Minimum viable innovation system
This post is a summary and interpretation of the article Building an Innovation Engine in 90 Days published in the December 2014 issue of Harvard Business review.
Innovation require individual heroism or serendipity. Efforts to jump start innovation frequently fail. To solve this, companies can implement a minimum viable innovation system (MVIS) that is reliable and strategically-focused.
All innovations fall into one of two buckets:
- Core innovations extend today’s business by enhancing existing offers and improving operations. Core innovations are expected to deliver value in the near future.
- New-growth innovations reach new customer segments or markets, move to adjacent product categories, often through new business models. New-growth innovations take longer to bring substantial revenue.
New-growth innovations are necessary to close the growth gap: the difference between a business’ growth goals and the growth that the core business can achieve.
The further from the core a new-growth innovation is, the more it runs counter to systems and processes designed to strengthen and support the current business. Corporate systems such as budgets, incentives and strategic planning are designed to further today’s business, not to create tomorrow’s. MVIS can help companies overcome this difficulty.
Follow these steps to set up an MVIS.
- Research. Take three weeks to meet with a dozen clients. Probe for unmet needs. Investigate new developments in and around your industry.
- Focus. Identify three innovations that:
- many customers need and no on is addressing well;
- enable customers meet those needs more cheaply, easily or conveniently; and
- you have special capabilities within your company that competitors can’t easily copy. Wandering into a new market where you have no natural advantage is a common innovation trap.
- Form a team. Assign at least one person that gets up every morning and goes to sleep every night thinking about nothing but innovation. If you have no one fully focused on new growth, you’ve decided not to focus on new growth. Here’s how to free up resources:
- Competitive forces and customer demand are likely already creating unsanctioned innovation cycles within your teams. List all efforts with at least one part time employee working on them. Identify the markets these efforts target and estimate the size of the opportunity. Categorize the big enough efforts into core and new-growth, and consolidate these efforts with the ones you identified as part of step 1 and 2 above.
- Fund the projects. Set a threshold investment amount that project teams can spend without leadership approval. Fund projects as needed, not as part of quarterly or annual budget cycles. Ensure the leadership can make quick decisions to keep the momentum.
- Scale the MVIS. Once you see signs that specific projects are will bear fruit, bring the components of the MVIS that are working well into more formal systems. For example:
- Create an innovation portfolio
- Forecast the pace and scale of investment and the financial impact over a multiyear period
- Create tools to regularly monitor the portfolio
- Keeps abreast of market changes
- Look for partnership opportunities to amplify efforts