lean innovation @pearson publishing
DESCRIPTION
The talk on Lean Innovation delivered at Pearson Publishing, London UK.TRANSCRIPT
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