Most companies today prioritise innovation, with approximately 83% rating it among their top three management priorities, and only 3% are ready to deliver on these ambitious goals.[1] This trend is understandable as innovation, when paired with a robust system for its implementation, can drive substantial business growth. The importance of structure and strategy in innovation cannot be overstated.
Scaling innovation, particularly in start-ups, is a formidable task. It demands a readiness to disrupt an existing business model with innovative designs, a meticulously planned product testing program, and the backing of a parent company that allows for rapid progress. These factors can serve as the thin line separating success from failure, underscoring the need for strategic planning and preparedness.
It’s worth noting that not many businesses perceive themselves as successful innovators. In the data and digital revolution age, even these successful innovators face the challenge of continuously acquiring new capabilities and developing faster research and development strategies that maintain their agility.
The digital revolution has fundamentally redefined innovation by altering its end goal. In the pre-digital era, innovation was typically aimed at creating a finished product ready for market release. However, with the increased presence and importance of digital technology, businesses are constantly experimenting with their innovations, refining them even post-launch. This shift in approach has significantly impacted how businesses scale their innovations.
The Four-way approach to scaling innovation
There are generally four ways to scale innovation to its fullest potential. Understanding which aligns best with your business can clarify the process for initiating and efficiently scaling your innovation. Importantly, post-launch iterations and improvements remain essential.
Minimum Viable Product (MVP) Rollout: This approach provides the most straightforward path for innovation. The rollout begins with a limited market and then iteratively expands based on customer feedback. In this scenario, you transition seamlessly from your minimum viable product into full development.
MVP Launch: This method is more challenging. Businesses using this approach must make quick iterations post-launch, mainly because they cannot effectively limit the scope of the launch. Sometimes, this approach becomes necessary even for digital services when network effects are considered. A business may also find it impossible to limit the release of its innovation due to high brand visibility or the anticipation of widespread attention.
Polished Rollout: Here, your innovation can be launched in limited locations or to a select group of customers. However, once public, it cannot be rapidly iterated. Thus, the product must be highly polished at the point of release. By rolling out the innovation in stages, you can validate initial findings and assess how it is received by various customer demographics or in different markets.
Polished Launch: This is the most challenging path for scaling innovation. It requires releasing the innovation to all customers simultaneously, without the opportunity for quick iterations. This puts more pressure on the company to thoroughly test innovation before its public release. This method is typically used for new automobiles, pharmaceuticals, hardware, etc.
Determining which path to take for your business requires answering two key questions:
- Can the offering be rapidly iterated after launch? This is typically easy for software products via online updates and feasible for services but almost impossible for physical products or designs.
- Can the rollout be staged, or must the innovation be released to all customers simultaneously?
Developing a robust innovation strategy involves a combination of introspection to understand the strengths and weaknesses of the company’s innovation system and an outward-looking perspective to identify key trends shaping customer demand and attractive areas for investment. This strategic approach is crucial for enterprises looking to adopt a culture of innovation and drive growth.
Other crucial aspects of fostering innovation in a company include building a culture of testing and learning, involving all team members in the innovation process, and planning for (and even celebrating) failure. Embracing smart failure is not just about accepting mistakes, but about creating a learning culture that is essential for innovation.
Lastly, avoiding the four primary innovation pitfalls can also be integral to a company’s innovation journey. These pitfalls include a lack of focus, being trapped in the laboratory, inaction, and an autoimmune reaction where projects and strategies threatening the status quo are stifled prematurely.
Innovation Through Experimentation
Innovation is crucial in driving business growth and success in today’s digital era. It involves changing products, services, or processes that add value to the organisation. Innovation can range from incremental improvements to groundbreaking and unprecedented ideas.
Traditionally, innovation focused primarily on the finished product. However, businesses must adopt a different innovation approach in the digital age. This new approach emphasises quick experimentation, constant learning, and focusing on the problem rather than solely on the final product. By identifying the right problem and developing tests to explore potential solutions, organisations can bring new ideas to market with less cost, reduced risk, and increased organisational learning.
The story of Intuit illustrates a prime example of this approach. Intuit’s team recognised a pressing problem faced by farmers in India who sold perishable goods. These farmers had limited market accessibility and struggled to find the best buyers based on local supply and demand. Intuit set a goal to develop a product to help farmers increase their income from crop sales by 10%. They created a marketplace platform where buyers and sellers could connect, implemented a service to alert farmers about the crops being grown, and introduced an SMS notification system to inform farmers about market prices. This innovation approach enabled Intuit to increase its innovation premium by 9%, adding $1.8 billion in value over five years.
Experimentation is a vital component of the innovation process. It involves iterative learning, testing ideas, and determining what works and what doesn’t. Rather than eliminating wrong ideas, experimentation aims to quickly and cost-effectively test promising ideas to gain insights and learn from the results. This approach is a key part of the innovation process, helping businesses to refine their ideas and strategies.
There are two types of business experimentation: convergent and divergent. Convergent experimentation is a formal design that seeks to answer specific questions and test the product. It can be used in digital and non-digital environments and focuses on improving elements of the customer experience. On the other hand, divergent experimentation is an informal experimental design that poses a set of questions and utilises prototypes to gather feedback and make decisions. It helps explore new business areas and generate substantially new products, services, or processes.
Organisations must employ convergent and divergent experiments at different stages and parts of their business to drive successful innovation. Convergent experiments are suitable for improving core business areas, while divergent experiments are ideal for exploring new business areas and developing innovative solutions. Digital technology, which offers unique tools and accelerates innovation, can help conduct these experiments more efficiently and rapidly.
There are seven fundamental principles that organisations should follow when conducting experiments for innovation. First, it is essential to start experimenting early in innovation to learn as early as possible. Speed is also crucial, as teams should aim to learn in iterative cycles of days rather than weeks or months. Additionally, organisations should focus on the customer’s problem rather than becoming attached to a specific solution. Gathering credible feedback from actual or potential customers is crucial to validating ideas. Measuring the most critical metric for the innovation’s success is vital. Testing assumptions helps identify risks and uncertainties associated with new ventures. Lastly, organisations should embrace smart failure, which involves learning from failures, adapting strategies based on insights, failing early and cheaply, and sharing learnings within the organisation to avoid repeating mistakes.
Conclusion
Innovation has been widely acknowledged as a necessity in the business world, yet there remains a high degree of uncertainty about its implementation. The true challenge is to go beyond the mere verbal affirmation of its importance to actually allocating resources for innovation and creating successful, market-ready products and services. This, in the end, is what secures the future of any corporation.
In conclusion, innovation through experimentation is essential for organisations to thrive in the digital age. By adopting a mentality of continuous learning, embracing both convergent and divergent experiments, leveraging digital technologies, and following the fundamental principles of experimentation, businesses can drive successful innovation, reduce risk, and accelerate the pace of growth and adaptation to the rapidly changing market landscape.
References:
[1] https://www.bcg.com/press/4june2024-companies-rank-innovation-as-a-top-three-priority
