How to manage innovation: The Lean Startup methodology

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Innovation – everyone is talking about it, everyone wants to do it, yet most of the clients we talk to struggle to plant entrepreneurial thinking within their companies.

Innovation – everyone is talking about it, everyone wants to do it, yet most of the clients we talk to struggle to plant entrepreneurial thinking within their companies. According to a recent Capgemini research, 87% of organisations have an innovation centre, but only 17% carry out innovation beyond their innovation centres and across their whole organisation.

As business and digital converge and customers expect better digital services, decision makers see digital innovation as a top business priority. However, most companies think of innovation as a random process, which happens out of thin air and does not need to be managed or formalised. This is fundamentally wrong and numerous theories and books have been written to disprove this common idea.

The Lean Startup

The most popular theory is the Lean Startup by Eric Ries. As the name suggests, The Lean Startup is aimed at newly created companies that go through initial periods of high uncertainty and need to quickly iterate solutions to improve their understanding of the external market and customers. However, the theory’s concepts can be used to manage innovation within large organisations as well.

The Lean Startup concept defines a closed-loop three step approach to deliver products to customers faster:

  • Build – Firstly, a Minimum Viable Product (MVP) has to be built and tested with real users
  • Measure – Then user feedback is measured
  • Learn – Feedback is channelled in the learning process to refine the MVP, which is going to be tested again with users.

It sounds like a simple and common sense-based process, but it clashes with the classic top-down financially driven management theory. Generally, entrepreneurs (and intrapreneurs) have to draft detailed business plans to get investors’ (or senior management’s) buy in and go ahead; however, these plans are based on wild hypothesis and finger-in-the-air assumptions that can’t be validated unless tested in the market. Many large corporations we help see themselves confronted with the “make up a (unrealistic) business case or don’t get funded” dilemma. For these reasons, The Lean Startup focuses on action. Instead of plans inked on paper (some might say ‘comprehensive documentation’), it encourages prototypes (‘working software’).

The Lean Startup might be the natural option for new companies but, to be embraced by large organisations, it requires a paradigm shift. As a first step companies are setting up innovation labs where development teams get things off the ground quickly, with minimal initial capital investment. However, even though this is a step in the right direction, this has a limited impact on the overall organisation.

Being Lean requires a cultural shift

In addition to a structured process, digital innovation must be supported by the right IT tools and organisational culture. IT should not be siloed, but integrated and customer facing, allowing for fast paced delivery. Lean principles and IT tools have to be leveraged to create a “safe field” in which development teams can experiment new things.

This is just the start of the innovation journey. Innovation can’t be limited to a team/lab, but needs to become part of the BAU for the entire organisation. The transformation requires a cultural shift from the PRINCE 2/Waterfall mindset, to an Agile/Iterative approach.

The competitive landscape has changed and smaller, nimbler startups are rivalling, and oftentimes winning against incumbents that are not able to quickly react to the changing environment. That’s why companies need to act like a lean start-up, using the right tools, processes, methodologies and culture to support innovation.

 

Author


Andrea Barbesta Andrea Barbesta

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