NOTE TO CORPORATE INNOVATORS — YOUR NAKED BUTT IS SWINGIN’ IN THE BREEZE

This article is written for the people who are tasked with implementing an innovation or LEAN program in their long established organization. As the title suggests, this may well involve a degree of risk that isn’t possible to mitigate. If you work for a company that exists to maximize the efficiency of every process that contributes to higher margins, then embarking on a LEAN innovation program means there’s no hiding the outcome. For many senior executives, promoting the need for an innovation program can be enormously challenging. The company is doing well, sales are growing steadily, bonus targets are being met, shareholders are happy — why take risks with investments in the unknown outcomes of innovation? In the 21st century this is precisely the right time to bring focus and resources to an innovation initiative and here are the 9 biggest organizational behavior issues that must change to support the LEAN model.

1. Customer feedback is filtered by the call center

Sales and customer service departments are tasked in dealing with client problems using off-the-shelf solutions in the most efficient way. A transactional, KPI-driven view of service. Coming up with an experiment for an uncertain solution that might work doesn’t fit their job description and will have a negative impact on their performance review. Product development and engineers, on their turn, expect these departments to deliver them client insights to design more relevant products and services. This model is the inverse of LEAN which mandates solution designers to work directly with a sample customer group.

2. Innovation in established companies fights with the corporate KPIs

This statement is perhaps a little unkind. Managers have their own KPI’s and growth objectives. If Manager X decides to invest in an innovation program to create new disruptive revenue streams for his Business unit; the ideas will be created around those objectives. Now imagine one of the accelerator teams realizing that they should pivot away from the original scope to keep a viable idea relevant for the company as a whole. Few managers will allow the team to pivot in a way that another business unit takes all the revenues and credit.

3. Typical corporate governance is designed to inhibit speed

Firstly, strict processes and guidelines make best practices repeatable, which is perfect for incremental business improvements and running an everyday business. Secondly, it keeps new disruptive initiatives from reaching those that have the power to implement the latter. Imagine having 7 management layers between an employee with a brilliant idea and the director that needs to allocate the budget to make it happen. Each manager will shape the idea to different KPI’s and personal preferences. All the interesting and differentiating factors, that make the idea brilliant, will be gone by the time an implementation decision can be made.

4. Sunk Costs Can Feel Like a Total Failure

Killing projects is a brave thing to do for both sponsoring managers and the project teams. Why? Firstly, it transforms all investments in the project into costs. Secondly, all people involved will have to accept that they failed and let go of the project. Lastly, it’s a challenge to know when a team tried everything possible to make a project work.

5. ROI (or payback cycle) is the standard KPI to measure investments

Everyone knows that uncertain projects need more time to reach their payback time. Most projects (90%) don’t even reach break-even. If they do, though, chances are that the ROI will be multiples of your ‘low hanging fruits’.

6. No budget available unless linked to clear deliverables

This investment strategy has been great for heavy IT implementations, but it doesn’t work for projects without a clear outcome yet. The push for control and short term return (often driven by shareholders) makes it impossible for uncertain projects to change direction when needed. This increases the chance of failure and premature project closure.

7. “We have a reputation to protect”

Don’t get me wrong here. It takes decades to build a good company reputation and it should be protected! What I want to tackle is how risk managers and corporate communication departments flag any type of experiment with clients involved. The main issue is the difference in both mindset and contextual understanding of lean startup type experiments. The risk manager and intrapreneur will have to meet in the middle.

• Scenario 1: Regular question to risk manager:
• “Can we propose a fake service to clients to see if they want the service? If they do, we will make it.”
• Likely answer: “Hell no!”
• Scenario 2: Question with minimized liability principle:
• “Can we propose a fake service to 10 clients with a life-time-value of €100? If we lose all clients, we have a cost of €1000. That’s a fraction of the development cost we would have if we develop the solution and clients don’t want it.”
• Likely answer: “Why do you bother to call me for a risk of €1000?”

8. Holding ‘GENIUS’ ideas internally to protect a first mover advantage

A very common theme that appears in innovation sessions: “We will educate the market, like Apple did in 2007 when they launched the first smartphone”. Well, nice to be challenged as an innovation facilitator, but let’s face the facts: in the early 90’s, IBM launched the Simon Personal Communicator. Next to calling, the device was able to send and receive faxes and emails. IBM didn’t succeed, but it sounds like a smartphone to me. Most successful products launched by big companies are a smarter, faster, less costly copy of what others are doing.

9. “Coming up with innovative solutions is always an important part of my job”

…and “Innovation is only for new projects” are quotes you likely often hear when part of an innovation workshop with non-innovation professionals. Well, dear companies, if you really want to be innovative, you better start experimenting in existing projects. Start small and create a culture of trying new ways that question the status quo. Failures can and should be celebrated because you ran LEAN and you learned a great deal with a small budget in a short timeframe.

Summary

To summarize, implementing lean startup in a long established corporate is a challenging and exciting initiative to unroll. Large organizations, driven by shareholder returns are designed to maximize efficiency and managers naturally limit risk and focus on achieving their KPIs. On top of that, the Lean Startup book is one of those books that look nice on your shelf without reading it. This results in many people using innovation buzzwords (see below) without practicing what they preach. So only one way to go: define which of the 9 challenges apply to your organization, consciously focus on changing those behaviors and start testing new ways to unleash lean startup thinking.

Buzzwords that should be banned from your project scope document

1. Platform: Yup, That’s right. I wanted to get this one out of the way first. And here’s why: 90% of the time, it’s just a cover up for an idea that you didn’t really think through. Is it a matchmaking marketplace with a supply and demand side? Is it a DIY website builder? Is it … ? Seriously.
2. Fix: Try and explain your idea without using this word and find out how quickly you realise it’s an empty box…
3. One Stop Shop: So you want to fix all the existing needs and problems in one go? Maybe that’s a bit much to take onto your plate as a small innovation team…
4. Instead, try and list all separate features you would need. How about actually nailing one thing at a time?
5. Disruptive: Actually, the main pain of this word is that it’s not used for what it really means . Unless you’re offering a service that was previously inaccessible to a certain customer group at a severely lowered price with a drastically improved UX, Don’t call it disruptive.
6. Community: How many people do you need before you’re community would be a success? Right. Maybe try convincing 3 users first?
7. Quality Label: “Oh a community is indeed a lot of work. Let’s go for a quality label.” First off: how many of these labels actually exist already? Do you pay attention to any of them? Nope. Neither does anybody else. Next to that. How many partners would you need to convince to make it credible?
8. Omni-channel: Are you living in 2005? In all seriousness: focus! You are innovating using the LEAN method. Find your early adopters and validate their PREFERRED channel.
9. App: Really, you want to make an app for that? If you said ChatBot, I might’ve been somewhat intrigued.
10. Big Data: Oh god. Maybe Business Intelligence (BI) but never Big Data.

Greg Twemlow, May 2017 — read more at http://www.gregtwemlow.co/