Eric Reis’ lean startup approach is now familiar to anyone who’s trying to innovate inside a large company. His dismantled so many of the clichés of both corporate and start up life: the hockey stick growth, the assumption of a large market, the effectiveness of the grass roots efforts to innovate. The many stories and examples he presented illustrated the challenges, but also the willingness of some companies to embrace a different approach all together toward supporting innovation. For me, there were three main takeaways:
- Market share assumptions: Assumptions about market growth and market share (the hockey stick graph) shouldn’t be the drivers of big decisions, as there is really no way of knowing whether a market may accept a product. Often times simplistic models are used to gauge to the merit of an idea, but there is such little accountability for those numbers that the overdependence on them doesn’t quite make much sense.
- The importance of a single customer and single unit: Many companies that are designed to produce in mass quantities don’t understand the value of rapid prototyping, minimal viable product or customer feedback and testing. Without early feedback loops, the risk taking becomes that much harder because of the massive amounts of resources that need to be sunk into new product development
- Changing the deep systems of companies: Innovation can’t thrive under old rules and norms – and to support a truly innovative culture, changes that involve every function of the company need to accommodate the shifts in perspective that an entrepreneurial culture requires. Whether its HR and how teams are evaluated, finance, marketing or sales organizations, the processes for all the systems in the company need to be able to support the lean, rapid prototyping, minimal viable product approach that the start up mindset brings.
Eric made a good point about how all these change needs to be from the top-down, and that grass roots innovation efforts can only go so far. Bolt on innovation teams need better support from their leadership and different funding models to ensure that they have the flexibility to deal with a different level of risk, with a recognition of the potential reward.
Structuring for growth and new products
DuPont’s demonstration of its approach toward managing innovation provided a glimpse into the operational and strategic challenges of large innovation portfolios. Henry Bryndza’s presentation provided key insights into looking across the different ideas and selecting which ones to kill vs which ones to nurture using a data-driven portfolio optimization approach. His presentation highlighted a number of things for me:
- Having an overall business strategy over all into which the technology strategy ties in: For Dupont, which is re-establishing itself after the merger with Dow and now preparing to spin out into a specialty products and materials company in 2019, establishing the business strategy was necessary to provide the guardrails for what the company would pursue. This allows for the vetting of ideas in relation to a bigger outcome and preventing distractions along the way.
- Validating the customer opportunity early on: DuPont’s learning machine, which pairs a business and a technology person and gives them 100 days to conduct 100 interviews across the value chain to assess an idea reinforces the idea that customer needs and value chain alignment need to come together with the science to deliver on a successful product. For a company that is rooted in R&D and science, this sort of market listening activity is critical to ensure that resources are being allocated correctly
- Comparing business opportunities by risk and investment required: The heart of the portfolio management system was the relative comparison of the different projects, and breaking them into bread and butter, pearls, oysters, and white elephants – the 4 quadrants into which the projects fall. By having an optimal spread of these, Dupont is able to have a pipeline of innovations that adequately manages the risk of the overall portfolio.
As innovation activity and the number of ideas generated within a company keeps increasing, having a systematic way to compare these activities is an important function that needs to be adapted. By comparing the projects using similar metrics, with an underlying basis of market understanding and business strategy, Dupont’s approach allows them to manage their innovation activities with an understanding of the risk profile of their undertakings.