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In my experience, there are plenty of innovation and startup teams that feel stuck. Despite using lean startup tools they feel as though they are running around in circles and making no progress. It feels as though they have forgotten why they started using lean startup methods in the first place. They have run a few experiments and they have learned a lot. But somehow, all these lessons learned are not really helping them make decisions. They struggle to articulate clear answers to questions like: where are they are right now and what do they need to do next?
What Are We Looking For?
Innovation is the combination of creative new ideas with sustainably profitable business model. Regardless of the idea you are working on or how cool and amazing it is, eventually you have to solve for this equation; are you able to deliver value to customers in a way that is sustainably profitable? Finding such sustainable traction allows you to scale your product through the actions of your current customers (e.g. revenue, retention and referrals).
It is important to note that an innovation team cannot make progress without running experiments. Experiments are a necessary but insufficient condition for success. It is important to always remember that the goal of every experiments we run is to solve the innovation equation presented above. We do not build, measure, learn or create minimum viable products for the sake of it. The build-measure-learn loop is the engine we use to navigate the innovation lifecycle. In order to get a sense of progress we need to know where we are trying to go and the puzzle pieces we are trying to find.
The Innovation Puzzle
To get to sustainable traction, we need to search for and find the key Innovation puzzle pieces and slot them in the right places. These key pieces are described below:
- Problem: At their core, sustainably profitable business models require us to make products customers want. This means that we have to develop a deep empathy for our customers and their needs. We have to understand their pains and the goals they are trying to achieve (i.e. jobs to be done). This is the first and most important piece of the innovation puzzle. This piece is so foundational that if you don’t understand the customer you are very lucky if you are able to ever make a product they will want to buy.
- Solution: Once we have found a customer need worth serving, the second piece of the puzzle involves ensuring that we are creating the right solution to meet that need. This is an iterative process that requires us to create minimum viable versions of our solution, and test those with customers, before we build the full solution. Our goal is ensure that we are building something that delivers value to customers in a manner that they are willing to pay for.
- Business Model: While working on our solution, we can use the opportunity to learn about the costs involved in creating and delivering value to customers. These costs, when set against what customers are willing to pay, can provide an early indication of whether we are on track to find a profitable business model. This business model is the next innovation puzzle piece that we have to solve for. As the right solution becomes clear, we have to solve for other pieces of our business model, such as finding the right channels to reach customers or finding the right key partners to help us create and deliver value.
- Growth: The final piece of the puzzle is growth. It is possible to find a really good business model and then fail to scale it. As such, we have to find the right growth engine for our product, and remove any bottlenecks in our customer funnels. For example, we may have really great marketing tools for acquiring customers, but we may be failing to convert customer interest into revenue or retaining the customers in the long term. These pieces of the puzzle have to resolved before we can get sustainable traction.
There Will Be Many Detours
The above description of the innovation journey is presented in a linear fashion for storytelling purposes only. In reality, innovation is an iterative process that involves taking one step forward, two steps back and then five steps forwards again. Any innovation project will begin with a few pieces of the puzzle already clear, some will be partially visible and other key pieces will be missing. This combination of knowledge versus assumptions will be unique to each innovation project. I have never worked on any two innovation projects that have the exact same pattern of known versus unknown innovation puzzle pieces.
February 11, 2018 at 09:43AM
Forbes – Entrepreneurs