LeanStartup

Spot-Frame-Learn: From Emerging Technologies to New Business Models

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

 

Last week, I was co-presenting with Owens Corning’s innovation team at the IRI 2017 Annual Meeting in Boston. We shared a success story about building organization’s competency of integrating technology and business model innovation to drive business investment in new growth platforms and fast tracking ideas to market.

 

One example that we shared was commercializing disruptive material technology for 3D printing and achieving first commercial launch. The technology area itself resonated with many in the audience, and so did the team’s challenges in building the new business.

 

Reflecting on our story and the discussion it generated with the meeting participants, I wanted to share a few insights…

 

When I first met Anne Berthereau, R&D, VP of Emerging Technology and Composite Solutions Business at Owens Corning, her challenge was similar to that of many innovation executives: building her organization’s capacity to identify emerging technologies relevant to the company and engage business partners, turning them toward new growth platforms. Several key insights emerged from our discussion:

 

  • The biggest change doesn’t come from your own market (think of Kodak and Netflix). How do you extend your search across the industry boundary, yet stay focused and relevant?
  • There are many sources of information, but how do you know that you didn’t miss anything?
  • An idea is not enough. How can you quickly learn which technology presents a real business opportunity?
  • Information alone won’t make the business compelling. How do you engage business partners, ensuring their buy-in and commitment to adopting the opportunity?

 

Working with Anne and her team, we focused on overcoming three central challenges: 1) Establishing a robust capability to spot new technologies relevant to the company; 2) Using a strategic business context to create a frame for generating excitement with the business partners; 3) Building out capabilities for learning how selected technologies can be integrated into a business model (supported by the business).

 

Of the three challenges—spotting, framing and learning—the most attention is typically given to the first: finding new technologies that can become new growth ideas.

 

While this is by no means trivial, the actual challenge increases when fresh ideas must be turned into new business opportunities, then adopted by business units. This is especially true when new opportunities don’t fit neatly with the core business model, typically because the integration of new technologies: 1) Competes for R&D and business resources with established development programs; and 2) Requires learning new skills for succeeding with unfamiliar markets and new business models.

 

Our approach for spotting-framing-learning focused on:

 

  • Leveraging internal and expanding external networks to systematically uncover technologies and provide a forum for knowledge exchange.
  • Building an articulate framework to provide strategic context and ensure relevance and early engagement of business partners.
  • Adopting a structured learning process; this requires hypothesizing and building new business models, then quickly reducing uncertainties by staging business experiments and market tests.

 

With technologies framed within the language of the business, the innovation pipeline came to life and first successes emerged. One was the major international platform, advanced into an early commercial stage; the first product launch was achieved by leveraging strategic partnerships.

 

Reflecting on my earlier discussion with Anne, I think this Owens Corning’s example confirms that building organizational competency—learning how to succeed in unknown markets and with unfamiliar business models—is critical for shaping growth opportunities, and turning your portfolio into market success.

 

About the author:

Dr. Irene Spitsberg 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.

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.

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.