Take These Three Steps to Foster Lean Innovation
Guest Post By Tucker G. Marion
Editor’s Note: This is an excerpt of an article that appears in the January-February 2017 issue of the CIMS Innovation Management Report. In it, Tucker Marion–Associate Professor and Director, Innovation Masters Programs, D’Amore-McKim School of Business at Northeastern University—explains that there’s more to lean innovation than meets the eye.
Firms need a new approach to the innovation process. Product and service failure rates have remained essentially unchanged for over 40 years. Global competition, pressure from startups, and dynamic technologies mean that established firms need to be more agile, resource efficient, risk-tolerant, and empowering of their employees.
The author at a recent conference
In short, the process with which they approach new product and service development needs to be more entrepreneurial. Lean innovation is a method that can foster this change. At the Northeastern University’s D’Amore-McKim School of Business we set out to understand—from firms that are new and established, large and small—the important factors that constitute lean innovation. We found that it is a combination of three methodologies that are important when used alone but a catalyst for innovation when brought together. They are the integration of design thinking, a lean development process, and an iterative model of development.
For firms both large and small, ambidexterity in innovation efforts is essential. Innovation ambidexterity is the ability to be effective at not only exploiting current technology and product/service lines, but skilled in realizing truly new opportunities. Unfortunately these skills are rare.
All too often we cite Apple; its last 17 years remains the business case study of our generation. Diverging into new markets (e.g., iPod and iPhone), creating new services (e.g., iTunes), improving and enhancing high-margin staples (e.g., the iMac and MacBook lines) and rethinking how those products and services touch the consumer in new ways have taken Apple to new heights in profitability and market capitalization.
There are other examples as well, like BMW. As one of the world’s most profitable automakers, it has done an amazing job of exploiting existing platforms into different market segments (e.g., all the variants of the 3 and 4 Series) while investing heavily in exploratory R&D, resulting in vehicles like the electric/hybrid i Series (e.g., i3 and i8). There are new-venture examples as well, from Tesla to the now Alphabet (Google)-owned Nest.
In innovation research we look to see how these firms—large and small, new and established—can acquire, hone and leverage their ability to be effective and efficient at both exploiting and exploring their assets. Over the last decade and half, our research with both new ventures and established firms has pointed to a key attribute in developing these skills.
Lean Innovation combines three main methodologies. Each is powerful by itself, but it is their combination that can be transformative. The first is the ability to identify new opportunities and gain a deep understanding of the user through the use of design thinking.
Design thinking, popularized by design firms such as IDEO, enables individuals and groups to obtain considerate, empathetic knowledge of product/service users and their context, and through observation uncover unique and non-obvious insights that can translate into opportunity.
Within this methodology are ways to perform structured brainstorming, near-zero-cost prototyping, and robust user research to understand problems in real situations.
I was recently involved with leading practitioners and academics in a design-thinking workshop at Kaiser Permanente innovation labs in Oakland, Calif. The work being done surrounding healthcare innovation using design thinking was truly inspiring, from rethinking hospital room layout to changing the interaction between doctor and patient.
Similarly, Northeastern University’s School of Law has used design thinking to develop a law innovation lab, the first of its kind. The ability to leverage design-thinking methods to uncover new opportunities has potential in all industry and governmental sectors.
The second methodology is the ability to quickly—and with few resources—develop, prototype, validate, and improve solutions that can leverage an opportunity discovered during the design- thinking process.
“The Lean Startup” and related works by Professor Steve Blank are now required reading for any budding entrepreneur. And rightfully so; the book’s lessons are simple and powerful. However, the concept of fast learning iterations, early validation and minimal prototypes that characterizes key, but bare-bones, functionality is not new. The Wright Brothers, the Apple I computer from 1976, and Microsoft’s early efforts with both MITS and Apple are all examples of a “lean startup” methodology. Within large firms, these concepts are starting to take hold.
Apple’s iPod was developed by a small, empowered team of individuals from inside and outside the corporate walls. Project Purple, which spawned the iPhone, was run in a similar fashion. Firms like the recently acquired Dell-EMC have enacted a systematic innovation process that seeks new ideas, funds winners, and allows teams to pursue their projects through to commercialization.
Information technology firms like ConstantContact and Citrix are also exploring how internally funded startup teams can create new businesses. So far, the results have been promising.
One thing is clear from our research: setting-up idea hunts and having winning teams is the easy part. The hard part is establishing an ingrained innovation ecosystem that funds, mentors, empowers, and rewards individuals and teams for their efforts. Simply building an innovation space and hoping the new ideas come is a sure-fire way for the effort to decline into the boneyard of failed corporate initiatives.
The third method is the most familiar but no less important. To us, lean processes goes beyond Total Quality Management or Six Sigma. Lean processes have a well-established track record of success.
All too often, promising projects are encumbered by onerous procedures, stage-gates, Microsoft Excel forms, and meetings that detract from value-added work. By cutting waste and making continuous improvements, lean processes allow innovation teams to escape some of the bureaucracy and complex processes that inhibit innovation. (As an example, upon taking the CEO position at Ford in 2006, Alan Mulally was dismayed at the dysfunction in Ford’s product development process.)
For a personal perspective, when I was a project manager and lead engineer at former Ford subsidiary Visteon Corp, at least half of my time was spent preparing documents to be reviewed in stage-gate meetings. Buried in corporate reports, I thought there must be a better way.
In 2001, I began an investigation into product development at new ventures. These represent a unique lens into the innovation process; they either succeed with scant resources or die trying. From biotechnology to consumer products, the research sought to understand the hallmarks of a successful process.
My colleagues at Northeastern and I found that the best firms, those that made it to market and were successful despite overwhelming odds, embraced a few common sense principles: Less paperwork, targeted and effective meetings, fewer decisions points and gates, and a focus on milestone management were common traits regardless of industry vertical. These firms did not manage the innovation project to a prescribed process, but rather to goals. This is one reason why SpaceX has developed rockets and spacecraft in a far shorter time and with fewer resources than both NASA and Boeing.
So what does this mean for your organizations? Combine and embrace design thinking, lean startup, and lean processes to develop a sustainable lean innovation process. Doing so can enable you to beneficially leverage your existing products and services while having the processes in place to explore truly new opportunities. But it will take time, investment and support of upper-level management to ingrain these elements into the fabric of an organization.