Facebook, Instagram and Snapchat... All of these companies were founded by young entrepreneurs (now young billionaires) in a community of people interested in starting their own business. Unsurprisingly, startup communities are now popping up all over the world. These entrepreneurial ecosystems are driving new business creation and job growth in the countries they operate in. It may not be as obvious at first glance, but they are completely changing the process of innovation.
Recently, there has been a shift in the best practice approach to starting a new business venture that is quickly replacing the conventional thinking and methodology of startups. This new approach, known as ‘The Lean Startup’ emphasises experimentation, customer feedback and iterative design rather than the traditional startup tenants of in-depth analysis, planning and intuition.
Static business plans have been replaced with a dynamic ‘business model canvas’ that places as much focus on business model and process innovation as it does on product or service innovation. In the past, new business ideas were kept a closely guarded secret to the development team, who only showed their offering to the market when they were convinced that all issues had been rectified and the product was ready for the market to embrace it. Instead, the lean startup focuses on delivering a minimum viable product to the market, testing hypotheses, seeking feedback and then redesigning the offering or business model based on customer feedback. This process, known as Agile Development allows organisations to learn quickly which aspects of their value proposition the market values most, and how much they are willing to pay for it. The organisations can then adjust their offering or business model to maximise the release of this value. This process is then repeated using the next iteration of the offering which becomes more and more customer focused, based on the collaboration and co-creative aspects of the process, resulting in a significantly higher chance of the startup growing into a sustainable enterprise.
The big question is, do the principles of the lean startup approach apply when managing innovation in established organisations? Let’s think about that question using Apple as an example. Apple is a global brand with a very high reputation for producing quality, innovative and above all, user-friendly technologies. When Apple announces it is launching a new product, customers camp out in tents for days and queue around the block to ensure they are among the first people to buy the new offering. Early sales and reviews of the new offering dramatically impact Apples share price, in either a positive or negative way. Based on the environment Apple operates in, does Apple have the luxury of bringing a minimum viable product to market, gaining consumer feedback, altering the product and re-releasing it to the public?
Whilst an argument can be made that Apple’s platform strategy does exactly that (IPhone 5, 5s, 5c anyone?), the reality is that there is too much external shareholder and brand pressure on the product launch to ever launch a minimum viable product to the open market and then tweak it to a consumers liking. But what about using the lean startup approach to innovation internally to improve business processes?
When managing process improvement, too often businesses get caught up in bureaucracy and multiple layers of administration and signoff procedures. These can lead to lengthy and convoluted innovation cycles and high associated costs. Imagine if a leader was to view their workers as customers. Could the lean startup tenants of co-collaboration and agile development be useful? Let’s use a capital improvement project as an example. How many of us have been in a situation where a problem has been identified by the staff, the engineering team spend 12-18 months designing a solution that when implemented, doesn’t effectively solve the problem? Imagine implementing a minimum viable solution, gaining feedback from the staff in the area and adjusting the solution accordingly. Not only would the solution likely be much cheaper and have a much greater chance of actually solving the problem, the process would engage the team of the area where the change is being made, leading to more ownership of the asset or change when it occurs.
The Lean Startup is a revolutionary innovation methodology designed to get desired products and solutions into customer’s hands more quickly and cheaply than ever before and should be part of any organisations toolkit when managing innovation and process improvement.
Thomke, S & Feinberg, B ‘Design thinking and innovation at Apple’ May 1st 2012 Harvard Business Review
Ries, E 2008 ‘The Lean Startup’
Written by Sam Byrnes, Coriolis Consulting Pty Ltd