Six Principles For Creating A Good Corporate Innovation Process5 April, 2018 / Articles
Innovation is management. For those of us that want to create a lasting innovation culture in our companies, understanding this principle is vital to success. There may be plenty of myth making around innovation these days, but innovation is not about working on random ideas to see what sticks. Companies need to develop a clear point of view about where the world is going and the key trends that could impact their business. They then need to develop a clear innovation strategy that informs the types of new ideas they will invest in for the future.
In addition to a clear innovation strategy, companies also need a clear process for managing new ideas once they have them. I am often amazed by the number of companies that do not have a clear process for managing innovation. These companies treat each idea as a one-off project whose chances of survival depend on the political savvy of the intrapreneur. Across the company, teams working on different innovation projects all work in different ways. There is no consistency around innovation best practice, which makes it difficult for leadership to track and measure progress.
In such a chaotic environment, innovation success is hit and miss. However, the pace of change nowadays requires companies to manage innovation in a more deliberate fashion. It should be clear to every employee what the company process is for evaluating ideas, testing ideas and taking them to scale. This is why I believe that every company needs to develop a repeatable process for turning new ideas into profitable business models.
The moment that innovators hear the word process, they start rolling their eyes. Process as a management concept has a bad reputation. Rigid processes have been accused of stifling innovation, and in my experience this is true. Corporations tend to stifle creativity when they manage innovation using the same processes they use to manage their core products.
But this is not the fault of process as a management concept. It is important for us to distinguish between good process and bad process. There is, after all, a difference between the baby and the bathwater. A process is only as good as the assumptions about business that informed its design, and how well those assumptions map to reality.
Traditional management processes are based on faulty assumptions about the stability of the world. This is why most processes are generally non-responsive to change (e.g. annual budgeting). Often these assumptions about the world are implicitly held within the company, which makes it hard to improve the process if it becomes problematic. In most of these situations, process can become a bottleneck that leads to “stupid” decision making.
When it comes to managing innovation, these traditional assumptions have to be challenged. The goal is not to get rid of process altogether, but to design better and more responsive processes. So the argument remains the same. I still believe that innovation is management. This is not to say that, if we design a good innovation process, it has to be blindly followed. In fact, a good innovation process should be different from other processes. The process itself should be designed to evolve based learnings.
Principles For Creating A Good Innovation Process
There are several innovation processes that have been designed and published. Examples include Steve Blank’s Customer Development and Ash Maurya’s Running Lean. These are all great processes for managing innovation. However, I often recommend that corporations create bespoke processes that are more appropriate to their context. But before they start to do that, they need to understand the principles that underlie a good innovation process. These principles can then inform process design. Below are six such principles for companies to use:
The Startup As A Method: Startups are not just Silicon Valley teams in jeans and t-shirts using canvases and sticky notes. Startups are not the artefacts they use. Instead, startups are a method for developing new products under conditions of uncertainty. They are a set of tools and practices that any organization can adopt. Uncertainty is the key defining feature of innovation. As such, managing uncertainty must underpin the innovation process we design.
Searching Versus Executing: The best way to manage uncertainty is to search, rather than execute. Most management processes direct teams towards executing on their ideas, before they have tested their assumptions. The reason why innovation is defined by uncertainty is that most innovation projects begin with a bunch of untested assumptions about customers and business models. These untested assumptions represent potential risks that could derail the project. As such, our innovation process should not direct teams to execute; rather teams should be encouraged to search.
Business Models Matter: If teams are encouraged to search, then what are they looking for? For starters, innovation is not simply about having creative cool ideas. Innovation is the combination of creative new ideas with profitable business models. Without a good business model, even the coolest ideas will fail. A great business model involves making products customers want and figuring out a way to deliver that value profitably. This is the magic we are searching for and until we find it we should not launch our products at scale.
Right Thing, Right Time: To avoid premature scaling, a good innovation process should help innovation teams navigate uncertainty by doing the right things at the right time. There is hierarchy of answers that need to be provided to key innovation questions. For example, before creating a solution it is important to first understand our customers needs. Before spending money on a huge marketing campaign, it is sensible to ensure that we have found the right channels. Doing the right things at the right time is key for successful innovation and our innovation process should support that.
Right Question, Right Time: Most management processes are designed as tools for managers to ask questions. They setup scenarios that help with decision making. Badly designed process, when followed rigidly, can lead managers to ask the wrong questions at the wrong time. For example, a process that demands that teams provide ROI estimations before they begin their work, forces that team to make guesses about future success. Rather than demand long business cases full of assumptions, a good innovation process helps managers understand where their teams are on their innovation journey and helps them make decisions about what to do next.
Evidence Based Decisions: Rather than guess, innovation teams should make decisions based on evidence. There is no point in testing our assumptions if we then fail to use our learnings to make informed decisions. If we are just going to run experiments as innovation theatre, then our process will ultimately be no different from traditional waterfall methods. Making decisions based on evidence means that we must go wherever the evidence takes us. A good process should allow teams to change direction based on learnings, and stop the project if they need to, without negative consequences for them. If this is not possible, then our process is simply innovation theatre.
The Innovation Journey
The above six principles can be applied to creating a clear and flexible innovation process. Our process should recognize that most innovation projects are unique; but at the same time there are a set of basic questions that every team must answer. These questions are rooted in an understanding that all businesses are still based on one basic idea: i.e. sell your stuff for more than it costs you to make it.
This basic idea requires every innovation project to answer similar sorts of questions (but perhaps in different ways depending on context, product or service). Who are the customers? What problem are we solving for them? Can we create a solution? What is cost of creating and delivering the solution? Are customers willing to pay? How much are they willing to pay? Have we found the right price point for profitability? How will we reach customers to scale our product?
The above questions (and many others) are pieces of the puzzle in the business model equation, and our innovation process should help us answer them. On a regular basis, we should also be reviewing our process against the above principles and seeing if it is helping us succeed. It is not only our products that need continuous improvement. We should also continuously improve the processes we use to create them.