lean innovation @pearson publishing

Lean Innovation

Tendayi VikiUniversity of Kent

Website: www.tendayiviki.com Follow Me: @tendayiviki

Agile Practitioners

The Importance of Innovation

Joseph Schumpeter (1883-1950)Creative Destruction

The entrepreneur disturbs the economic equilibrium and is the prime cause of economic development.

• V1: Innovation comes from entrepreneurs (Schumpeter, 1934).

• V2: Innovation can also come from entrepreneurs within large organizations (Schumpeter, 1949).

PWC’s Innovation Survey, 2013 http://www.pwc.com/gx/en/innovationsurvey/files/28222_GIS_Final_HiRes.pdf

PWC research shows that, over the last three years, the leading

innovative firms have grown at a rate 16% higher than the least innovative.

PWC’s Innovation Survey, 2013 http://www.pwc.com/gx/en/innovationsurvey/files/28222_GIS_Final_HiRes.pdf

PWC’s Innovation Survey, 2013 http://www.pwc.com/gx/en/innovationsurvey/files/28222_GIS_Final_HiRes.pdf

What is Lean Innovation?

Frank Knight (1885-1972)Risk, Uncertainty and Profit

Uncertainty and the willingness to act in the face of uncertainty are the hallmarks of entrepreneurship.

Whereas risk is somewhat estimable, uncertainty is not estimable and cannot be insured against.

The Narrative

The Reality

Stephen J. Kline & Nathan Rosenberg (1986)An Overview of Innovation

“Models that depict innovation as a smooth, well-behaved linear process badly misspecify the nature and direction of the casual factors

at work…..

Innovation is complex, uncertain, somewhat disorderly, and subject to changes of many

sorts…”

Stephen J. Kline & Nathan Rosenberg (1986)An Overview of Innovation

“Thus, an important and useful way to consider the process of innovation is as an

exercise in the management and reduction of uncertainty” (pg. 275).

The Challenge

Most new businesses and innovations fail:

In some cases failure rates are over 70%.

Most new product launches fail.

Being part of a large company does not guarantee success.

Having a lot of investment money does not guarantee success either.

Previous success does not guarantee future success (Frankish et al., 2012).

Entrepreneurs don’t really learn, they just claim they do!

http://ow.ly/eR6Uh

What we learn in business school…  

Business planning is problematic:

• Because it describes as linear, a process that is actually non-linear.

Business planning is problematic:

• Because it places too much emphasis on the value of the initial idea.  

• It also gears up the organization for execution and operational effectiveness.

Do not place too much emphasis on the value of your initial business

idea.

People are terrible at predicting what other people will pay money

for!

You probably think your product idea is this cute…

But this is what it looks like to your customers!

The difficult discipline is in deciding:

• How much effort you want to put into execution and optimization, before you are certain that you are on the right path…

IMMITATIONThe Greatest Form of

Flattery

Startups fail because they imitate large companies too early.

Startups are not smaller versions of big

companies! (Steve Blank & Bob Dorf, 2012)

Rob Fitzpatrick and Salim Viranihttp://www.foundercentric.com/

Startups also fail because they imitate other startups.

The new cult of the celebrity founder.

No two startup situations are the same…(Even in the same market as another company)

Rob Fitzpatrick and Salim Virani http://www.foundercentric.com/

Each startup situation has its own topography….

And it’s your job to systematically figure out the topology of your own

startup

The Innovation Thesis 

A Path for Searching:

For a sustainable and profitable business model…

Innovating is Really Like a Research Project:

We should not be making business plans, we should view our initial business model as a research proposal.

The Innovation Team is a Research Team:

All hands on deck, to learn what customers want…

And a sustainable/profitable way to deliver that value to them….

A Significant Contribution:

The significant contribution of a startup is building something people want…

Upon achieving product-market fit, a startup graduates…

Eliminate Waste

Stephen J. Kline & Nathan Rosenberg (1986)An Overview of Innovation

“The majority of inventions that have been recorded at the US Patent Office have never been introduced on a commercial basis” (pg.

276).

Michael L. Tushman & William L. Moore (1982)Readings in the Management of Innovation

Of the 1800 successful innovations tabulated by Donald G. Marquis in 1976, almost three

quarters were the result of perceived market need, and only one quarter from perceived

technical opportunity.

Stephen J. Kline & Nathan Rosenberg (1986)An Overview of Innovation

“Both technical and market needs must be met for successful innovation” (pg. 276)

Successful Innovation:The Technological + The Commercial

In Other Words: Product – Market Fit

The Scientific MethodApplied to Innovation and Entrepreneurship

Eric Ries (2011) The Lean Startup

http://lean.st

Ash Maurya (2012)Running Lean

http://www.runningleanhq.com

/

Ash Maurya (2012)Running Lean

http://www.spark59.com/

Alexander Osterwalder (2012)http://www.businessmodelgeneration.com/

A Tool for ExperimentationThe Minimum Viable Product

The hypothesis/objective you are trying to learn.

from the target market segment you are trying to learn about.

and the minimum form that it takes to achieve that learning.

Patrick Vlaskovitz (2012)

http://vlaskovits.com/2012/09/apple-maps-debacle-and-minimum-viable-products/

The Minimum Viable Product

Source: @ryanmaccarrigan

Source: @ryanmaccarrigan

Lean Innovation Inside the CorporationThe Innovation Sandbox

Innovation must be managed strategically, it cannot be

done successfully in a haphazard fashion.

Nagji & Tuff (2012)

Harvard Business Review

Key Principle

The Innovation Ambition Matrix

Nagji & Tuff (2012)Harvard Business Review

Nagji & Tuff (2012)Harvard Business Review

Innovation Portfolio

Innovation Returns

Nagji & Tuff (2012)Harvard Business Review

Innovation Portfolio

Nagji & Tuff (2012)Harvard Business Review

Firms must develop the unique capacities needed for transformational innovation:Innovation teams should be separated

from day-to-day operations (Innovation Sandbox).

/

Inside the Innovation Sandbox

Nagji & Tuff (2012)Harvard Business Review

Firms must develop the unique capacities needed for transformational innovation:Funding should come from outside the

normal budget cycle (Stable and Predictable Funding).

/

Inside the Innovation Sandbox

Nagji & Tuff (2012)Harvard Business Review

Firms must develop the unique capacities needed for transformational innovation:Talent within innovation teams should

include a diverse set of skills (Cross-Functional Teams). ◦ Creatives, Designers, Anthropologists,

Scenario Planners and Analysts; that are able to deal with ambiguous data.

/

Inside the Innovation Sandbox

Nagji & Tuff (2012)Harvard Business Review

Firms must develop the unique capacities needed for transformational innovation:Pipeline management should focus on the

iterative development of a few promising ideas, not the ruthless filtering of many (Build-Measure-Learn). It is impossible to predict fifth-year sales for

something the world has never seen.

Inside the Innovation Sandbox

Nagji & Tuff (2012)Harvard Business Review

Firms must develop the unique capacities needed for transformational innovation:Metrics should recognize nonfinancial

achievements in early phases (Innovation Accounting).What if the only hurdle to clear to receive

investment is that the company might learn something.

Inside the Innovation Sandbox

Nagji & Tuff (2012)Harvard Business Review

Eric Ries (2011) The Lean Startup

http://lean.st

THANK YOU