In my experience, there are plenty of innovation and startup teams that feel stuck. Despite using lean startup tools, they feel like they are running around in circles and making no progress. It seems as though they have forgotten why they started using lean startup methods in the first place. They have run a few experiments and they have learned a lot. But somehow, all these lessons learned are not really helping them make decisions. They struggle to articulate clear answers to questions like: where are we right now and what do we need to do next?
What Are We Looking For?
Innovation is the combination of creative new ideas with sustainably profitable business models. Regardless of the type of idea you are working on or how cool and amazing it is, you will eventually have to solve one key equation; are you able to deliver value to customers in a sustainably profitable way? Finding such sustainable traction allows you to scale your product through the actions of your current customers (e.g. revenue, retention and referrals).
An innovation team cannot make progress without running experiments. Experiments are a necessary but insufficient condition for success. It is important to remember that the goal of every experiment we run is to solve the innovation equation presented above. We do not build, measure, learn or create minimum viable products for the sake of it. The build-measure-learn loop is the innovation engine we use to navigate the product lifecycle. In order to get a sense of progress, we need to know where we are trying to go and the puzzle pieces we are trying to find.
The Innovation Puzzle
To get sustainable traction, we need to search for the key innovation puzzle pieces and slot them in the right places. These key pieces of the puzzle are described below:
- Problem: At their core, sustainably profitable business models require us to make products customers want. This means that we have to develop a deep empathy for our customers and their needs. We have to understand their pains and the goals they are trying to achieve (i.e. jobs to be done). This is the first and most important piece of the innovation puzzle. This piece is foundational because if we don’t understand our customers, we will not be able to make the products they want.
- Solution: Once we have found a customer need worth serving, the second piece of the puzzle involves creating the right solution to meet that need. This is an iterative process that requires us to create minimum viable versions of our solution, and test those with customers, before we build the full solution. Our goal is ensure that we are building something that delivers value to customers in a manner that they will be willing to pay for.
- Business Model: While working on our solution, we can use the opportunity to learn about the costs involved in creating and delivering value to customers. These costs, when set against what customers are willing to pay, can provide an early indication of whether we are on track to find a profitable business model. Find a great business model is the next innovation puzzle piece we have to solve for. As the solution becomes clear, we have to solve for other pieces of our business model, such as finding the right channels to reach customers or finding the right key partners to help us create and deliver value.
- Growth: The final piece of the puzzle is growth. It is possible to find a really good business model and then fail to scale it. As such, we have to find the right growth engine for our product, and remove any bottlenecks in our customer funnels. For example, we may have really great marketing tools for acquiring customers, but we may be failing to convert customer interest into revenue or retaining customers in the long term. These pieces of the puzzle have to be resolved before we can get sustainable traction.
There Will Be Many Detours
The above description of the innovation journey is presented in a linear fashion for storytelling purposes only. In reality, innovation is an iterative process that involves taking one step forward, two steps back and then five steps forwards again. Any innovation project will begin with a few pieces of the puzzle already clear, some will be partially visible and other key pieces will be missing. This combination of knowledge versus assumptions will be unique to each innovation project. I have never worked on any two innovation projects that have had the exact same pattern of knowledge versus assumptions.
As such, it is important to meet teams where they are. Every innovation project should begin with a benchmarking process to uncover the pieces of the puzzle that are missing. For example, I have worked with teams that have a solution already launched, but are struggling to get customers. When we benchmarked the project, it became clear that they have not spent any time trying to understand their customers’ needs. In fact, they were not even really sure who their customers were.
For such a team, it is clear that despite having a product, they are not really at the solution part of the innovation journey. Even if they are unaware of it, they are missing the foundational puzzle piece of understanding customer needs and jobs to be done. No matter how many experiments they run with their MVP, this team will find themselves stuck doing faux lean startup but making no real progress However, after benchmarking where the team are today in an objective fashion, it becomes easier to make decisions around what they need to do next.
Different teams will struggle with different versions of this challenge. Some will have a product growing in the market, but they don’t understand how or why this growth is happening. Some will have identified a need, but will be struggling to create the right solution; while others will be stuck between running experiments to test customer needs and building a solution at the same time. If they remain unaware of the innovation pieces that are missing from their puzzle, they will spend time running experiments that deliver learnings but don’t really help them make decisions.
This, by the way, is true in science. Experiments are not run for their own sake. Experiments are run to advance theory and knowledge. This is why most researchers focus on gaps in knowledge. Deciding the right thing to test with our experiment is more important than running the experiment itself. Within innovation, our theory is our assumptions around the right business model for our product. And just like scientists, we have to use experimentation as a tool for testing the right things in order to fill our gaps in knowledge.
So stop whatever you are doing right now. Take a hard look at your innovation project. Where are you right now on your journey? Which pieces of the puzzle are still missing? Are the experiments you are running right now helping you solve for those missing pieces? Are you really testing the right things? If not, then you need to recalibrate and reprioritize your work.
Tendayi Viki is the author of The Corporate Startup, an award winning book on how large companies can build their internal ecosystems to innovate for the future while running their core business.