Faced with digital disruption, many organizations struggle to get beyond ‘innovation theater,’ says Steve Blank, co-creator of the Lean Startup movement. The solution: make innovation part of an end-to-end business process.
As one of the most respected business thinkers of Silicon Valley during the past 20 years, Steve Blank often finds himself called in by the management of large companies to help them resolve an innovation conundrum.
Like many of their peers, these companies have responded to the disruptive threats of digitally enabled start-ups by creating incubators and accelerator hubs outside their core operations to spark transformative products and even new business models. But in consulting with Blank, co-creator of the Lean Startup movement, they confess: “We don’t know what’s wrong. We have all these great things coming out of our incubator but no-one [internally or externally] cares.”
The problem: many of their efforts simply turn out to be ‘innovation theater,’ says Blank in our exclusive Big Thinker video, often brilliant creations that are not destined to make it beyond that unreal world. He even accepts some blame for having unwittingly encouraged such strategy in the early years of the digital revolution.
“We created incubators and accelerators inside of large companies thinking that if all we did was emulate what startups are doing, we would have success,” he says. But it takes more than just setting up a ‘digital garage,’ assembling the best available talent and applying lean and agile processes to create compelling apps, he says.
The flaw is that such activities are rarely aligned with the fundamentals of the existing corporation. “People kind of forget that, for large companies, the goal isn’t to run the incubator and accelerator; the goal is to deploy and deliver products and solutions at speed,” he says.
What often happens is companies start such activities without connecting them to the business core — to sales channels and budgets, to P&L groups and heads of divisions, to incentive schemes and career advancement. In almost every case, Blank hears back: “We put off those hard things ’til later on.”
An end-to-end process
That’s missing the point, he says. What is lacking in most companies is any notion of an ‘innovation pipeline.’
“You need to think of the problem all the way from sourcing to prioritization: any product or service created during incubation needs to be integrated with existing profit centers, stood up within a [business] division or spun out as a new activity,” he says. “Unless we think about this in totality, we end up in individual [innovation] activities rather than a set of processes that can deliver [business value].
“And this distinction between innovation activities as theater versus an end-to-end process is what kills innovation in large corporations,” he says.
Learning to pivot
A related trait of startups that large companies find equally difficult to emulate is the art of the pivot — changing direction in mid-development when circumstances and market intelligence dictate.
As part of the innovation process you may have discovered something needs adjusting in the business model: the product you’ve developed may be just great but the sales team are targeting it at the wrong customer group, he explains. Or you’ve identified the customer requirement correctly, but the product is not quite right for that.
The imperative is to act: “To make a substantive change [even though] you are right in the middle of the development process,” he says.
In a large company, where new development is usually governed by a product management process, that’s sometimes really hard — making it very different from an agile customer development or lean cycle.
“It’s a big idea. The product management process in a corporation starts with a marketing requirements document and engineering functional spec. That may include some agile methodology to develop a product but you’re still on a product management clock speed which requires going through a series of [approval] stage gates.”
Moreover, he points out, there is no real feedback mechanism to actually ask, “Wait a minute, are we still building something that someone wants or cares about? Has the external environment changed or are we now facing a different set of competitors?”
But there is another aspect that impedes any midstream changes of direction. “To be able to kill a project inside of a large corporation is very hard. To pivot requires saying that your initial assumptions were wrong. And requires admission of failure or, at least, you weren't perfectly correct on day one. And such an admission is almost never career-enhancing when you’re part of an execution organization.”