Why Startups Are The Best Way To Manage Innovation
By Tendayi Viki, innovation excellence
Innovation has become an imperative for corporations. The importance
of having an innovative culture is something leaders no longer debate.
In most surveys of corporate leaders, innovation is ranked among the top
organizational priorities. For example, in their 2017 CEO survey, PWC found that innovation was ranked as the number one priority among CEOs.
While the aspiration to innovate
is nearly universal, it is also
clear that corporate leaders struggle with bringing this aspiration to
life. In the same CEO survey, PWC also found that over 77% of CEOs
struggle to get the creativity and innovation skills they need. Part of
the challenge is a skills gap within businesses that are used to
managing their existing product portfolio. This means most of their
employees will need training and coaching before they become effective
innovators.
While it is a challenge to train people to become more innovative,
this challenge is exacerbated when there is a lack of clarity among
leaders about exactly what they need. What exact skills are they looking
for? How do they define innovation? How are they planning to use
innovation in their company? What do they want innovators to do? Do
leaders have the right processes in place to manage innovation?
A lot of leaders do not have very clear answers to the above
questions. This lack of clarity means that leaders can end up investing
in innovation theater instead of real innovation. The goals of this
article is to help provide a lens through which leaders can create
repeatable processes for turning ideas into profitable business models
(i.e. an innovation ecosystem).
What Is A Startup?
The first issue to clarify concerns what we are referring to when we
talk about startups. Most people tend to imagine young people in Silicon
Valley working on some ground breaking technology. This perception has
resulted in companies creating innovation labs packed with whiteboards
and sticky notes. However, this innovation theatre does not represent
startups. It is not even startup culture.
For executives to provide clear leadership in innovation, they have
to understand startups from first principles. Unlike an established team
or organization that executes on a know business model, a startup is a
method for managing uncertainty. And since uncertainty is the defining
characteristic of innovation, the startup is the best known business
tool for managing innovation.
The whiteboards and sticky notes begin to make sense when leaders
recognise that teams working under uncertainty cannot stick rigidly to
long term plans. Instead, startup teams need flexible tools that allow
them to sense and respond to the world. Startups are not just working on
a cool idea, they are also searching for a profitable business model to
sustain that idea.
The Innovation Puzzle
When startup teams are searching for a profitable business model,
what exactly are they searching for? A profitable business model is
found by systematically searching for answers to a hierarchy of
questions.
- Before we creating a solution, we want to know if there is a real customer need to be served and how strong that need is.
- As we are working on our solution, we want to know if it is delivering value customers.
- While we are delivering value to customers, we want to know if we can do so profitably.
- And once we have profitability, we want to know if our business model is scalable.
Answering these questions, means that we have successful innovation.
This is the startup way. This is true startup culture. The challenge for
leaders is to create an internal ecosystem that supports this way of
working within their organizations. Rather than asking for long business
plans, leaders have to ask the right questions at the right time.
Asking about revenue, before a team understands their customers needs,
will stifle innovation – even if the team has a lab with sticky notes
and canvases. Managing startups from first principles, will help leaders
create and sustain innovation within their organizations.
Tendayi Viki is the founder and principal consultant at Benneli Jacobs,
a strategy and innovation consultancy firm. He has worked for companies
including Airbus, American Express, The British Museum, General
Electric, Pearson, Standard Bank, Tetrapak, Whirlpool and The World
Bank. He is nominated for a Thinkers50 Award and is the co-author of The
Corporate Startup, winner of the CMI management book of the year award
2018 in the Innovation and Entrepreneurship category.
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