Innovation at 50x 081515

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 ≠ Café’s

These are all physical places to do innovation




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


Steve Blank

what’s this mean?∧


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


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


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


Type of Innovation

Innovators Leave or Start New Initiatives

Process Execution


• 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



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


An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way

they execute current business model


An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute

current business model and serve existing customers


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


Source: Baghai, Coley, White

Product Product Product


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


Existing Business Model:Process Innovation

Execute Core Mission

Known

Mission- Critical Projects



Execute

Known

Partially Known

New Opportunities viaBusiness Model Innovation

Extends Core Mission




Execute


Execute/Search

Known

Unknown

Partially known

New/Disruptive Business Model

Explores




Execute ProgramsContinuous Improvement


Makes MVP’s


Runs PilotsMake Prototypes

Known

UnknownPartially known


Capabilities/Risk Assessment

Existing CapabilitiesLow Risk

Need New CapabilitiesHigh Risk

Some CapabilitiesModerate Risk

Known



Innovation at All 3 Horizons

Existing Business Model:

Process Innovation

New/Disruptive Mission Model

New Opportunities via

Business Model Innovation

Known



Innovation Portfolio

Process 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



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


Execute


Search


Execute/Search

Known


Lean Innovation MgmtProcess Mgmt

Managing Three Horizons of Innovation - Goal

Existing Business Model:Continuous Innovation

Execute


Search


Execute/Search

Known


Lean Innovation Mgmt



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



• 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



“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


Success Creates “Debt”

Success creates• Technical debt• Organizational debt


Refactoring

Steve Blank


Horizon 3

Refactoring is an Integral Part of Innovation

Process Innovation


• Horizon 3 takes shortcuts • Technical shortcuts add up and

become what is called Technical debt

• People/process shortcuts are Organizational debt


• 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


Steve Blank

• Companies operate on goals and incentives• Incent mavericks, incent support, incent adoption

Process Innovation

Refactoring Group


Company Incentives & GoalsIn support of Innovation in All 3 Horizons


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


Agency Incentives & GoalsIn support of Innovation in All 3 Horizons


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


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


• Success means scale

• Scale requires plans, KPI’s procedures, processes, incentives

• Innovation becomes execution


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


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


Turning the Business Model Canvas Into Facts

9 Guesses

Guess Guess

Guess

Guess

GuessGuess

Guess

GuessGuess

Customers

Channel


Revenue Model

Customer Development is Hypothesis Testing

3. Build Incrementally & Iteratively

• Frame Hypotheses• Test Hypotheses• Build the product

incrementally & Iteratively

Business Model


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

Thanks!

[email protected]

mailto:[email protected]

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


We can do the same for new ventures


We can do the same for new ventures

Emphasis is on data


• 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


Problem / Solution Fit• Problem Solution fit• Low fidelity MVP

Hypotheses

Problem/Solution


Validate• Product/Market fit• Right side of canvas

Hypotheses

Problem/Solution

Product/Market fit


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

Thanks!

[email protected]

mailto:[email protected]