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Innovation at 50x
Steve Blank@sgblank
www.steveblank.com
What is Innovation?
Innovation ≠ Incubator
Innovation ≠ Accelerator
Innovation ≠ Startup
Innovation ≠ Lean Anything
Innovation ≠ Open
Innovation ≠ Reorganization
Innovation ≠ Incubator
Innovation ≠ Accelerator
Innovation ≠ Startup
Innovation ≠ Café’s
These are all physical places to do innovation
Innovation ≠ Incubator
Innovation ≠ Accelerator
Innovation ≠ Startup
Innovation ≠ Café’s
These are all physical places to do innovation
Having them does not guarantee any innovation
will happen
Innovation Development
• Places: – R&D, Engineering, Incubators, Accelerators,
Hackathons, Open Innovation, etc.• Methodology:
– Waterfall, Agile, Lean• Pedagogy:
– Lean LaunchPad/I-Corps, Case-studies, Mentors• Metrics:
– KPI’s, StateGate®, ECV, Pivots, IRL, TRL, …• Funding
– SBIR, VC, Corporate VC, M&A, etc.
Innovation Development
• Places: – R&D, Engineering, Incubators, Accelerators,
Hackathons, Open Innovation, etc.• Methodology:
– Waterfall, Agile, Lean• Pedagogy:
– Lean LaunchPad/I-Corps, Case-studies, Mentors• Metrics:
– KPI’s, StateGate®, ECV, Pivots, IRL, TRL,…• Funding
– SBIR, VC, Corporate VC, M&A, Incremental, etc.
Innovation Is?
Satisfying users current or future wants/needs by turning an idea into a product or service
Innovation Is?
Satisfying users current or future wants/needs by turning an idea into a product or service with speed and urgency, using minimal resources and costs
Innovation Succeeds
• Where there is a path to adoption• When it fits into the overall mission and strategy• Because it performs, has metrics, …• It is managed as an innovation portfolio• And has management support (the spirit of “yes”)
Continuous disruption requires Continuous Innovation
Steve Blank
Continuous disruption requires Continuous Innovation
Steve Blank
what’s this mean?∧
Continuous disruption requires Continuous Innovation
Steve Blank
∧what’s this mean?
External Disruption• U.S. Navy assumed carriers would always defend the Western Pacific
Asymmetric warfare = “Carrier-killer ICBMs” = disruption
Continuous disruption requires Continuous Innovation
Steve Blank
∧what’s this mean?
Internal Disruption• The military built encryption hardware to protect classified data
• Waterfall development process and long device lifecycle• Now they post software that enable their customers to implement
their own solutions
Using commercial off-the-shelf software broke the traditional model = Disruption
Our Competitors Speed is a Threattechnology, channels, etc.
Our Competitors Speed is a Threat
Our Speed is the MitigationContinuous innovation, adaptability, lean, etc
Continuous Innovation requires new management tools
Steve Blank
Continuous Innovation requires new management tools
Lean Innovation Management
Steve Blank
Why Lean Innovation Management?
10x the number of initiatives in 1/5 the amount of time
50x
The Problem
Agencies Start as Innovation Engines
New/Disruptive Innovation
• Disruptive• Business Model Innovation
• Better/faster/cheaper
• Innovation requires no restrictions by plans, procedures or processes
• Success = finding a repeatable and scalable business model
• Grows and scales
Steve Blank
Continuous Innovation
Success Creates “Debt”
Success creates• Technical debt• Organizational debt
• Refactoring “cleans up” debt by restructuring it
Refactoring
Steve Blank
New/Disruptive Innovation
Type of Innovation
Innovation Becomes Execution
Process Execution
Disruptive Innovation
• Success means scale
• Scale requires plans, procedures, processes, incentives, KPI’s
• Innovation becomes execution
Refactoring Group
Steve Blank
Continuous Innovation
Type of Innovation
Innovators Leave or Start New Initiatives
Process Execution
Disruptive Innovation
• Founders/early employees don’t fit in execution organizations
• Short-sighted companies: innovators leave
• Far-sighted companies: they start the next cycle of innovation
Refactoring Group
Steve Blank
Continuous Innovation
Disruptive Innovation
Can You Create an Organization that Executes and Innovates?
Can You Create an Organization that Executes and Innovates?
It’s Called an Ambidextrous Organization
Source: James March, Charles O’Reilly, Michael Tushman
An Ambidextrous organization achieves breakthrough innovations
Source: James March, Charles O’Reilly, Michael Tushman
An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way
they execute current business model
Source: James March, Charles O’Reilly, Michael Tushman
An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute
current business model and serve existing customers
Source: James March, Charles O’Reilly, Michael Tushman
An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute current business model and
serve existing customers = We can chew gum and walk
at the same time
Here’s How
Types of Company Innovation
Steve Blank
Three Horizons of Innovation
Source: Baghai, Coley, White
our established capabilities
Three Horizons of Innovation
Source: Baghai, Coley, White
Product Product Product
Three Horizons of Innovation
Source: modified Baghai, Coley, White
Products Products Products
programs
capabilities
our established capabilities
New Three Horizons of Innovation
Known
Unknown
Partially Known
Level of innovation is defined by whether the business model is being executed, extended or explored!
Execute
Explore
Extend
Three Horizons of Innovation
Existing Business Model:Process Innovation
Execute Core Mission
Known
Mission- Critical Projects
Three Horizons of Innovation
Existing Business Model:Process Innovation
Execute
Known
Partially Known
New Opportunities viaBusiness Model Innovation
Extends Core Mission
Mission- Critical Projects
Three Horizons of Innovation
Existing Business Model:Process Innovation
Execute
New Opportunities viaBusiness Model Innovation
Execute/Search
Known
Unknown
Partially known
New/Disruptive Business Model
Explores
Mission- Critical Projects
Three Horizons of Innovation
Existing Business Model:Process Innovation
Execute ProgramsContinuous Improvement
New/Disruptive Business Model
Makes MVP’s
New Opportunities viaBusiness Model Innovation
Runs PilotsMake Prototypes
Known
UnknownPartially known
Mission- Critical Projects
Capabilities/Risk Assessment
Existing CapabilitiesLow Risk
Need New CapabilitiesHigh Risk
Some CapabilitiesModerate Risk
Known
UnknownPartially known
Mission- Critical Projects
Innovation at All 3 Horizons
Existing Business Model:
Process Innovation
New/Disruptive Mission Model
New Opportunities via
Business Model Innovation
Known
UnknownPartially known
Mission- Critical Projects
Innovation Portfolio
Process Innovation
Disruptive Innovation
Continuous Innovation
• Build
• Buy
• Partner
• Open
Types of Innovation
Innovation Portfolio
Horizon 1
Horizon 2
Horizon 3
Steve Blank
Process Innovation
Product Mgmt Is the Current Process for Horizon 1
Horizon 1Extend the core
Product Management
Known Stakeholders
Use traditional methodologies for Horizon 1 projects
Steve Blank
Process Innovation
Disruptive Innovation
Continuous Innovation
Lean Is the Process for Horizon 2 & 3 Innovation
Horizon 1Extend the core
Horizon 2
Horizon 3
Speed & Urgency
Lean
Use Lean Methodologies for Horizon 2 and 3 projects
Steve Blank
Managing Three Horizons of Innovation - Current
Existing Business Model:Process Innovation
Execute
New/Disruptive Business Model
Search
New Opportunities viaBusiness Model Innovation
Execute/Search
Known
UnknownPartially known
Lean Innovation MgmtProcess Mgmt
Managing Three Horizons of Innovation - Goal
Existing Business Model:Continuous Innovation
Execute
New/Disruptive Business Model
Search
New Opportunities viaBusiness Model Innovation
Execute/Search
Known
UnknownPartially known
Lean Innovation Mgmt
Disruptive Innovation
Continuous Innovation
Lean Means Getting Out of Your Office
Horizon 2
Horizon 3
Speed & Urgency
Lean
Steve Blank
• If you’re not talking to 10’s of customers, it’s not lean• If you’re not building iterative and incremental minimum
viable products, it’s not lean
Horizon 3
Horizon 3 Needs To Leave Home
Process Innovation
Continuous Innovation
Disruptive Innovation
• Physically separate from operating divisions
• Company Incubator, etc• Their own plans, procedures, policies,
incentives and KPI’s• They operate with speed and urgency• Goal is to find a repeatable and
scalable mission model
Steve Blank
Intrapreneurs are (Good) RebelsBad Rebels
AngerPessimist
Energy-sappingAlienate
ProblemsVocalize Problems
Worry ThatPoint Fingers
DoubtSocial Loner
AssertionsMe-focused
Break RulesComplain
Good Rebels
PassionOptimistEnergy-generatingAttractPossibilitiesSocialize OpportunitiesWonder ifPinpoint CausesBelieveSocial
QuestionsMission-focused
Change RulesCreate
Source: Carmen Medina www.rebelsatwork.com
Horizon 3 Protects MavericksHorizon 1 Fires Mavericks
• In Horizon 1– Pains in the butt– Always looking at something different– Doesn’t get with the program
• In Horizon 3– The head of your innovation project– Invents your next capability
Horizon 1 ProceduresMeets a Horizon 3 Project
Steve Blank
Horizon 3 Project
Horizon 1 Management
Horizon 1 Management
Horizon 1 Management
“Get to Yes” Corporate support of Innovation in
All 3 Horizons
Process Innovation
Refactoring Group
Company support orgs
Steve Blank
• Task Support Organizations to work inside Horizon 2/3• Assign Finance, Legal, HR, etc.• Job is helping all Horizon projects “get to yes”• leverage existing assets and capabilities is critical
Disruptive Innovation
Success Creates “Debt”
Success creates• Technical debt• Organizational debt
• Refactoring “cleans up” debt by restructuring it
Refactoring
Steve Blank
New/Disruptive Innovation
Horizon 3
Refactoring is an Integral Part of Innovation
Process Innovation
Disruptive Innovation
• Horizon 3 takes shortcuts • Technical shortcuts add up and
become what is called Technical debt
• People/process shortcuts are Organizational debt
• Refactoring “cleans up” debt by restructuring it
• You need a process organization dedicated to refactoring Horizon 3 projects
Refactoring Group
Steve Blank
Horizon 1
Company Incentives & GoalsIn support of Innovation in All 3 Horizons
Disruptive Innovation
Steve Blank
• Companies operate on goals and incentives• Incent mavericks, incent support, incent adoption
Process Innovation
Refactoring Group
Company support orgs
Company Incentives & GoalsIn support of Innovation in All 3 Horizons
Disruptive Innovation
Steve Blank
• Company operates on goals and incentives• Incent mavericks, incent support, incent adoptionIf there are no Horizon 2/3 incentives in the company then there is no real commitment to innovation
Process Innovation
Refactoring Group
Company support orgs
Agency Incentives & GoalsIn support of Innovation in All 3 Horizons
Disruptive Innovation
Steve Blank
• Company operates on goals and incentives• Incent mavericks, incent support, incent adoptionIf supporting Horizon 2/3 is not part of Company goals & incentives then there is no real commitment to innovation
Process Innovation
Refactoring Group
Company support orgs
Positive – Financial Awards, Performance Bonuses, & Honorary Awards
Negative – You can lose product funding
Type of Innovation
Innovation Becomes ExecutionHorizon 1 Adopts Horizon 2 & 3
Process Execution
Steve Blank
Horizon 3 support orgs
Refactoring Group
Continuous Innovation
• Success means scale
• Scale requires plans, KPI’s procedures, processes, incentives
• Innovation becomes execution
Disruptive Innovation
Horizon 2
Horizon 3
Horizon 1
Why Innovation Fails
Shiny Objects
• Technical founder enamored with new tech (shiny object)• Abandons core Horizon 1 business• Treats Horizon 1 as the “old guys who don’t get it”• Company is still dependent on Horizon 1 until new tech gets
adopted– Apple and the Mac– Research In Motion and QNX
Solution:• Can’t demoralize current product team• Need transition plan• Make sure that $’s, people, and infrastructure are in place to
cross the Tech Transfer “Valley of Death”
Leadership is Focused on Now
• Leadership managing agency for current mission• Not investing for the long term• CEO and/or mgmt incentives all on current mission and goals• No incentives for CEO or mgmt on innovation for Horizon 2 or 3
Solution:• Need a Corporate Chief Innovation Officer who understand
innovation• Need Chief Innovation Officers in all Divisions
Innovation Is a Buzzword
• Stop using it to describe everything
Solution:• Use the Horizon 1, 2 & 3 metaphor• Understand that Incubators, Café’s, Shark Tanks, etc. are just
the innovation vehicles• Lean is the methodology for acceleration• I-Corps is the way to implement it
Failure is Career Retarding
• A failed project is to be avoided at all costs– Projects/programs are expensive (years, lots of $’s and people)
• In a Lean organization failure is part of the process• It’s acceptable because failures are MVPs
– Very low cost– Happens Rapidly– It’s how we get to 50x
• Pivoting from a failure gets us new learning
Horizon 1 Uses “Innovation” to Reinvent What Works
• Loses sight that the goal is to move forward, not reinvent what works– Rebuilds work already done by others and already
available as a service– Doesn’t team with others– Build competing architectures– Use different source repositories, different standards,
different ticketing systems, etc
• Fundamental Problems: – Confusion about the goal of innovation in Horizon 1
Innovation Has No Incentives
• No divisional incentives for Horizon 3• No divisional or Senior-level job description for Horizon 3• No strategy/tactics for integration of Horizon 3 into operating
divisions
Solution:• Develop meaningful incentives for Horizon 3• Develop written job description for Horizon 3 support• Develop strategy/tactics for integration of Horizon 3 into the
rest of the organization
Bottleneck: The Intransigent MiddleTurning Go into No
• Top of the organization says, “Do it”• Bottom of the organization
(innovators) ready to go• Middle management kills it
– Actively– Sabotage– Benign Neglect
• Innovation programs die
Steve Blank
Innovation Groups Ready
Middle Mgmt Barrier
Executive Buy-In
GO
NO
Why the Bottleneck?
• Threat– Power, ownership, turf, prestige, pay
• Confused– Job spec’s are still the same– No training on how to support, participate
• No incentives to change behavior• No penalty for ignoring it
Steve Blank
Removing the Bottleneck
• Prove that this can work• Then: Communicate, communicate, communicate
– Big idea – shared goal/mission– Strategy – big picture of how the pieces work together– Tactical implementation
• Update job specs to include innovation support• Change incentives to include innovation support• Shower those who came before with appreciation• Support those who try and fail and try again
Steve Blank
Sales Freezes Talking to Customers
• Sales says “no one can talk to our customers”– Valid concern of pitching new capabilities in place of ones that exist– Belief that they understand all the users needs
• But Customer Discovery is not pitching new products– It’s about understanding user problems/needs and how they use current
solutions– Almost impossible for a single individual to predict all of users needs now
and the future
Steve Blank
Engineering Is Not Talking to Customers
• Engineering believes innovation is about technology• Just talks to the Subject Matter Expert, or.. • To the same small group of users they’ve talked to for the
past 5 years– They’re not talking to the total available market, and so they miss
solving the bigger problems
Solution:• Focus the organization on understanding customer
problems• Focus on solving current or future problems
Steve Blank
What We Now Know
Horizon 2/3 ProjectsAre Not Smaller Versions of
Horizon 1
Startups Are Not Smaller Versions of Large Companies
Horizon 1 Executes Known Business Models
Startups Are Not Smaller Versions of Agencies
Horizon 2/3 Search for Unknown Business Models
We Can Build a Process to SearchBefore we Execute
Lean Innovation Delivers Products and Services
that users want and need in a fraction of the time
Lean Works for Everyone
Gov’t Agencies, Corporations, Startups
Adopted by the NSF(National Science Foundation)
550+ teams, 1,700+ team membersTaught by 50 NSF Sponsored Universities
Lean for Life Sciences at UCSF
• Therapeutics• Diagnostics• Devices• Digital Health
75 teams, 350 clinicians and researchers
Lean at the NIH (National Institutes of Health)
Pilot with: NCI, NHBLI, NINDS, NCATS
Lean at the DOE(Department of Energy)
LabCorps – first teams this Fall
Goal of I-Corps in Companies• Horizon 1 and 2
– Validate that products and services are what customers want and need
– With speed and urgency
• Horizon 3 – Validate that products and services customers never
imagined were possible
– Do all with minimal resources (time, money, people) in a fraction of the time
The Lean Methodology
Lean = 3 parts
Business Model Canvas
Part 1
Customers
Channels
Customer Relationships
Revenue Model
Value Proposition
Activities
Resources
Partners
Costs
Business Model Canvas = summary of the hypotheses of how you create and deliver mission
value for the company and its stakeholders
Part 1
Customers
Channels
Customer Relationships
Revenue Model
Value Proposition
Activities
Resources
Partners
Costs
1. Frame Hypotheses
• Frame Hypotheses
1. Frame Hypotheses
• Frame Hypotheses Business Model Canvas
Business Model Canvas
2. Test Hypotheses
• Frame Hypotheses• Test Hypotheses
Business Model
Customer Development
Customer Development is how you search for the model
Customer Development
Turning the Business Model Canvas Into Facts
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
Customers
Channel
Customer Relationships
Revenue Model
Customer Development is Hypothesis Testing
3. Build Incrementally & Iteratively
• Frame Hypotheses• Test Hypotheses• Build the product
incrementally & Iteratively
Business Model
Customer Development
Agile Engineering
The Minimum Viable Product (MVP)
• Smallest feature set that gets you the most … - learning, feedback, failure, orders, … - incremental and iterative
• It is not a prototype • It is not a deployable version with the fewest features• It is whatever enables us to validate/invalidate a stated
hypothesis • Early on it may be a drawing, a slide, a wireframe, clickable
workflow, etc…
The Pivot
• Definition: A substantive change to one or more of the business model canvas components
• Iteration without crisis
• Fast, agile and opportunistic
• Weeks and $100K
Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
ExecutionSearch
Pivot
Part 1
Agile Engineering
+Part 2
Part 3
Elements of Lean Startup
Lean Startup
Part 1
Agile Engineering
+
+
Part 2
Agile Engineering
Part 3
How to Start an Innovation Engine- 0
• Reorganize around Mission + Innovation• Each Horizon 1 division needs a Chief Innovation Officer
• Drives Continuous Innovation • Finds Horizon 2 opportunities• Starts and Funds 10x the new initiatives for MVP’s
• Each Company needs a deputy director of Innovation• Runs/funds Horizon 3 incubators with I-Corps methodology• Runs open innovation incubators• Provides staff and infrastructure support for Divisional Innovation
Steve Blank
How to Start an Innovation Engine- 1
• Identify Lean Innovation Vehicles• R&D, Engineering, Incubators, Café’s, Accelerators, Hackathons, Open
Innovation, etc.
• Adopt Lean Product Development: Digital Services Playbook..• Adopt Lean Metrics: Hypotheses tested, Pivots, IRL, TRL, …
• Adopt Lean Funding and acquisition: TechFar ..
• Adopt Lean Pedagogy: Lean LaunchPad/I-Corps
• Use Lean Mgmt processes– Agree how to “Hand-off” and “scale” small efforts (hard)– Develop organizational processes/procedures/incentives that support
innovation (hard)
Steve Blank
Start an Innovation Engine - 2
• Educate the company on Innovation – Communicate goals– Communicate process (hard)
• Everyone expects detailed specs like Horizon 1 - bad
– Consolidate innovation efforts (hard)– Recruit teams (3-4 people)– Recruit mentors - one per team (hard)– Get divisional cooperation (hard)– Train the Trainers
Steve Blank
Start an Innovation Engine- 3
• Design Programs– Emphasis on speed, urgency, evidence, pivots– 1½ day “Train-the-Trainers”– 6/8-week “I-Corps” programs– Investments and adoption of H1 and H2 by divisions
• Run Programs
Steve Blank
Start an Innovation Engine - 4
• Rally around a mission not theory• Pick something everyone agrees is a good goal and
congruent with the company’s mission• Legitimatize the need for exploration and exploitation
• For example, for a cybersecurity software company:
“Advance and promote real-time security to protect information and outmaneuver hackers”
Steve Blank
Start an Innovation Engine -5
• Leadership that is capable of managing the issues associated with multiple simultaneous Horizons– Resource allocation– Incentives– Etc.
• Needs to balance a culture of risk taking, speed = mitigation, quick to opportunities, receptive to innovation
Steve Blank
Summary
• Lean Innovation Management is not about efficiency and innovation
• It’s about developing the capabilities necessary to offset competitors who may have equal or better technologies
• It’s how to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments
• It’s about survival in the 21st Century
One More Thing
Innovation Metrics
NASA
NASA/DOD Technology Readiness Level (TRL)
• Formal Way to assess project maturity• Quantify Relative Risks• Data Driven• Adopted by NASA, DOD, FAA, ESA…
NASA/DOD Technology Readiness: Levels 1 & 2
Basic Technology Research• Basic principles observed• Technology concept formulated
Concept
NASA/DOD Technology Readiness Levels 3 & 4
Research to prove Feasibility • Experimental proof of concept• Breadboard validation in lab
Research
Concept
NASA/DOD Technology Readiness Levels 5 & 6
Demo Prototype • Breadboard validation outside the building• System demo in real-world
Research
Concept
Demo
NASA/DOD Technology Readiness Levels 7, 8, 9
Deployment• System Development• System deployed in real-world
Research
Concept
Demo
What Can We Do With All This Data?
The Investment Readiness Level
Investment Readiness Level
Investment Readiness Level
We can do the same for new ventures
Investment Readiness Level
We can do the same for new ventures
Emphasis is on data
Investment Readiness Level
• A Formal Way to Quantify Relative Risks• Data Driven• Analog to NASA/DOD
Technology Readiness Level (TRL)• Use IRL as a way to establish immediate
funding increments
Investment Readiness: Levels 1 & 2
Hypotheses• Value Proposition summarized• Canvas hypotheses articulated
Hypotheses
Investment Readiness: Levels 3 & 4
Problem / Solution Fit• Problem Solution fit• Low fidelity MVP
Hypotheses
Problem/Solution
Investment Readiness: Levels 5 & 6
Validate• Product/Market fit• Right side of canvas
Hypotheses
Problem/Solution
Product/Market fit
Investment Readiness: Levels 7 & 8
Validate• Left side of canvas
Hypotheses
Problem/Solution
Product/Market fit
Investment Readiness: Levels 9
Metrics That Matter
Hypotheses
Problem/Solution
Product/Market fit
Left side of the canvas
Technology Readiness Level
Problem/Solution
Hypotheses
Product/Market Fit
Validate Right side of Canvas
Validate Left side of Canvas
Metrics that Matter
InvestmentReadiness Level
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