Digital Strategy No 5: The dirty secret about innovation

April 2016

There is a dirty little secret about innovation; it doesn’t require much inspiration. Having a ‘Eureka’ moment like Archimedes is, by and large, not necessary. So anyone who has ever thought they could not innovate because they haven’t had any special moments of inspiration need not despair. Innovation is largely the result of systematic process, and everyone can learn that.

If you follow the startup world you will know that the best new companies work with a set of tools that to the wider business community are not that well known. These are:

1. The Business Model Canvas
2. The Value Proposition Canvas
3. Lean Startup Methodology + Agile development
4. Design Thinking/Sprints
5. Systems Thinking

Lean Startup author Eric Ries famously wrote “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” and the tools above are aimed at removing as much of that uncertainty as possible. Their applicability though is across the board; established businesses may have different dynamics to start ups, but the ongoing prosperity and survival of any business involves creating or improving products or services. These tools really help.

1. The Business Model Canvas

Created by Alexander Osterwalder, this is a visual chart that splits your business model into 9 segments, and in doing so allows you to really focus in on the fundamental purpose and viability of your business. The nine segments are:

1. Value Propositions
2. Customer Segments
3. Costs
4. Revenues
5. Channels to market
6. Customer Relationships
7. Key Partners
8. Key Activities
9. Key Resources

Points 1 & 2 are expanded on below but the beauty of this process is that it forces you to distil your business down to fundamentals, and encapsulate it on one slide or sheet of paper. Unlike a 50 page business plan, where discursion is the norm, the Business Model Canvas is powerfully transparent. If it does not look good here, then you better start planning for change. It can be a chastening exercise to run your own business through this; maybe it isn’t as strong or sustainable as one thought (or more precisely probably never actually thought about – in depth).

2. The Value Proposition Canvas

Extrapolating points 1 & 2 of the Business Model Canvas, here you address what your value proposition is, and whether or not it addresses customers who have real goals, real pain points and real beneficial requirements. Again the point is to surface strengths and weaknesses in your product or service. So many products address imaginary needs, miss areas where they could really add value, or go after customers that in practice do not exist, or are unlikely to ever be profitable.

3. Lean Startup Methodology

Once you have negotiated the two hurdles above you need to get your product or service into a state where it can be put in front of a real customer. As Steve Blank has said “No business plan survives first contact with a customer”. The Lean Startup Methodology is all about not wasting your time on things that do not matter. And it does that by taking you through a process where you get your product or service in front of a customer, learn from the encounter, and iterate until you have something with strong and sustainable ‘Product/Market Fit’. Build/Measure/Learn – and repeat. Honestly measure what matters and test all your assumptions. Business does not have to be boring, but it does have to be rigorous; the goal is to work on what works, and to not waste your time.

4. Design Thinking / Sprints

Steve Jobs said “Design is not just what it looks like and feels like. Design is how it works.” Few people seem to understand this. So often in business one encounters people who think of design as logo/colours/font and that is if they even think of font. Which is why the world is full of badly designed products, services and environments. Design thinking is a systematic approach that follows five steps: Empathise, Define, Ideate, Prototype and Test. You start off by working out who is your customer and what matters to them. From there you define their needs and ideate as many possible solutions as you can come up with. Then you filter these down to your best guess as to the number one option, prototype it and put it in front of a customer. You will then find out what worked, or didn’t, what hypotheses you had that were valid and which were plain wrong. Then, in the spirit of Build/Measure/Learn you repeat the exercise until you get it right. Though there is no absolute right. This whole process should be standard operating procedure in your company, something you do on an ongoing basis. After all the world moves on, doesn’t it?

Google use a variation of design thinking that they call design sprints. Where there is a particular issue, or service, or product to be dealt with they gather together everyone who might have an impact on the matter, and through a ‘Sprint’ lasting five days they collaboratively work their way through an intense ‘design’ process that culminates with controlled interviews with customers. This process allows for decision making time to be compressed dramatically. What might take months being discussed and moved down a decision tree is thrashed out in just a week through the not so simple expedient of forcing everyone who counts to focus on just one thing for five days. In ‘Get Things Done’ terms it wins top marks!

5. Systems Thinking

Lastly, Systems Thinking “is the process of understanding how those things which may be regarded as systems influence one another within a complete entity, or larger system.” So for example, if you are involved in the world of Smart Cities you need to look at how changes to transport networks affect pollution levels and energy usage. If you are developing software you might need to consider how taking one approach in a ‘standalone’ module would be much more impactful if it were linked to another hitherto ‘standalone’ module. It is the ‘no man is an island’ principle; everything is connected, although often in subtle ways that are missed unless one consciously looks out for such connections. Systems thinking is about zooming out and seeing the big picture, but as with everything discussed here, the process is iterative. You zoom in, then out, in then out. In mature industries you can pursue six sigma and aim to design out any inefficiencies or superfluous costs. In the world described above the assumption is that life is fluid, ever changing and ever demanding that we change and flex with it.

So there you have five very powerful tools to build, sustain or grow your business. As every business is becoming a digital business they should be an active part of your digital strategy.