testing, as well as the technologies and tools to conduct this type of experimentation rapidly and iteratively. Therefore, securing the intellectual support and financial commitment from senior leadership is vital for creating and maintaining the capability to maximize innovation-driven business performance while optimizing investment.

Skills and experience valuable to building competence in RIEP generally include having worked for a startup, incubator, or accelerator. For rapid prototyping of IT-driven solutions, competence in Agile development, digital and emerging technology, design thinking, and UX/UI design would be instrumental. For concept simulation and testing, a background in new venture development, business strategy formulation, innovation marketing, market analysis, Lean/Six Sigma, critical thinking, business case development, implementation planning, creativity facilitation and gamification, and role-playing would be very useful.

For the technical platform, solutions to enable rapid prototyping of the ‘touch, feel, and works like’ of the innovative concept are many. The goal is to know which solution to apply when. In addition, using free (for example, Open Source) solutions and provisioning on demand as much as possible, particularly in the early days of establishing an RIEP capability, as the patterns of the enterprise’s innovative idea prototyping needs emerge, is an important consideration.

Realizing value through effective innovation

Whether an organization employs their own RIEP capability or engages a trusted provider with the required competencies and infrastructure, it can expect significant increases in the quality and speed of input for decision making on innovation investments. This in turn will lead to higher returns from their new and novel ideas and business concepts. In particular, enterprises can expect higher innovation performance in the form of revenue growth, increased customer satisfaction, profitability enhancement, shareholder value creation, and ultimately optimized innovation investment.


About the Authors

Courtney Wood
Director, TCS Innovation Management Services

Courtney Wood leads the Innovation Management Services capability at Tata Consultancy Services (TCS). Courtney has spent 25 years in management consulting, supporting both large and early stage enterprises in establishing high-performing growth and profitability engines by developing the right business strategies as well as designing the right business capabilities and executional roadmaps to remain market relevant and fiscally viable in an ever more dynamic and complex world. During the ‘dot com days,’ Courtney was co-founder and chief strategist of a technology-based business incubator that brought promising start-ups into its nest, exchanging new venture development capability for equity.

 

Ron Jonash
Director and Senior Partner, IXL Center

Ron is a senior partner at the Center for Innovation, Excellence, and Leadership (IXL Center) and leads its innovation management practice. He is on the faculty of the Hult International Business School and the Tufts University School of Engineering, and is a partner at a venture capital firm. He is also chairman of the Board of the Global Innovation Management Institute, which establishes standards and provides professional certification for both innovation practitioners and managers. He was previously the founder and managing director of the Innovation Practice at the Monitor Group, and before that was head of Arthur D. Little’s Technology and Innovation Management Practice for over 20 years. Ron is author of the award winning book, The Innovation Premium, as well as numerous other innovation books and articles.

 

Mick Simonelli
Innovation Consultant

Mick is a thought leader on innovation in financial services. He is the former lead innovation executive for USAA, a Fortune 50 Insurance and Banking company, where he built and led their program to best-in-class status. Prior to USAA, he was an innovation and transformation officer for the U.S. Department of Defense.

Government Innovation From Within – 3

UAE Edition. Part 3

INNOVATION IMPACT

By: Rafael Lemaitre, ShiftIN Partners

 

Measuring the impact of innovations is not a straightforward task and is an area of high subjectivity. However, it is important to try to understand the perceived impacts that innovations have within the different entities surveyed. We asked the respondents if their organisations had some sort of mechanism or measurement system in place to assess the results of their innovations and only half of them responded positively. Nevertheless, although at low rates, encouraging signs also emerged as entities were looking at evaluating their innovation process regularly (27.4% fully implemented / 33.5% partially implemented), as well as evaluating the impact of their innovations in terms of outputs and outcomes (25.5% fully implemented / 37.0% partially implemented).

While analyzing the impact of the Most Important Innovations (MII), respondents reported the following set of positive effects as being at the top: improvement of the quality of services, increase in the speed of delivering services and delivering new services. The table below presents the ranking of the positive effects associated with these innovations.

shiftin5

 

 

shiftin8

Important conclusions arise when innovations are transformative in nature and when they are cross-cutting (i.e. they do not involve only one type of innovation). In these cases the impact reported was higher and there was a clear and significant positive association between these variables and the positive effects delivered within the entities.

In addition to reviewing the internal effects on the entities, we also analyzed the perceived impacts that innovations have on outcomes. This analysis does not, of course, imply any causality between innovations and outcomes, but it does give an indication of their association. To this end, we asked the respondents to identify, to their best knowledge, the positive and negative effects of their Most Important Innovation on a set of predefined outcomes.

The results of the analysis showed that the top rated positive outcomes were the increase of the quality of life of citizens and residents and the reduction of negative impacts on the environment. The top “neutrally” rated outcomes were the enhanced access to finance for citizens, residents, and businesses, and the decrease in the cost of living.

shiftIN6

CONCLUSIONS

Through our first analysis of the survey results we have identified actions that entities could take towards improve their innovation process.

At the organisation level, the government entities could exploit their strengths at the front-end of the innovation process and move their efforts to the back-end, setting clear innovation intents/goals (and/or innovation strategies), placing in parallel a careful focus on the role of leadership. Awareness should be created in this role in supporting failure and fostering experimentation, in order to create a culture that encourages innovation.

At the individual level, strong emphasis should be given in the development of senior management capabilities in the balance of risk and innovation. The government entities should build capabilities in the management of innovation and more specifically in the addressing and management of the risk embedded in the innovation process.

In regards to the innovation initiatives, the government entities should prioritize projects that are shorter to materialize in terms of time and in the process adopt the principles of lean innovation. Instead of waiting until the later stages of innovation projects, the focus should be on moving quickly and testing and challenging assumptions at the initial steps of the design and incubation mechanisms. This should help develop the concepts and prototype them in a rapid manner.

Lengthy innovation projects with time horizons of over six months / one year mark should be carefully re-assessed whether or not these should continue, be re-scoped, or abandoned.

Finally, innovations that are cross-cutting and do not have a single focus on improving only one element in the outputs range should be prioritized. This white paper summarizes one of the few quantitative researches undertaken in government innovation in the Middle East and is a first step towards having a more systematic approach of measuring different aspects of how innovation happens and delivers results.

 

OUR PERSPECTIVE GOING FORWARD

shiftIN9

 

 

Methodology Note

The primary research involved 243 questionnaire interviews conducted across UAE Federal entities as well as Emirate level entities. The respondents were, in their majority, middle and senior management personnel. All responses are confidential and data has been disaggregated making it impossible to track individual responses.

The questionnaire was built incorporating lessons learned from other similar exercises around the world, (i.e. Innobarometer 2011; MEPIN 2011; Australian Public Service Commission 2012).The questions were peer-reviewed by experts in the field and were subject to extensive cognitive testing by a group of 35 UAE Government civil servants.

The statistical analysis behind these results included a variety of methods applied (i.e. generalized linear models), more details can be furnished upon request.

 

About ShiftIN Partners:

ShiftIN Partners is a leading strategy management consulting firm focused on helping clients manage strategy and innovation programs that enable the organization to achieve the necessary Shift, working from withIN. ShiftIN professionals have successfully led several consulting engagements worldwide, Partnering with customers in the Government, Utilities & Infrastructure, Oil & Gas, Manufacturing, Healthcare & Pharmaceutical, Financial Services and Telecommunications sectors. 

Government Innovation From Within – 2

UAE Edition. Part 2

INNOVATORS AND THEIR ORGANISATIONS

By: Rafael Lemaitre, ShiftIN Partners

 

During our research we examined various factors at both the individual and organisation levels. For the individuals we analyzed their skills, domain knowledge, risk appetite, and attitudes while at the organisation level we looked at leadership styles, incentives, and processes.
Innovators Characteristics

As mentioned before, innovation goes well beyond the frontend. Our research of the UAE Government entities yields quite interesting results. For example, almost one third of the respondents reported that their entities had innovation champions appointed and innovation teams were in place to steer the implementation. These two concepts are key, making innovation happen relies heavily on having the rightpeople in the right place with the right level of commitment. The existence of identified innovators, well trained and with sound tools, and governance in place can make a large difference.

ShiftIN-government-research

 

Our research also looked at the concept of risk, as it is closely linked with innovation. Risk is present in many stages of an innovation process, from the early stages up to the implementation phase. Pursuing innovation implies a certain degree of risk-taking, which has been identified as a characteristic of efficient innovation managers: risk-averse subjects are less innovative. The risk appetite can shape how individuals pursue (or abandon) innovations. We analyzed the risk appetite of the respondents at a scale from zero (unwilling to take any risk) to ten (fully prepared to take risks). Almost half of them (49%) were concentrated in the seven and eight marks while respondents with a risk appetite of four or lower were very rare (11.2%). Furthermore, in our analysis of risk, we examined the impact of risk-appetite on the results delivered by the most important innovation in terms of positive effects for the organisation (i.e. better, faster, cheaper service, more efficiency, etc.) and found a significant positive association between the level of risk appetite and the positive results.

We also reviewed the domain of respondent’s knowledge: (a) knowledge about new trends and developments, (b) knowledge about information and communication technologies relevant to the organisation. In the first domain, a large share of respondents (74%) reported to have full knowledge of the trends in the sector of their organisation. In the second domain, the percentage of respondents who reported full knowledge was somewhat lower (63%).

Innovation Culture and the Role of Leadership

After looking at the individual profiles of the innovators, we examined the collective profiles of the organisations with special emphasis on the leadership style and the incentive mechanisms in place.

The role of leadership in innovation is pivotal: from giving individuals the time to innovate, supporting them through the innovation process, creating a culture that encourages innovation, to providing the right incentives for doing so. We analyzed the various levels that entities are achieving in each of these aspects. When it comes to creating a culture that supports experimentation and accepts failure, reported levels are on the low side: 29.6% of the respondents state that their entities management fully support experimentation and 16.6% stated that their organisations have a culture that fully supports them when an innovation fails, with relatively high levels of no support (14.2% and 22.7%, respectively).

shiftin2

In addition, the leadership profiles of the organisations towards innovation were assessed. The large majority was found cautious (63.2%) or open (30.4%) to innovation while a very small minority (6.4%) was averse to innovation.

Charts 8, 9, and 10 show results supporting experimentation, culture towards failure, and leadership attitude. There are multiple opportunities for improvement here, as innovation flourishes when there is an open environment that tolerates risk of failure and encourages experimentation, even if the probabilities of success are uncertain.

Additionally to leadership profile and attitude towards innovation, there is another organisational aspect that is essential for innovation, and it is the incentives scheme in place.

shiftin3

Incentives can take many forms, from mechanisms rewarding idea generation (financial or non-financial) to allocating time for employees to innovate. Our research indicates that 32.7% of the organisations have incentives for employees who produce ideas (76.9% when considering also partial incentive mechanisms) and take part in their development, and 22.6% have specific time allocated for innovation (72.6% when considering also some sort of time allocation).

At a further analysis, incentives were broken down into two categories: a) incentives for identifying new ideas (i.e. idea awards, recognition, etc.), and, b) incentives for taking part in the incubation and development of innovations. For each category, we identified the type of incentive, namely if it was non-monetary (i.e. recognition) from the senior management, non-monetary from external stakeholders, or monetary. For the idea generation, the majority of incentives were in the form of internal awards or recognition by the entities’ own senior management (40% of the respondents reported “Fully” in the relevant question) while monetary or external awards were much less reported (15% reported “Fully”). The incentives for the second category (taking part in the incubation and development of the  innovations) were highly correlated with the first, with almost identical response rates.

External Factors Driving / Hindering Innovation

Drivers and barriers to innovation are often quoted and cited in innovation research although it is difficult to draw a clear line in what constitutes a driver and what constitutes a barrier. For example, budget constraints or restrictions can act as a driver for organisations to innovate in order to do ‘more with less’, but they can also constitute a barrier, as the lack of funds for innovation can compromise some key innovation projects or initiatives. For this reason, we grouped the main external forces that could have an impact on the innovation of the entities (regardless of whether this impact is positive or negative). These are the factors assigned with ‘high importance’, in descending order:

 

About ShiftIN Partners:

ShiftIN Partners is a leading strategy management consulting firm focused on helping clients manage strategy and innovation programs that enable the organization to achieve the necessary Shift, working from withIN. ShiftIN professionals have successfully led several consulting engagements worldwide, Partnering with customers in the Government, Utilities & Infrastructure, Oil & Gas, Manufacturing, Healthcare & Pharmaceutical, Financial Services and Telecommunications sectors. 

Government Innovation From Within

UAE Edition. Part 1

By: Rafael Lemaitre, ShiftIN Partners

 

Based on our research undertaken in cooperation with the United Nations University – Maastricht Economic Research Institute on Innovation and Technology (UNU – MERIT), and sponsored by ShiftIN Partners and The Global Innovation Management Institute, we surveyed circa 250 government leaders in the UAE (at federal and regional levels) 1, using tools in line with best practice studies conducted in Scandinavia and the rest of Europe, and Australia to see how public sector innovation is being conducted, which barriers are being faced, which are the drivers of innovation and the critical success factors, and what are the outcomes of innovation projects.

The days when Innovation within governments was considered an oxymoron are long gone. Governments across the world are shifting from incremental improvements towards much more advanced and complex innovations and the case of the UAE is no exception. On the contrary, what has emerged from the survey and the analysis of its results is that the UAE Government organisations are experiencing an unprecedented momentum when it comes to innovation. The results indicate high level of “transformative” innovations and numerous positive impacts. In addition, the analysis shows that government entities are moving from focusing only on the front end of innovation (i.e. idea generation platforms) to the back-end (i.e. the development of the idea), and while doing so they are working on creating the right enablers (from culture and frameworks to processes) to do so.

The results make us realize that the UAE Government is well advanced on its journey to take a leadership role in public sector innovation and is undoubtedly a great case study. This white paper constitutes a first version to an in-depth research in the area and will be followed up by future editions.

UAE GOVERNMENT INNOVATION: AN OVERVIEW

 

Innovation goes well beyond generating an idea or even the next big idea. An idea becomes an innovation when the cycle is completed and that idea matures into a sound concept that captures and delivers new value, from a new service to a new product, or even a new set of internal processes: innovation can take many ways.

Our research indicates that UAE government entities are stronger at the early stages of the innovation management process (and at more abstract elements of the innovation framework), such as creativity and idea generation. For example, 55% of the respondents mentioned that their organisations fully support creativity and brainstorming (this percentage increases to 95% when “some” encouragement is included), and 40% answered that they have full idea generation mechanisms in place (90% including partial approaches). The government entities are less advanced when looked at other subsequent and more specific components such as innovation goals, strategies, and processes in place. For example, 35% of the respondents reported having specific innovation goals in place, and 50% indicated that their strategic goals could be linked to innovation. When looking at innovation strategies and innovation management processes, the results are also on the low side. Around 40% of the respondents were not aware of any innovation strategy or innovation management process in place in their organisations.

 

This gap between the large number of entities which have some sort of idea generation mechanism and creativity in place and the fewer number of entities reporting to have specific innovation processes and strategies is not however surprising. It demonstrates a well-known characteristic of innovation that organisations typically spend much more time working at the front-end of innovation while less time and energy are devoted to the back-end.

The gap is even higher when innovation strategy is contrasted with the overall strategy: 73% of the respondents consider that their organisations have a clear vision and a strategic plan in place while only 29% report that there is a written innovation strategy in place.

With regard to innovation rates, the UAE organisations are reporting high levels as 85% of the respondents stated that their organisations have introduced at least one significant innovation in the past 2 years. The respondents were also asked to think of the Most Important Innovation (MII) introduced by their work unit and to classify it. The largest share of MII type reported was for service delivery innovations or new products launched (64.3%), followed by new or improved processes to support service delivery (50.3%), operational processes (44.1%), and communication innovations (32.9%). Half of the respondents (49.6%) matched the MII with only one type of innovation while the rest matched it with two or more types. This shows that the most significant innovations tend to be cross-cutting and difficult to be associated with only one type. For example, the introduction of a new service will most likely bring side effects, such as a set of innovations within the structure and the processes required to deliver that new service.

For the most important innovations introduced according to the respondents, we also tried to identify if these MIIs were “transformative” in nature. These are innovations that completely change the way things are done, or provide large cost savings (at the working group or organisation level), or create an entirely new and important service. 80.8% of the respondents stated that their most important innovation was a transformative one – very large percentage. Caution is needed while interpreting this value, as this does not mean that almost 81% of all innovations are transformative in nature. This large percentage does however indicate that the large majority of the selected most important innovations were transformative.

When looking at the effort placed by the respondents to materialize the results of their most important innovations, almost one third of the MIIs (29.8%) took between 6 to 12 months to complete, 38.5% took between 1 to 6 months, and close to another third (27.9%) took more than a year. The effort of the innovations was analyzed in the context of the results delivered (see section on Innovation Impacts) and the results were surprising, as a significant negative relationship was found between the time required and the results delivered: the longer the time, the fewer the results3. A plausible explanation is that those innovations that require a high level of effort, from idea generation to implementation, can show diminishing returns. This could suggests that the adoption of lean innovation principles can be highly beneficial for public organisations.

 

About ShiftIN Partners:

ShiftIN Partners is a leading strategy management consulting firm focused on helping clients manage strategy and innovation programs that enable the organization to achieve the necessary Shift, working from withIN. ShiftIN professionals have successfully led several consulting engagements worldwide, Partnering with customers in the Government, Utilities & Infrastructure, Oil & Gas, Manufacturing, Healthcare & Pharmaceutical, Financial Services and Telecommunications sectors. 

Agile Development and Lean Startup Methodology: How Do They Fit Your Innovation Agenda?

By: Dr. Irene Spitsberg, the Managing Director at InnoVentures LLC

 

Having worked with a number of companies over the last two years implementing “lean startup” processes, I’ve noticed that there is still quite a bit of confusion surrounding certain Lean Startup concepts and Agile Development. More specifically, can they be integrated with the Stage-Gate process many companies use for new product development? Or should they remain separate?

How you organize for innovation and growth and what processes you use should depend on your company’s specific growth strategy and innovation objectives (e.g. integrating an emerging technology to maintain market leadership in your space is different – requires a different approach – than entering an entirely new market).  Using more than one process is okay, too (P&G and Corning, for example, are innovative companies known for evolving their innovation management system and processes—continuously adapting to their growth strategies).

Here are a few tips from my own practical industry experience and that of my clients.

 

What are Stage-Gate processes

Stage-Gate processes are the key process for innovating your core offerings. Even after implementing Agile methodologies and Lean Startup techniques, Stage-Gate processes remain important. It’s not that Agile and Lean Startup are better processes, but they just serve a different purpose.

Stage-Gate processes are most effective when your target customer(s) and markets are well defined, as it’s possible to establish clear objectives and performance targets. Projects suitable for Stage-Gate aim at maintaining or growing market share, or increasing profitability of existing and future products. These are the company’s lifeblood. That is, revenues from core products will pay bills today and generate cash for investment in future growth.

Keep in mind, too, that Stage-Gate is not a project a management process. It is a commercialization process for holistically aligning company resources for market delivery.

 

What is a Lean Startup?

Lean Startup is popular terminology for what is in practice strategic innovation (for future growth projects and initiatives). It is not about developing a new product; rather, it is about building a new business and innovating on the three parts of your company’s strategy: Who is your customer? What value should you deliver? How should you deliver it? Strategic innovations carry a high degree of uncertainty and risk. With this higher risk, there should be commensurate potential returns.

While the Lean Startup approach is often treated as a philosophy, these projects also require precise planning and discipline. But a different type of planning, compared to the rigid discipline of Stage Gate. Unlike with innovations in the core, the uncertainty here is much higher. Requirements cannot be established upfront and will evolve as you learn more about the market. The planning priority, therefore, should be to quickly identify and resolve the biggest uncertainties—often done through market prototyping (commonly known as your Minimal Viable Product (MVP), or Prototype).

Lean Startup processes should be carefully designed with commercialization in mind—not just as an exploratory process. Start by asking, How should we define success of the project? and not Can we prove that this [technical idea here] can work? It’s also critical that you build in provisions for leveraging resources of the core business. This is because many lean startup projects fail at the transition stage, when they are to be adopted by the business. The business, however, is usually not prepared.

 

What Agile IS and IS NOT

Agile is NOT a holistic commercialization process, but it IS a project management approach. Agile methodology came from software development. Translating this methodology to other types of companies, no matter what the industry, yields the fundamental principle of organizing development loops—or sprints—focused on answering a specific, well-defined question or set of questions.

 

Using Agile approaches with a stage gate

In a situation with one major uncertainty requiring resolution, it makes sense to make additional investment. Think of it as testing one parameter once all others are fixed. Such agile loops can be organized within any stage. For example, it can be useful in the early stages of projects with higher degrees of technical uncertainty, when the product concept needs fleshing out and/or when external technology needs to be identified and integrated.

 

Integrating an Agile approach with your Lean Startup process

In this case, there are many uncertainties at once, and the interface between each loop and the overall project is fairly complex. Recalling the previous analogy, there are not many parameters that can be fixed upfront. Therefore, the process itself should be organized as a sequence of loops. During each loop, key uncertainties should be identified and addressed in each of these four areas: Market, Technology, Go-to-Market, and Internal Organization. This ensures that no single uncertainty is overemphasized or worked on in isolation without revisiting the overall program direction. The loops repeat until risk is adequately reduced, enough so for making a major investment in the new business.

Designing systems and processes that are right for you is an art and a science. It is a science in the sense that you must observe certain fundamentals. This is where one can learn from innovation exemplars.  Ignore these and you are guaranteed to fail. At the same time, you can rarely use best practices as they are, or out of the box, and usually have to adapt them to your unique goals. This almost always results in a unique approach, your very own version of the process—which is why it is an art.

 

Please follow this link to learn more about Agile Thinking methodology.

 

About the author:

Dr. Irene Spitsberg (Contact) is the Managing Director at InnoVentures LLC, a strategic innovation company, where she works with Fortune 500’s as well as smaller companies on their toughest innovation strategy and execution problems.

Irene was the key strategist and driver in establishing Innovation Ventures Group at Kennametal, where she was responsible for multi-national cross-functional teams working on the development and commercialization of new offerings in adjacent and new spaces.  Her other roles included Director Global R&D Business with Cristal and a number of technology leadership positions with GE Aviation. Known for developing and implementing leading-edge innovation management frameworks and organizational solutions, Irene is a frequent speaker and author on the topics of Innovation management. Irene holds a PhD in Material Science, is the inventor or co-inventor for over 80 US patents, is a leading author of two featured papers in Research-Technology Management journal and is a recipient of NASA’s “Turns Goals into Reality” Award.

Page 1 of 712345...Last »