Tag Archives: Innovation

How to manage those Innovations?

Posted on by

This is part of my ongoing series exploring Innovation, Lean, Lean Startup, and Agile.

A few days ago I wrote about how the Lean Product Development method at Toyota essentially builds a Skunk Works around a new technology. This concept was popularized by the Lockheed Martin Skunk Works, which produced some of the most amazing aircrafts ever created, including the fastest plane ever made, the SR-71 Blackbird, which was designed in the mid 70’s.

In a similar fashion to Toyota, Lockheed relied heavily on existing technologies to drive down the cost of a new break through innovation. This allowed the Engineers to focus more energy on the few systems that truly required breakthrough engineering and thinking. Existing components for the bulk of the design also significantly reduced costs as the engineers did not have to design everything from scratch and could rely on standardized or consistent components at interfaces. This means the cost was lower using an already designed part, the part could be purchased at economies of scale, and the engineering work on new components was reduced because of they didn’t need to design interfaces.

This approach is seen as a best practice not just by Toyota and Lockheed, but Christensen argues this approach should be applied for any sort of disruptive innovation at a large company. This is required because of the risk of cannibalization of existing sales, lack of alignment with the needs of existing customers (doesn’t meet performance needs), and wins that might be small for the overall organization are huge for the new team. The alignment between wins and team help cement the team as successful and continue to shelter it from unrealistic demands from the broader organization.

In the Innovation Machine the author argues this is the approach that the most successful companies at innovation use. It helps companies become serial innovators and continually disrupt their markets and industries. Furthermore, the small wins for a new team doesn’t mean that these companies can’t have extremely aggressive goals for these internal startups. In fact, it’s likely many of them have billion dollar goals within 5 years for them, such as IBM has for their internal startups. However, the funding and the organizational structure is sheltered for a short amount of time and protected from the normal funding cycle that other portions of the organization are subject to. This is to ensure investment in future innovations that have a great deal of uncertainty.

The added benefit of these internal ventures is that the leadership of the entire organization can decide to use them as a means to change how the organization operates. For example, in the case of the Macintosh, re-integrating the Mac mini-company back into Apple forced massive changes in the way everyone worked. If the work processes are more efficient in the Skunk Works it is key that those processes are adopted by the business unit that will eventually house that new innovation. If the Skunk Works is using Lean processes and Lean startup practices integrating into the rest of the organization is going to be difficult unless those leaders are helped to get on board with the methodological approaches. This will take time but will certainly be worth it.

This is the approach that GE is taking for their new engine development. They essentially used the Lean Startup to develop an MVP by using a Skunk Works/Lean approach where they leveraged an existing engine to move the technology in a new direction with customer feedback the whole way.

For companies to be successful in deploying these approaches it will be key to to develop a safe place for them to experiment. Learn and grow away from the unrealistic expectations of a mature idea, when the idea is living in a space of extreme uncertainty.

Lean canvas, Lean Development, the Theory of Disruption

Posted on by

In yesterday’s article I talked about how you can use a product development approach called Set Based Concurrent Design (SBCD) to avoid some of the risks associated with developing a disruptive design regardless of how integrated or modular a given technology and its platforms are. Before that I had written about a concept called Lean Canvas to include questions associated with disruption to help push the initial design into a more disruptive place to maximize the likelihood of success.

In “Running Lean” the author, either knowingly or unknowingly emulated the benefits of SBCD whenever he fully described his approach for creating Lean Canvases. Ash Maurya recommended that for any given startup to initially start with multiple different views of the initial Lean Canvas which could represent different solutions, problems, customer sets, and metrics. Each one of these is to be discussed with potential customers in interviews.

However, once you understand your customer, you’ll need to begin developing your solution. In the case of a piece of software it may be easiest to simply caret multiple wireframe mock ups that emulate the SBCD. While with physical products, you’ll need to start with several mock ups and ideally multiple different specifications for components within the design. This is important as you may need to mix and match components of your physical design based on the niche customer set that you are targeting. The best result may end up forcing you to create a product that might be difficult to make if you don’t plan for the different specification interactions from the beginning.

While building your product as  you look at each different iteration it is important to continue asking if the actual solution continues to be disruptive or if it has slid into a less disruptive niche in the market. It is also vital that you still are aware if the interaction between the changes in your product and how it impacts your customers. If your potential customer decide that there are too many features you may have pushed yourself out of the initial niches  you were striving for. This will also mean you’re moving into a market space that will force you to compete head on with your competitors.

Using these three tools, questions for disruptions, lean canvas, and setbased concurrent design, will help speed the decision to continue pursuing a specific product, problem, and customer set. The point of this early process is to speed learning as quickly as possible and the B-M-L approach coupled with a set of Lean Cavnases and Products will help rapidly increase that knowledge set. Especially when using tools to help determine the trade-offs between your choices.

Finally, with continual engagement with your customers and products that are narrowing down towards a completed solution, you may find that your sets of products could become a family of products. This means that your learning may even be more valuable than before.

Innovation and Lean Product Development

Posted on by

This is another portion of my on-going series for Innovation, Lean, Lean Startup, and Agile, see my last one here.

So far we’ve talked about how to combine some of the various theories together. For example looking how Lean and Agile work together or Lean startup and Lean work together. Similarly we looked briefly at how Lean Startup and Agile can be meshed, but haven’t discussed this much. Today we’re going to look at how the Lean Product Development methodology can be combined with the theories purported in the Theory of Disruption. I will look at how these can be combined with yesterdays article tomorrow.

Lean Product Development is a natural outgrowth of Lean manufacturing. It is how Toyota is able to continuously develop new products at a faster rate than their North American competitors. It is how Toyota is able to create new designs that are extremely high quality and disruptive to the market.

In the Innovator’s Solution, Christensen argues that integration and modularity are on a swinging pendulum where due to the constraints on the “not good enough” technology, that a more integrative approach is required because a fully modular design would reduce performance below thresholds that customers would be willing to pay for. Christensen argues that this would occur because relationships between firms dictate how new technologies can be developed. Whenever firms work jointly on a technology there must be agreements in terms how the components interconnect with each other. These underlying interfaces between technologies evolve much more slowly whenever there are multiple firms are working at the interface of these technologies.

Allen Ward writes about Toyota’s methodology for product development. He calls this approach Set Based Concurrent Design, where there are multiple different designs for a given new product from the start. For the case of the Prius, Toyota started the process with incredibly lofty goals and over 20 initial designs. These designs were kept loose initially, until they were reduced down to four that were selected to be turned into clay molds. During this time Toyota had been working closely with their suppliers, where they had no plans to insource more of their components than for a typical car. As it stands Toyota uses suppliers to provide roughly 75% of components to their cars, while focusing on the hardest components like the Engine and body. Similarly to a gas car, for the Prius Toyota elected to keep ownership of the drive train, and the hybrid engine systems. Otherwise everything else would be managed in a similar process as any other car.

To manage for the uncertainty of their four designs, they provided their suppliers with a range of requirements. Engineers at Toyota and their suppliers developed a range of “Trade-off” curves, which provide the ranges of trades-offs between different features and the limitations of those features. For example, engine vibration will have a trade-off with the tolerances of the Pistons. These trade-off curves increase the rate of learning for a given product and reduces the risk for a new product development.

This means with more information shared between companies there is less need for companies to oscillate between heavily integrated designs and modular designs. For an organization like Toyota the desire to share information and creating a formal process to enable disruptive innovation without owning the entire new product is a huge advantage for the organization. Toyota is actively investing in new capabilities and disrupting their competition.

This of course doesn’t disprove what Christensen is saying though. This approach has worked well for Toyota but has not been adopted by many other organizations. This is one of the problems that companies are having with disruptive technology. Furthermore, Toyota inherently turns new product development into a pseudo skunk works, which is what Christensen recommends for these ventures, by making their Chief Engineer a mini CEO for the product as well as dedicating, or as close as possible, engineering and manufacturing resources to the tasks. Finally, Toyota focuses on a few key elements that will be disruptive while reusing a great deal of older technologies maximizing technology reuse and learning from historic projects.

Disruption and Lean Startup – improving the Lean Canvas

Posted on by

One of the more interesting tools I’ve discovered lately was the Business Model Canvas. This was created by Alex Osterwald with a huge group of people. I thought it was incredibly useful for putting issues that companies have into a specific context. However, I did feel that something was missing. Something important. The picture linked above is extremely useful for an existing company that wants to put everyone on the same page, but I felt that it would fall a little flat in helping a new company start. There are simply too many unknowns to answer a lot of the questions that are in the frame work.

This is where the book Running Lean comes in. The author decided to adapt the business model canvas into something that a lot of entrepreneurs could use the Lean Canvas. In entrepreneur circles today, the most important thing to focus on is the problem trying to be solved. If you don’t have a clear articulation of the problem you’re trying to solve you’re going to fail. As such, there is more of a focus on the problem, the metrics associated with the problem and less focus on the planned solution. Secondly, Ash Maurya, argues that the best way to use the Lean Canvas is to look at both the problem and customer segment concurrently. Ignoring any potential solution, but looking at the problem you’re trying to solve and the people you’re trying to solve it for. This helps keep in perspective the real goal with your product, solving a problem for a customer that they’d be willing to pay you to solve.

However, I believe that this solution is still missing something which is something of an analysis of the existing competition and the planned solution. While Maurya does highly recommend including existing solutions under the problem, there is no effort to really use them – other than to make sure your product is different than their product. With the Lean Canvas the goal is to interview customers to identify if your existing solution is worth pursing more through rapid continual feedback – leveraging the MVP that I discussed in my last article. There are a few questions that can be asked to help shape the direction of the solution before talking to any customers.These questions come from the Theory of Disruption which argues that there will be less competition over time for the customers you’re pursuing because incumbent firms truly don’t want them as customers.

Does this product compete with Non-consumption? If you can answer yes to this, then you are expecting to undercut an existing incumbent that does not serve an existing market segment. In the case of Radios this mean extremely low quality devices that most people wouldn’t buy. In the case of video games now, you could argue that consoles are competing against non-consumption, this argument makes even more sense in terms of games on a smart phone. If the answer is No, then you need to ask the next two questions.

Does this product represent a sustaining technology? If you introduce this product to the market does it go after the same customers that the existing firms are already attempting to serve? Furthermore, does it go after the highest most valuable customers in those customers segments? If you answer yes to this, you will face extremely stiff competition from incumbent firms. They want those customers and will fight you tooth and nail for them. You will lose against those businesses and should look for a different solution to the problem you’re trying to address. If the answer to this is no, then you need to ask yourself the next question.

Does this product represent a disruptive technology? If you introduce this product would only the least valuable customers decide to purchase it? These would be customers that are being over served by existing solutions. For example, Pandora and Google Play Music both represent solutions for people that are over served by Apple’s iTunes. For customers that find iTunes to be part of their iDevice there’s little reason for them to look outside Apple’s Ecosystem especially since there are solutions for Apple users in that ecosystem. However, for non-iDevice users, iTunes represents a product that has many features that are undesirable. So Pandora and Google Play Music represent a smaller music collection where you never own the actual music you’re listening to even if you pay a premium for the updated services. This is disruptive to iTunes for that very reason.

Including these three questions at the minimum, with a clear understanding as to what they each mean, will help shape the solution to the problem you are trying to solve. Additionally, it will help you understand what customer segments you should pursue from the very beginning. As you are successful in capturing the lower tier customers you will continually improve your product and begin to move farther and farther up market. Which allows you to then truly disrupt the market.

Combining these theories into the Lean Starup approach will help understand the best route to pursue. Furthermore, you might not be able to answer these questions honestly. You will likely need to get customer feedback pertaining to these questions. Don’t as straight forwardly if the customer thinks it’s sustaining or disruptive, they won’t understand what that means. You will need to ask them if a competitor is already offering this service and if they aren’t using it why. If they are using a similar service make sure you try to differentiate between the competing product and high light the differences. Try to understand if your competitor would release this and if their customers would use the service.

That’s where the Lean Startup Build Measure Learn cycle comes back into the fore, you ask questions, learn build again, learn, and continue the cycle.

Innovation Isn’t Just a Buzzword

Posted on by

It’s rather unfortunate that everything has to be an innovation these days. Even worse, is that for a business to be effective, it seems they must drive disruptive innovations. Innovations are simply inventions that have been successful in the market, those inventions might actually business model changes that have been successful in penetrating the market. I personally find that looking at innovation as a framework to analyze business pressure to be extremely interesting. I did this today in an interview and it felt really good as I was able to create context around changes impacting the health insurance industry.

Several years ago I wrote about the 4 types of innovation, Incremental, Modular, Architectural, and Radical. This is a bit different than the framework that Christenson argues, since he only looks at 2 types, Incremental and Disruptive. I believe that disruptive encapsulates both Architectural and Radical. Architectural changes are business model innovations while making a very similar product but one that significantly undercuts existing businesses or creates a new market. While Radical innovations creates a new market but also attacks existing customers, through a new business model and a completely different type of product. Think of a fan competing against an air conditioner window unit, while central air is an architectural change for the window unit.

da9cf-typesofinnovation

I believe that this framework is just as useful for businesses to analyze their environment as Porter’s 5 Forces because it forces businesses to confront the disruptive innovations that they might have overlooked otherwise. Without using this framework it is likely that businesses would ignore the new entrants force as they don’t feel that those businesses will ever compete with them. However, based on historic evidence those entrants that have a different business models or a different metrics for their performance eventually supplant incumbents. I believe that this type of analysis should be conducted annually or bianually as many industries and markets have continually increasing uncertainty and faster rates of change than historically.