BUS501: Strategic Management

Today, organizations, especially large enterprises, are often challenged with shrinking revenues from existing products and services. Furthermore, technological breakthroughs and incremental product development no longer necessarily provide competitive differentiators to grow their business. Management needs to investigate how to reinvent ways to sustain innovation and stay in front of their competitors.

The innovation process is often seen as very linear, with business models created from market research results, leading to large development efforts creating products that fail to meet customer's needs.

New product development aims to figure out the right thing to build – the thing customers want and will pay for – as quickly as possible. But why do new products fail so badly everywhere we look? The first problem is the allure of a good plan, a solid strategy, and thorough market research. In earlier eras, these things were indicators of likely success. So what has changed? Today, this approach does not work as organizations operate under extreme uncertainty.

We must learn what customers really want, not what they say they want or what we think they should want. We need to go beyond asking hypothetical questions and observe real customer behavior.

The following model combines ingredients from 4 different disciplines to help with this innovation dilemma:

1. Design Thinking
2. Lean Startup
3. Business Model Canvas
4. Agile

Each part is fit for purpose in the cycle of innovation.

1. Design Thinking – develop customer empathy to generate insights and create ideas

Design plays a significant part in innovative business models, and it is important in creating value for users.

Through working with a product development team in a large enterprise, I have observed how well Design Thinking complements Lean Startup. Lean Startup is taking the world by storm. However, the build-measure-learn cycle does not address the design and ideation cycle – how do organizations and teams identify ideas, customer insights, and leap-of-faith assumptions that need to be validated?

Thinking like a designer will certainly help transform how you develop products, services, processes, and even strategy through contextual inquiry and observing customer behaviors. Immersing yourself in the context and observing customer behaviors helps you unearth details and intricacies of the problem space. Accurate observations will help you generate insights, create ideas, and develop initial product designs for a customer segment. These ideas, designs, and leap-of-faith assumptions can then be further validated using Lean Startup.

2. Lean Startup – scientific experimentation and validated learning

Lean Startup supports the launching of businesses and products. It relies on validated learning, scientific experimentation, and iterative product releases to shorten product development cycles, measure progress, and gain valuable customer feedback. In this way, organizations can design their products or services to meet their customer base's demands without requiring large amounts of initial funding or expensive product launches.

Lean Startup is a learning framework for "disruptive innovation" defined as an unknown problem, customer, market, solution, and the search for "the right thing to build". The primary output is a validated business model through rapid iteration, empiricism & non-vanity metrics to measure progress.

The design thinking process provides a vehicle to generate tested ideas quickly. The Lean Startup approach can then validate the ideas, customer insights, and leap-of-faith assumptions using experiments.

Both Design Thinking and Lean Startup take a very similar iterative and customer-driven development design approach. The combined approach of Design Thinking and Lean Startup provides a systematic approach for organizations to create disruptive innovation.

3. Business Model Canvas – Rapidly create a business model

The Business Model Canvas is one of the most used business model frameworks. The Business Model Canvas allows you to rapidly create and capture the rationale of how an organization creates, delivers, and captures value. Design Thinking informs the Business Model of opportunities (such as who our customers are and what they value). The Business Model can be systematically validated/invalidated through Lean Startup experiments. Lean Startup is the framework to rapidly iterate over the business model.

Ultimately, this allows us to test the business viability and to change and adapt our business model to take advantage of the opportunities. Any part of the business model that is validated can be quickly delivered to customers through small releases (minimal viable products) using an iterative and incremental approach of agile development.

4. Agile – Implement and continuously deliver product features to the customer

Lean and Agile values, principles, and practices allow organizations to amplify the leap-of-faith assumptions by continuously delivering value to users through iterative and incremental development.

Mixing it all together

In the race to create innovative products and services, organizations will need to move away from the linear approach to innovation using assumptions based on market research. The combination of design thinking, lean startup, business model canvas, and agile is a holistic approach that pushes towards customer-centricity that helps provide a framework to create and sustain an innovation pipeline. Ultimately these 4 parts provide a model to build an innovative culture and delight customers with the right product with the right solution and market fit.

To create a sustainable innovation pipeline, organizations may reconsider through design thinking, Lean Startup, and Agile for implementation more than once as the product team refines its ideas and explores new directions.

Source: Chris Chan, https://reflexions80.rssing.com/browser.php?indx=14607139&item=11
This work is licensed under a Creative Commons Attribution 4.0 License.