Kaan Turnali recently wrote about redefining innovation in the enterprise. He raised a number of critical points, including embracing innovation as a mindset rather than a process, and finding new solutions to old problems.
In an age where a firm’s innovation strategy can make or break the company, it’s more important than ever for companies to define what it means to innovate, what disruptive technology means to them and most importantly, how to go about successfully exploring new business models.
So here are five (more) ways we can redefine and rethink innovation in enterprise.
1. Understanding you won’t have product market fit
Large, successful companies are large and successful because they managed to find product market fit and successfully capitalised on it. Over time, these companies have continued to improve their core competencies and products, solidifying their customer base and establishing themselves as the go-to place for a particular outcome.
The fruits of innovation programs, however, will often lead to completely new products, services and business models which might not appeal to the company’s current customers. This might lead to bleak projections from the company’s marketing and sales teams, resulting in new ideas never seeing the light of day.
However, it’s important to keep in mind that disruptive innovation, by its very nature, is inherently not meant to appeal to your current customer base. It’s completely normal not to be able to find product market fit for a number of months or even years. As such, disruptive technologies will initially underperform according to established methods and metrics used to define and measure success It’s important, therefore, to remember some of the world’s most famous and successful startups, such as AirBNB and Slack, were unable to find product market fit until they tested and measured and tested again...multiple times. AirBNB made $200 a week in its first nine months and it is now worth US$25B. Capturing new markets depends on…
2. …Exploring Disruptive, not Incremental Innovation
When a company keeps iterating on its current products to continue satisfying its current customer base, it’s investing in incremental, or sustaining, technology and extending its current technology S-curve.
The problem with this approach is that eventually, the S-curve plateaus, and the return on R&D investment begins to dry up.
Disruptive technology, however, creates an entirely new S-curve, and with it, a new growth market. It might only initially appeal to a very small, niche market, but this is one that can be used to drive initial revenues and test and improve the product before going upmarket.
S-Curves plateau so it’s up to the company to keep looking for the new S-Curve (without compromising its core competencies too much).
There’s also so much more to developing the new S-curve than just being the ones who did it before it was cool. Research shows late entrants face significant challenges when being late to the party - Clay Christensen states companies that enter the market within two years of a disruptive innovation first appearing are six times more likely to succeed than later entrants. Early entrants establish cost and operational efficiencies, distribution channel relationships and brand awareness and loyalty that provide them an often unbeatable advantage over large players that come late to market.
One of the distinctive marks of a disruptive technology is it’s only obvious in hindsight, so don't fall for this.
3. Startups are not the enemy
It’s common practice for incumbents to point the finger at disruptive startups and blame them for dwindling market share. As such, these companies will either deal with startups aggressively by fighting them through litigation or mud-slinging, or passively - simply ignoring them in the hopes they will just disappear.
However, there’s much incumbents can learn from startups (and vice versa). Processes that startups use, such as the Lean Startup methodology, customer-driven development, hackathons or incubation/accelerator programs can easily be employed by enterprises to hatch, develop and test new ideas and products rapidly.
Engaging with the startup community directly also provides a company with access to a hotbed of talent, ideas and solutions to existing problems. For example, hosting a 48-hour external hackathon, inviting the startup programmers to participate and encouraging them to develop solutions to a problem your firm faces will allow you to kill several birds with the same stone.
Some corporations have already started to engage with the startup community by running open innovation programmes, hack days, incubators and venture capital wings. Find below a link to some open innovation programs run by large organisations.
Unsure how to start talking to startups? Startup co-working spaces are a great place to start. Angel investment groups and startup communities such as Startup Grind (or your city’s equivalent) can also point you in the right direction.
4. It’s OK to Fail
When a company fails because of disruptive technology, it's easy to look back and blame poor management for not recognising and addressing shifting market demands.
Good managers, however, do their jobs well. They're good at executing existing processes, and they make decisions based on what will help them meet performance targets and make the company money. Good managers are risk averse and mitigate failures.
However, risk-aversion flies in the face of what successfully exploring disruptive innovation requires.
The key is to learn how to fail fast, fail often, and learn faster than anyone else. Throwing huge amounts of resources at a project, and then shrugging when it doesn’t stick, isn’t a feasible way of doing things. Taking small bets, building prototypes and constantly testing the set hypothesis with data and results before pivoting if needed are fundamental principles corporate innovation teams need to understand and use when building something new. Failures aren't the be-all-and-end-all of new products, but rather, critical lessons that will help you refine your product over time and find product market fit.
5. Getting Out of the Office
This is both a metaphorical and literal.
Often innovation programs within large organisations fail because they're smothered by all the regulations, processes and values the organisation have already set in place. These regulations are there to help the company execute a repeatable business model but are often not conducive to innovation or looking for a repeatable business model. However, size kills speed and speed kills innovation.
It's nigh impossible to affect organisational-wide change in values and processes towards one that's more conducive towards risk-taking innovation without the company's core revenue streams. Therefore, it's vital for an organisation's innovation team to work away from all existing processes and values. Using a completely different set of KPIs and metrics (read: innovation metrics) would be required to assess progress and determined success. Even physically getting out of the office is a good idea, even for a temporary off-site program.
While your team is out and about, it's a great opportunity to get involved with the startup community! Collective Campus (disclaimer: this is where I work) is an enterprise innovation hub and startup co-working space. We've hosted a number of off-site innovation programmes, including working with a team from Sportsbet. “We wanted our team to know what it’s like to be an entrepreneur and what it’s like to work in a startup environment”, said Oliver Hoy, Innovation Manager at Sportsbet.
A new environment and a fresh breath of air might be all your team needs to spark the curiosity needed to fan the flames.
In this ebook, we provide a brief overview of Proptech, what it means for incumbents in the real estate industry and what they can do to best prepare and respond to these imminent changes to BAU.