Chapter 8: Running an Innovation Process

8.1 Set the project up right internally

Arguably the hardest part of running a successful innovation process is helping senior executives to understand why they should back you when you can’t promise anything in return. For all the reasons we have described, this will not be usual territory for your boss. But then neither is what you are trying to achieve.

There are some strong cases to be made: most of the biggest and most valuable innovations of the past 150 years — the aeroplane, the MRI scanner, the television, PCs, social networks, the internet and so on — were not created with profit in mind. And let’s not forget that innovation projects that are run with targets front and foremost rarely meet those milestones (or indeed success by any other measure). That said, many total failures have also been generated by projects set up without clear targets. The challenge will be that you are likely to be competing for funding against projects that are promising a healthy ROI, even if they stand no better chance of delivering it than you do.

But you have one trick up your sleeve. And that is that you should not be asking for very much money. Ask for enough to get you through one or two cycles, where a cycle is enough to try something and learn something. Why would you ask for two and not one at a time? Purely because the process of asking can sometimes be unhelpfully dragged out, and asking for two at a time can, therefore, be more efficient. If the first proves that the idea won’t survive, then clearly the second tranche should not be carried out anyway.

The expectation held by senior management needs to be in line with the expectation held by your team. In other words, that proposition development should precede product development, that some ideas will work but that many won’t, and that the execution of a particular idea may need to change direction several times before a winning proposition is identified.

And the magic formula for doing that is… no, sorry we don’t have a magic formula. We know it’s possible, though, because we’ve done it a number of times with some of the biggest companies and brands in the UK. And each time it has been quite different.

At the simplest level, you can appeal to executive team members who know from experience that the alternatives will likely achieve nothing, and do so on the back of big failed promises which simply make everyone involved look bad. If they know what the alternative looks like, they may be more inclined to try this new approach.

It can help, too, if you can attach it to part of a trend or movement. We’ve mentioned Eric Reis’s book The Lean Startup a number of times and it is certainly helpful that this has earned a huge following and has received mainstream validation and approval from sources such as the Harvard Business Review. The brilliantly conceived ‘Preto-type’ movement has also built mainstream support for experimentation-based approaches whilst acknowledging that many of the techniques have been around for a number of years.

Clearly, it will require a kind of cognitive flexibility to accept that non-predictive product development techniques are actually tried and tested whilst still accepting that they carry no guarantees of success.

But beware. The temptation to revert to more traditional programme approaches will be everywhere. When difficult questions are asked and easy answers present themselves, the temptation will be strong. But no matter how hypothetical a prediction may be made to sound — ‘Let’s just say… if it were to be successful, what sort of a return could we expect?’ — don’t mistake the appearance of a target as it hurtles towards you. Get used to saying ‘I have no idea what the outcome will be, but I can explain to you how we plan to learn more about it’.

The team will need to have a wide range of skills and, if possible, should come from across the business. But more important will be the full-time availability of the team, if only for a few weeks initially.

As discussed earlier, the team should also not be incentivised for the learning project to last longer than it need be or, alternatively, being hurried through.

Checklist for moving on to the next stage:

Executive support for the innovation programme on the understanding that it will be purely exploratory until it has created a clear product
Agreement that budget will be green lighted based on the presence of learning and the absence of
Enough budget for one or two cycles of experimentation and learning.
Full-time staff allocated to the project for a fixed time frame, with clear plans for how the team will return to their day jobs when the project is
A clear and decisive project leader, skilled in the methods we are describing.
No executive intervention during the cycles

8.2 Strategy and context

But where do you start? What legwork is required before you even get a lean innovation unit up and running?

Whenever we start working with a new customer, we like to get a clear understanding of the markets they are currently operating in and their current strategy for moving forward. We may not be in the business of tuning or developing the performance engine, the money- making machine which powers the current business, but we are keen to understand its dynamics. What levers does the business seek to move on a weekly, quarterly and annual basis? What are their current opportunities for growth?

More often than not, the market for the potential revolutionary innovation adjoins the company’s current market in one way or another. And so any existing information about operating in the current market is highly relevant.

A clear view of where a business is heading will also give us insights into how decisions are currently made. Quite often, existing strategy amounts to little more than ‘do the same thing, make more money’, either through doing a bit more of it or by improving margins. Also common are models which — explicitly or implicitly — manage the steady decline of a business by moving towards cost-cutting and margin improvement rather than growth just as a market opportunity decreases.

What is more useful is if the business in question can tell us about any changes they are considering making to their consumer proposition or delivery in order to improve either customer experience or margin. A more developed future plan of this sort can also help us understand where the new product fits into a longer-term road map.

Companies are also often able to offer significant insight into the behaviour of customers or have good research facilities that allow easier insight and access to customer groups.

Where such groundwork is clearly documented, the innovation team needs to arrange to collate and understand all of these existing materials and speak directly with the strategy or research team to understand the material in more depth. Where they don’t exist, a simple context- and strategy-setting phase is very useful, even if it is the result of just a few days’ work.

No company we’ve ever met admits to not having a strategy, but it’s reasonable to ask for a few days in which teams can bring together all their strategic thinking in one place. It would be wise, for example, to speak with senior executives to discover their views of the future, as well as understanding the current challenges facing the business. This can normally be accomplished with a series of short interviews, and, depending on the questions asked, can reveal a lot to both the innovation team and the leadership team members. Asking what contentious issues consistently come up for discussion at leadership level often delivers a lot of insight. It is also very valuable to have senior executives speak about previous attempts to do new things and how they fared.

Read between the lines of what they are saying. If a previous project leader is described as ‘difficult’, ask yourself whether you think that person asked too many questions of senior management, or too few. Why did previous attempts fail?

Meetings with senior executives should not be wasted. While the interviewee should be the one speaking for the majority of the time, this may be your best opportunity to start sowing the seeds for how innovation will work. That said, allow them to be the ones making the suggestions. Imagine a conversation about a previous project where the budget was pulled because early returns weren’t good enough. Ask whether more could have been learned if less had been risked, or whether the project should have been measured on return so early.

When you come to suggest an approach based on learning, executives who’ve recently been considered failures because of the predictive method will be more willing to try something new. If they believe that a more experimental approach is their idea, you have done your job very well. Don’t attempt to take credit for ideas that executives steal from you. Humility is a key character trait for the good innovator.

Where research, market segmentation, customer studies or market performance reports exist, think about how this collateral can help you answer your questions. Ninety per cent of the research from your business (or external sources) may prove unhelpful, but the last thing you want to do is go out and reinvent the ten per cent which helps you answer questions.

Checklist for moving on to the next stage:

You understand the current market.
You have a clear view on a future business trajectory and can share this with The same view is shared by those who will influence the innovation stream.
You can create a clear story for what is going to be different in this new programme.
Senior stakeholders have a vested interest in your success and feel that they’ve helped create the programme.
You have access to any interesting customer research and other analysis work carried out to date

8.3 Building belief

When we work with clients, one of our primary tasks is to build a sense of belief. Belief in the programme, belief in individuals who are going to participate and support, and belief from the management team. As an area of focus this can persist throughout lengthy projects, even as clients prepare to take products to market or understand the implications of a product launch. But it is especially true at the start of the process.

Before we start working with clients, we often hear the most depressing accounts of previous innovation schemes, projects and initiatives. These stories can make the account we’ve shared in Chapter 4 seem like a week in the Caribbean.

What remains is a pathological aversion to the apparent riskiness of the whole endeavour. No longer does the concept of doing something new seem either terribly likely to succeed nor does it appear entirely safe to get involved with. ‘Getting stuff done round here,’ we hear, ‘is extremely time-consuming. XYZ department is very slow / obstructive / unhelpful’ and so on. So, if you’re actually going to do anything, as opposed to simply musing about it, it seems like you’re going to need a pretty big budget.

This is no good at all, because to get stuff done in large companies, we must spend as little money as possible, tangle with as few of these sectarian forces as we can and get output as early as possible. This is how belief is built — one step at a time.

We also need to set the stage for what is to come — we need to start teaching people straight away that most experiments will not produce expected outcomes but they will produce a great deal of learning nonetheless.

We use a variety of rapid techniques to do this, but one that’s really captured the imagination of many companies is our Rapid Start event.

We looked at the typical life cycle of a product development lab (described later) and compressed it to make it fit within a time frame more normally associated with a business trip or a team trip away to review annual budgets.

Within our ‘lab’ environment, we had already reduced the cycle time down to one week for some projects, and part of getting ready for this is getting people used to the idea and build the confidence required to work at pace.

So we wanted to do something much faster than this. What was the shortest period that we could generate value (learning) whilst considering the logistics of bringing together influential people in our client’s organisation? We settled on two days.

Within those 16 or so working hours, our teams shortlist ideas (within the first 90 minutes), develop the ideas into marketable propositions and test-market the ideas in some way, as well as examining business viability and — where necessary — feasibility.

The reaction to these experiments has been dramatic. The world- weary bunch who turn up on day one have little faith that they will be able to achieve much during the sessions. Typically they will feel they know the ‘drill’, having been involved in motivational brainstorms and the like in the past. They are normally surprised that we spend so little time on idea-generation, and are surprised again at how hard we want them to work, often needing to flex muscles that may not have been exercised for quite a while. For one firm, we were in the street conducting customer interviews by 11am on the first day. This was certainly not a standard day for the participants.

Aside from encouraging people out from behind their desks and their comfort zones, these experiments reveal that many of the supposed blockers to getting new ideas off the ground are a kind of fictional constraint — a passing of the blame parcel that is both convenient and expedient in political organisations where the focus is, and should be, on the business of today. The teams quickly see that having the ideas is not the hard part of the process. Instead it is the development, refinement and assessment of the idea which adds value to the business.

When organisations can see how much can be achieved in terms of revolutionary innovation over just a few hours, we start to break down the barriers to investing small amounts of time in working with ideas – and we increase team members’ self-belief that these things can be achieved in their organisations.

Yes, there will always be risk, but if we can prove to the business that we are not risking much and that we will learn, and learn quickly, the risk becomes much more acceptable.

Checklist for moving on to the next stage:

We have proven to the team that we can generate ideas and turn them into something valuable in just a few days.
We have modelled a positive attitude to the negative outcome of experimentation.
We have generated evidence that lean innovation can actually work in the organisation.
We have a group of people who are excited and keen to participate.

8.4 Create valuable ideas

Sir Ken Robinson has a fascinating definition of creativity:

‘Imagination is not the same as creativity. Creativity takes the process of imagination to another level. My definition of creativity is: the process of having original ideas that have value. To be creative you actually have to do something. It involves putting your imagination to work to make something new, to come up with new solutions to problems, even to think of new problems or questions… You can think of creativity as applied imagination.’

Of course, ideas for business are straightforwardly an example of creativity. Or, as Ken Robinson has it; applied imagination.

The trick for us, as it is for Sir Ken, is to ensure that the ideas we’re creating have value: value for the business and the consumer. We already know the idea will have value for someone — specifically the person who thought of it. There’s a reason why an inventor will often describe their idea as their brainchild. And as any parent will know, there’s no such thing as an ugly baby, so long as it’s your baby. Ideas can be the same. So, in fact, we need to do two things: first, strip the idea of the inventor’s value; and second, assess how valuable it is to the business.

The actual creation of ideas, aka imagination — often regarded as the heroic element of new businesses — is in many ways the easiest part, and it’s one which is well understood, if not very closely observed. In his 1965 book, A Technique for Producing Ideas,33 James Webb Young explains more or less all of the techniques needed to go about generating ideas. And he does it in just 40 pages. So if you’re not sure how to generate ideas, you could do a lot worse than reading Young’s book, just as millions of other creative people have done in the last half a century.

In no time, you’ll have the participants gathered and whiteboard markers, Post-its and sharpies in hand. But when you do, remember to set a clear brief. All too often, we’ve seen brainstormees set free with a remit to think ‘big’, ‘outside the box’ and so on. Narrowing the domain will produce better ideas which better meet the needs of your business.

When we are creating ideas for things that a business might go on to produce, we will also need to quickly evaluate that idea to see if it might be a reasonable commercial success. To do that we must strike a careful balance between only favouring ideas which are very close to the business we already understand, and taking off into wild flights of fantasy that would operate in markets we’ll find hard to understand.

The first test for ideas may be surprising and, although a blunt tool, it is effective in finding that space between too easy and too hard. For those who’ve developed ideas, we simply ask them to choose which ones they like the most. When they know that the next step will be to develop the idea out, at which stage they will be presenting and defending their idea to the group, participants tend to quickly pick out the ideas they think most practical.

Checklist for moving on to the next stage:

A list of ideas or high-level initiatives that have potential
A group of people that are excited by, and believe in, some of those ideas.

8.5 Manage a portfolio of ideas

Let’s say I work in a large international consumer packaged goods company and a few formats have been tried for new deodorants. The Australian team comes up with an idea for cat deodorants. Sounds crazy? Well, there are a lot of pet lovers out there with smelly felines and significant disposable income. And so the idea is tried and it fails. The product doesn’t sell. What should happen next?

All too often the corporate instinct is that the idea should be kept secret. When development first starts, the desire is to protect our groundbreaking innovation. As we proceed and start to see the results of the trials, early sales, and so on, we decide numbers should be kept to the product team — others wouldn’t understand the various subtle nuances. And then the project fails and the product line is discontinued, and nobody wants to talk about it.

What’s the problem here? As George Santayana said: ‘Those who cannot remember the past are condemned to repeat it.’ 34 And so, in a few months, across the other side of the world, the team in the UK spend a lot of time thinking about cat-odour-related products. Or someone back in the Australian office spends time researching a dog breath product — ‘Stinkies’. A lot more wasted time, finding out the same things again and again.

But that is only half the problem. Ask around the Australian team about what happens with new ideas. What will you hear? ‘We often start on things but then it normally goes quiet’; ‘Lots of brainstorms but nothing ever really comes of it’. Why is it that we think that our otherwise intelligent members of staff are unable to deal with the concept that we tried something and it didn’t work out? Why are we afraid to go back to them to tell them we valued their thinking, but it didn’t work out on this occasion?

So, we should keep a log of all the ideas we have tried and share it with anyone who is interested. It should be as detailed as possible in terms of describing what happened, and who to talk to if you want to find out more. Should we spend as much time on products that didn’t work? In fact, we can afford to spend more, since the products that succeed will be known about anyway and don’t need to be explained. What about the experiments that produced negative outcomes for the product’s success? Share those too, and give hope to the next generation of product developers. Let them see that the road to a successful project is rarely free from obstacle and setbacks.

And what if another team has tried your idea before and failed to make it work? Does that mean you shouldn’t give it a go? Not at all. But it will give you some pretty big questions to challenge. If you are to succeed where they failed, you will need to be able to work out why. Perhaps Minty Dog biscuits will work only in the Middle East. Or perhaps you have found a whole new way of selling smelly-kitten- trousers to the OAP market. It doesn’t matter what it is, but if you can save time, with research already done, you can invest more in removing the assumptions which have not yet been addressed.

8.6 Build around propositions

Think of ten ideas.

Done?

Odds are that’ll take you about five minutes, especially if the types of ideas you want are closely defined.

Now write a paragraph explaining each idea.

That’s a bit more time-consuming. It’s stopped feeling like a game and started feeling a little bit like work.

Keep the momentum up by quickly producing increasingly well- developed versions of the proposition. Bear in mind that in each iteration you are not just focusing your lens on an already complete thought but, rather, developing the idea. It might feel as if you are merely rearranging words, but what you are actually doing is changing the meaning of the proposition in each turn, and hopefully improving it, but certainly moving it along so that it can be improved at some stage.

We ask that each idea be turned into the simplest of propositions, a ‘value hypothesis’ or ‘why would anyone want it?’.

Customer. Who are the customers you are creating this for? Is it 30-year-old mums in the south of England? Fifty-year-old single men in France? Kids with an interest in technology? The product has to have an audience.
Problem. What problem do the customers have that you are trying to solve? Be aware of the fact that your customers may not know they have a problem now, even though they might one day be unable to live without your product — think iPod, dishwasher, smartphone and so on. In this scenario, you might choose to position your idea as an opportunity rather than a solution to a problem. The smartphone, doesn’t ‘solve a problem’ per se but it does exploit an opportunity ‘to enhance people’s access to information and content on the move’.
Solution. The very pithiest description of your answer to their problem: for example, ‘store entire music collection in your pocket’. Wiring diagrams are not required in proposition statements. We don’t need to know whether storage is on magnetic disc or solid state. We just need to know what it does for the consumer.
Alternatives. Are there any alternatives currently available? What do consumers do today to solve the problem?
Advantages. Why is your solution better than the alternatives?
Commercial opportunity. How will you make money out of solving the customer’s problem?

A small group can typically create a draft proposition statement for an idea in just a few minutes. Yet big businesses have been built on less understanding than you will gain if you can get these simple proposition statements right.

You may also find yourself suddenly blocked by something which hadn’t previously seemed important. For example, do you really understand what the competitive landscape is like, or how rival firms solve customers’ problems?

If ideas are the input to this process, the key outputs — in addition to the beginnings of a defined proposition — are assumptions and, therefore, questions. Is the problem you have identified genuinely worrisome for the customer? How successful are the alternatives? What are the attitudes to them in reality? Are there enough people in the world who really match your customer profile? Is your potential customer really willing to pay what you think they will pay? Stand back from your proposition and ask yourself; how realistic is this picture? Have I invented the Segway,35 or something like it? Now, and not after all the money stuff, is the time to get to grips with the proposition.

Let’s look at a product that could have benefited from this initial review, Microsoft Zune:

Customer. Music fans.
Problem. Not being able to take their music collection with them when they are not at home.
Solution. It allows their whole collection to be stored on a small portable device.
Alternatives. Apple
Advantages. None. It is less well known, has a less vibrant ecosystem and is otherwise undifferentiated.
Commercial Significantly less than the Apple iPod, which already has a big chunk of the market.

And a product that is successful, Google AdWords:

Customer. Existing advertisers, and companies who hadn’t previously advertised because it was too
Problem. Expensive media is often not seen by those interested in buying
Solution. Ability to target those specifically searching for a product or solution.
Alternatives. Media spend across specialist websites or print titles.
Advantages. It is more immediate and precise; it can be bought in smaller units.
Commercial opportunity. The value of the entire traditional media industry, and more!

From just this simple analysis, we will focus our attention on who matters most to our business. This may seem obvious in retrospect but can be confusing at first. Note that we haven’t even mentioned consumers as part of the Google AdWords case. In fact, when you’re trying to understand a platform (and many models have platform elements), you will need to think separately about the two sides of the platform: advertisers and searchers in Google’s case.

In six questions, we have started to think about who our most important audience is, why we matter to them, who our competitors are, and how much we might be able to charge for our product (clue: often this is zero).

By starting to create a simple model of how large an audience is, and how much they might be willing to pay, we are halfway to creating our revenue case. Now an initial estimate of costs will give us a first indication if we have a viable business on our hands.

But what if we don’t? First, don’t panic. In the rollercoaster of idea development, this can be a low point. But many successful business owners will tell you that this was the revelation that led them to their real breakthroughs; it was this adversity which, in fact, set them on the road to discovering the true meaning of their idea. Like so much of what we will discuss, the drafting of a plan, using Excel, using the business model canvas we discussed earlier,36 using the back of a cigarette packet or whatever — it is an experiment. And experiments produce learning, and not money.

If the first draft doesn’t work, focus on what will need to change to make the idea successful. Do we need to rethink the customers, the problem, the differentiation, or how we will charge?

Of course, not all businesses are viable, even if they would have a potentially huge demand. That free ice-cream stand on Bondi Beach would have plenty of customers but would make no money! What do we need to introduce to make a profit? Membership, sponsorship, a price for an ice cream? Make sure you account for how your business model has really changed. Is sponsorship your model? Well, the beachgoers of Sydney are no longer your customers (some would say they are now your product); instead, sponsors are. What’s their problem? It’s probably got nothing to do with ice cream. And so on. Same idea, different propositions.

Checklist for moving on to the next stage:

A proposition which you and the team believe in, even after you’ve been forced to fill in the blanks.
A clear list of the assumptions you will need to validate to know whether your proposition really will be a consumer success.

8.7 Harvest assumptions

The fewer assumptions we take into development, the lower the chances that our assumptions will prove false during development.

At times, the desire to sweep assumptions under the carpet can seem integral to the character of entrepreneurs. That may work for the luckiest and most intuitive of them but, for the rest of us, assumptions are things we need to learn about.

We shouldn’t try to ignore them. We should seek them out.

Turning assumptions into facts is the key goal of the product developer. And of course this is a process of learning.

When we find that an assumption is false, it will lead us back to our original hypothesis, and that in turn will lead us to make changes to our product, how it works, and therefore the assumptions that underpin it.

Maintaining a list of assumptions, and our plans to validate them, is as essential as maintaining a risk log during project delivery. Indeed, assumptions not validated by delivery should probably go on that risk log.

Numerous techniques exist for finding more assumptions. For example, when you are further down the road with a particular product concept, try to construct an end-to-end story of how it will be used (also known as a ‘user journey’). What must your customer do first to find, buy or use your product, and what happens next? Now go back and overlay the assumptions you are making at every stage. Does your customer buy your product online? Assumption: target market is comfortable with e-commerce. Assumption: target market has a credit card.

Some assumptions — like these — can be answered easily, whereas others will require you to set up and run your own experiments, or carry out further research.

Furthermore, some assumptions, ultimately, cannot be answered. But every unchecked assumption is a strike against you as move to the next stage — a problem which may come back to challenge the overall feasibility of the project. It’s best to have as few as possible.

8.8 Compensate for diversions in technology and marketing

We know that if the product is really revolutionary, it will take us out of our comfort zone, either technically or in terms of understanding the market to which we are selling. Or both.

For such new products, we will often spend as much time understanding the new market or technology as understanding the new product itself. We also know that lack of fluency in either technology or market, is a key predictor of failure. Clearly, we need to try and mitigate this weakness, by being even stronger in other success factors and also by tackling the market and technology challenge head on. But how?

The first answer is a rather unfashionable one, in the business world at least, and that is we must tackle the challenge with humility. We need to understand, right from the start, that we know little about the market for our new product. We know little about how people will react to it, how important they might find it, whether they will care, whether they would ever talk about it. Even if we know a whole lot about something else, we know nothing, or very little, about this. We need to learn.

And to learn we must either provoke consumers in some way, to see how they respond; or we must do our best to get inside their minds, to understand how they really think.

Those are our only two options. We do not believe there is a third option whereby we get the customer to design the product, or provide direct feedback on it.

8.8.1 Provoking a reaction

We’ve already talked about techniques where we have found out with a great deal of certainty how customers will react to a proposition by simply getting them to react to that very proposition. We have created simple tests and seen how the customer reacts — will they buy the product, will they complain, what questions will they ask, and so on.

8.8.2 Getting into the head of the consumer

The growth of a huge industry around profiling and segmentation of customers might lead us to believe that the cost and effort involved in developing such understanding will be enormous. In fact, what we are trying to do is to create something very basic and fundamental in our nature. We are trying to build a relationship with, and comprehension of, our potential customers. Through conversation and interaction with those customers, we can see clearly what previously may have seemed quite opaque. What do they really care about? Why do they behave the way they do? What are their priorities? How do they relate themselves to the brands and organisations they interact with?

Often the sources of this insight are disarmingly obvious. In many cases, opinions about our products and categories are out there on the internet, just waiting to be read. Particularly with new social media platforms such as Tumblr, consumers will often tell complex and nuanced stories of the problems they are trying to solve, and their attitudes to life, to challenges and to brands. All you have to do is read it.

Not much more effort is required to take the next step, and that is to speak directly to potential customers of your product. In these conversations, consider what customers really care about rather than what they seem to care about. Ask them questions about what they find frustrating, or delightful, sad or fabulous. Get them to talk about things they love and things they hate. Let them talk. It is only when the customer is taken too literally, or asked to don the hat of the product designer, that these interactions are wasted. We have been in endless workshops with customers describing the perfect product. First, it will have every feature they’ve ever seen; secondly it will be… let’s see, ‘easy to use’ — ‘a button for everything’; next it will be cheap. They will then walk straight out of our session and buy an iPhone. Why? Because they don’t know what they want, and they suck at product design. Yet, get them to talk about what they love about music, or what they fear when it comes to their own data, and you can start to understand what the driving forces in your own product design should be.

And try and create a meaningful model of the customers rather than a formal design persona. Surround yourself with your customers, photos from the sessions you had with them, verbatim quotes, self- profiles they created.

Remember that you are not just looking to build a picture of the consumer’s life in which your product might fit. You also want to understand what the language should be to talk to your would-be consumers about your product. How do they talk to each other, how do they talk about the things they care about? Clearly you don’t want to imitate them in your brand language, but this input will be vital in understanding how your marketing will be digested, and hopefully how it will be talked about.

8.9 Adapting to technology challenges

When it comes to technology, the problem is different. There are two sorts of key technology challenges: a lack of specific skills; and a lack of understanding of a particular challenge. So, for example, in considering the creation of a new online storage service, we may not have the skills in-house to correctly plan, estimate and oversee the technical development. That is certainly a challenge. Even when we do have those skills, we then have particular key questions to answer. Namely, can the product be produced at all, i.e. is it even possible? How much will it cost to produce and / or operate it? Do we have any options in production and operation, i.e. can it be made to be viable by doing things differently? Finally, which — if any — of the elements of producing the product can be protected to create business advantage, i.e. is there any patent potential?

In order to refine and define the proposition effectively, we need to have at least solved the first challenge. Whether through hiring, partnering or calling in favours, we need to have technical domain experts available during the planning and definition phase of the project.

As we saw from Cooper earlier, the closeness of the technology at question, to the business’ established strengths, is a strong predictor of success. In other words, a lack of such expertise is a key risk.

The solution is to invest in bringing the right people on board but to avoid getting them to solve the problem straight away. Faced with a new challenge, any technologist worth his or her salt will instinctively try to solve the problem immediately. It’s the same human nature that got them into technology in the first place. That doesn’t mean they will start creating prototypes or writing code straight away, but you can guarantee they will start thinking about how to engineer the end product. And often they will start thinking about how to remove all of the problems from their previous project. Thoughts — in short — will turn to devising the perfect solution to your problem.

That will be a great objective. But that can be tackled later. For now, you need the technology team to switch gears, identify the questions they don’t know how to answer yet and find ways to evaluate those problems, as well as doing what no engineer likes doing to support your work — creating estimates for building and operating the platform in production. Again, beware fortune-telling. What you’re looking for is an order of magnitude so that you know whether you’re likely to ever recover your costs.

The building of the perfect solution can come later, when you are certain that is what you actually want to do.

8.10 Incubation cycles

We arrive at this stage with an idea in which we have some faith. We probably still know little about it and are still some way away from being able to make proper predictions, but things are moving fast.

Of the assumptions we take out of the ideas generation phase we will have three groups:

Assumptions about technology — can we make it work?
Assumptions about customers
1. How big is this problem we have identified?
2. How passionate do customers really feel?
3. Are customers willing to use our solution to the problem?
4. Do they understand it?
5. Do they find it acceptable / desirable?
6. How do consumers respond to our differentiation? g What will consumers really pay, if anything?
Assumptions about the business
1. Who are the competitors?
2. What are the real costs of doing this?

Our job now is to evaluate each of these assumptions through a series of experiments. We often describe this stage as ‘the lab’. Like the incubation theme, the subtext is clear. The idea still has a fragile quality at this stage. We are nurturing and developing it, hoping to evaluate strengths and weaknesses through experimentation. The idea will undoubtedly develop as it progresses through this stage.

Let’s look at an example of how we move the product forward through evaluation.

Imagine we want to discover how consumers relate to a problem. Using an example from Fluxx, we were looking to understand the huge problem of food waste. Up to 50 per cent of food sold in UK supermarkets ends up being thrown in the bin by many households. Clearly this is incredibly wasteful, both for the country as a whole and the consumer in particular, who could benefit to the tune of £100s a year if they could merely improve their use of food and throw less away — and, therefore, buy less in the first place.

It is, by any measure, a huge problem. But do customers care enough to do anything about it? And what, if anything, would help them solve this challenge?

Our hypothesis was pretty simple. We suggested that if consumers found it easier to keep on top of what food they had in their fridge, they would be able to make more informed decisions, and make better use of the food they already owned.

In some senses, this is not a new idea. Certainly the idea of the ‘fridge of the future’ is such an old idea that it has really become the fridge of some imagined past, belonging more with black and white television and early microwaves than our current generation.

The product we had in mind was a sensor which would automatically tell you what’s in your fridge wherever you were. Obviously, this is an extremely difficult thing to manufacture, and we certainly couldn’t make it just to test it. So we conducted several experiments. Two of which two are described below:

8.10.1 Stick it to your fridge

We accosted customers at a number of large supermarkets and asked if we could help them pack their shopping. We then asked those that agreed if they would be willing to take part in a study aiming to reduce food waste. To do this, we needed their email address. Nothing else. We also asked them to estimate how much food they wasted and to give us an estimate of how much food (by value) was thrown away, unused each week. We recorded the use-by or sell-by dates of all of the food in the customers’ baskets.

The next day we sent the customers a print-out of what was in their fridge divided up by the days in which it would expire. We even provided handy tips and advice for what to do with the food which needed to be used up each day.

Obviously, our method was neither internet-connected nor terribly clever. It did not know when consumers had used food. And so we asked customers to cross off goods as they were used.

Well, first of all, we learned how many people actually gave a hoot about food waste. Your email address may not seem that valuable but to give such personal information to a stranger with nothing more than a clipboard and a winning smile means something. Don’t believe us? Try standing in the street and asking random passers-by for their email addresses.

Secondly, we learned about what people will say when you ask them whether they waste food. We did not expect this to be an accurate picture of whether food is, in fact, wasted but rather it allowed us to understand the attitudes people are willing to articulate in public.

Finally, by following up with each of the participants at the end of the week (most food you put in your fridge lasts between a week and ten days), we were able to find out how much food the customers threw away, how this varied from their estimate, and whether they felt the list had helped them (for those who had one) and how.

Of the 20 people we included in the survey, we supplied fridge door lists to ten. Those ten reported throwing away significantly less food than those who didn’t receive a list.

Our conclusion? More information, delivered in an easy to use way, will help customers to reduce their food waste.

8.10.2 Whatsinmyfridge.org.uk

We refer to this as the ‘Dropbox’ technique. We don’t know if Drew Houston, the founder of Dropbox, was the original pioneer of this approach, but it’s certainly a widely talked about example of how to test an idea.

And the idea is that you create what appears to be a fully functioning product in such a way that consumers are totally persuaded that it is real, and this way we get to see a genuine reaction towards it. Drew created a video of his product in action, syncing files beautifully across multiple computers and put that in front of the sign-up form for beta users. The 10,000 sign-ups they received convinced them that the product had a strong market.

Our approach was the same — to gauge interest by setting up a site and signing up beta users. In our case, the execution was even simpler; we set up a web page to see how many signed up to it:

Of the people who visited the site (we promoted it with Google AdWords), 45 per cent clicked on the ‘I want one’ button. We don’t know if they would have converted into a sale — but these numbers at least give us some hard evidence as to the desirability of the product and how hard, or easy, it will be to market it.

Running a lab requires a great deal of discipline. You might expect the relatively unstructured nature of the work would mean that it is difficult to judge progress. In fact, with a small team all working at the same location, it is relatively straightforward to keep the team together and working effectively. Daily team meetings are all that is really required to keep everyone aligned and sharing their learning with each other.

8.11 Cell structures

Over the years, we have toyed with various models of setting up new projects and products inside existing organisations. We’ve found that there will always be a tension about how close the new business is to the existing company, and exactly how it will fit into the firm’s existing hierarchy.

To date, we have sought to find ways in which a company’s current team can be very closely involved in the new product or proposition. The thinking behind this is straightforward: long-standing employees bring with them knowledge about the business, the ability to negotiate its many networks, and the promise of the ability to merge the new proposition back into the parent company as it comes to fruition.

While these statements remain true, we now firmly believe that if the new business is of a genuinely revolutionary nature, it must be placed outside of the parent organisation to a significant degree, even if it employs staff from that parent company. We do not necessarily mean that it should be physically, or geographically, separated but it must sit outside many of its reporting structures and constraints.

Indeed, the language we may choose to describe such new ‘organisations’ will have more in common with the textbooks of military strategy than business strategy. This is not the crass borrowing of military lexicon we have seen from marketers (‘targets’ and ‘acquisitions’), but rather how to structure units based on the learning of military special forces when creating guerrilla units or ‘cells’ operating deep behind enemy lines. In order to carry out an essentially insurgent activity, in a context where much greater latitude, improvisation and initiative is required, a structure external to the main military hierarchy is required.

What is created is a cell of specialists with a flat command structure, and a relationship to one or two of the parent company’s most senior officers. These senior officers are very hands-off, but responsible for the overall direction and objectives. They are also responsible for ensuring the cell is as well protected and well supplied as possible tapping into the logistical and other resources of the parent on an ad hoc basis. Let’s call them the ‘handlers’, if that’s not stretching the analogy too far.

Thus the team we have set up is, therefore, autonomous in decision making but supplied and protected. A critical part of this is for the handlers to shelter the group from being blocked, or slowed, by the traditional politics of the organisation, whilst providing them the funding and resources they need.

So the role of the handlers becomes critical. They must make sure that the cell has understood its remit and sticks with it. The cell must be self-sustaining, but under strict control. They must be considered vital to success, yet expendable if things go wrong (we just mean they can be redeployed, of course, not left behind enemy lines).

Multiple cells can be tasked at the same time and different cells do not necessarily need to be aware of each other’s existence until this benefits their own objectives. And so it should be for the organisation as a whole; the need to see the outcomes of the new units, without being necessarily involved in their working or their methods.

Do such structures seem excessive or counter-intuitive? Well, it’s how Apple developed the iPhone. It is the structure used by IBM to transform their business from hardware and software to consulting. For sure, it is also the structure used by companies who have not found success, but our assertion is that companies who have succeeded with genuinely revolutionary innovations have rarely, or never, done so from their desks in the core of the parent organisation.

8.12 Managing up

Often, the hardest part of staying on track is telling the truth to senior people, even if that truth is something which does not sound like the sort of thing a confident, experienced and successful businessperson would say, such as: ‘I have no idea what is going to happen here.’

The truth is that no one could know the answers to these questions. And the best approach is to make a virtue of the essentially unknowable quality of the work you are doing.

Practise humility, honesty and straight-talking. Gain a reputation with senior management for spelling out the reality of the situation and being clear that there really aren’t any alternatives.

Deep down, your bosses will know that uncertainty can’t be made to disappear merely through the setting of targets and, hopefully, one day soon they will come to appreciate your approach. But never underestimate the challenge of managing upwards in the organisation. The importance of the ability to do this is just as great as keeping your teams on track as they build out and evaluate new propositions.

8.13 Making it real

All of this will get you to a much better idea of what you should be developing. One fateful day — hopefully not too long after you have started — you will have something worth the blood, sweat and tears of the development process. If you’ve done it right, you will have a lot of facts about your proposition. You will be able to give real answers to the key questions and assumptions which make the idea work. Hopefully too, you’ve been able to learn about which elements of your project matter most to your customers and add the most differentiation in the market place.

Will this spare you the standard experience of product development: endless cycles, delays, confusion and complexity? What can you do to make the next stage of the process less painful? And do we need to change our behaviour to re-emphasise confidence over learning, and certainty over doubt?

Certainly, a different style of leadership is needed. Precisely because you have learned about the proposition you are building, you should stand up for the ideas that you know are right and focus the attention of the development team on the areas you know are the most important for the customer.

The best way to communicate this certainty is by sharing both the results of the experiments you carried out and the details of how they were conducted. But be careful to also include the experiments you carried out that didn’t seem to work out when you tried them. The importance of this point is that showing your failure is proof of your honesty and objectivity, and when you present them with positive outcomes, they are believed all the more.

Try also to avoid believing that the picture of the product you have in your mind must match exactly how it will end up. Just because something worked well in an experiment doesn’t mean it can’t be made to work exactly the same way in the development stage.

Remember why you built those imperfect prototypes in the first place. As we discussed earlier, the details of the final implementation can make the different between a success and failure, especially when we include all the nuances of pricing, distribution, marketing, support, sales, returns… whatever factors are involved in determining how the customer experiences your product.

In advertising agencies, when creating communications, the teams are divided up between ‘creative’ (who make the concepts) and ‘design’ (who actually build the final communication product). More often than not, the ‘design’ teams have as much to do with a standout campaign as the ‘creatives’. Every member of your team, whatever they do — be it packaging, marketing, distribution, design or quality assurance — should be able to see how they can make the product better through execution. Be relentless. Encourage them, both with knowledge you have gained throughout the proposition development and with the enthusiasm you have for the product and how it will create value for your customers. Now is the time for you and your team to be passionate about the product you are building.

As Napoleon Bonaparte famously said: ‘The role of the leader is to define reality and give hope.’

8.13.1 Reviewing your journey

Just how far from your core business have you ended up travelling? Remember that it’s not just the product you will need to build; it is the entire business ecosystem in which it lives. And if you have found a new market or business opportunity to pursue, it is likely that you will need to break new ground to create all of those functions, as well as the product itself. Consider whether a whole new division should be formally set up to develop, launch and run the new product. Many of the clearest examples of businesses breaking with tradition and entering new markets (such as Hewlett Packard getting into the laser printer business) tell of a team for the new business which is organisationally, and physically disparate from its peers in the existing business.

Obviously, all products are different. All companies are different. And most people are pretty different. And so the exact approach that you follow will undoubtedly be… different. We’ve tried to be as clear and simple in our explanation as possible. No matter what you are working on, we believe there’s a huge amount of value in taking a deliberative and clear-headed approach to planning how you will navigate your organisation’s built-in machinery, and loosen up the ties that inevitably will bind you to the way business is done today.

By never losing sight of the fact that you are working against the grain of the company in which you are employed, you will be armed with key advantage over all those who have come before you in trying to do new things.