Class35: Why your corporate innovation process isn’t about innovation at all
Nick Parminter is the CEO of Class35. Here he shares with us his top five digital transformation tips that won't get you fired:
Large corporates spend millions on innovation. They set up labs, carve out departments, hire agencies, invest in startups and launch beta businesses. Some would call this progress. But is it? How much of this innovation work is truly valuable and will see the light of day, nevermind move the dial?
It can be hard to measure the return on investment of innovation in a large company. The uptick in revenue or growth, or new customer acquisition, is equivalent in balance sheet impact to a rounding error for the megacorp mothership. The response from a lot of the most corporate of innovation functions has been to focus on some of the softer benefits of innovation - the harder to measure cultural or learning-centred outcomes. Realistically, innovation departments are a cost centre for most businesses.
No matter how much coverage innovation ventures get for projects for large firms, the internal response can be cynical at best. Colleagues at the coalface of day-to-day dealings with customers, and who spend their days protecting revenues, not thinking about the future, often don’t believe in the work of their more casually dressed colleagues. Perhaps understandably.
The resulting burden of justification has fundamentally skewed what innovation is and does within large companies. Such is the unconditional desire to ‘get things live’, what is described as an ‘innovation methodology’ is more akin to a product development methodology. That is, rather than follow a process that embraces uncertainty and is by its nature a search for a viable product or service, innovation departments fight to make ideas survive, no matter how flawed.
I have lost count of the number of times that I have received a brief, or come across a project, that is absolutely hellbent on pushing out a pilot, even before they have established if or how the product will make money or solve problems for their audience. Even more concerning is that, more often than not, the guinea pigs are family, friends and colleagues - not the target audience. These projects are quite literally testing ideas without a business model, value proposition or any sense of go-to-market strategy with a few mates, at considerable expense - just to be seen to be shipping new things.
The less cynical would argue that they are testing their ability to ship product, and in doing so, are dragging the business on a journey to work quicker and smarter. This would make sense, if the vast majority of these projects weren’t outsourced to agencies or consultancies, and with their roll off comes an almost complete whitewashing of the shortcuts and know-how.
The trendy thing in corporate innovation is describing a ‘venture-like’ process, where they run a bunch of initiatives side by side, and let the winners evolve. Project owners are expected to pitch their ideas for funding, just as they would in real life. This makes a lot of sense, and you needn’t look further than the venture funds that have spawned some of the most valuable companies in the world for validation of this approach.
There is, however, one fundamental difference between the ‘venture-style’ process that corporate incumbents adopt, versus the portfolio processes of funds. Whilst funds accept that 10% of their investments will be successful and the other 90% will provide key clues to backing the next winner, the corporate knock-offs are so concerned about ‘taking the business on a journey’ that they spin passable ‘maybes’ as winners.
If corporates really want to take a leaf out of the venture funds’ book, they should:
Let ideas fight
Once it’s clear what the objective is, i.e. which problem should be solved, the organisation must consider it from all angles. The chances of arriving at the right solution first are very slim.
Identifying a number of answers to any given problem and allowing them the time and space to compete with each other brings clarity. That may mean multiple competitive concepts addressing the same audience group or problem statement - even taking business from each other. You’ll be surprised what rises to the top in a live environment.
So often, ‘failing fast’ is taken to mean building new digital products, services or platforms as quickly as possible. It doesn’t mean that to funds and startups, so why should it to corporates?
It means learning something valuable as quickly as possible: a £25k ‘smoke test’ could tell you much more than a complete £500k platform. Launching a product is one way to learn, but there are many more.
Be selective with methodologies
The innovator’s toolkit is broad, and there are so many frameworks to choose from.
Don’t choose an approach because it’s the flavour of the month. Lean startup, design thinking, hypothesis-driven - all have a part to play. Focus on the best tools for the job. What you are trying to prove will lead you to the best method.
For example, a design sprint is great for understanding ‘jobs to be done’ and finding solutions for them, but won’t find you a viable idea off the bat.
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Logic is as powerful as insight
With the rise of a ‘customer-centric’ approach, logic has become a dirty discipline. The most dogmatic innovation teams won’t listen to any wisdom unless it comes directly from a customer’s mouth.
In reality, logic can take you a very long way. Sensible people can look at a challenge and highlight all the reasons why something may or not be successful. Are there any market barriers or structural opportunities that shape the proposition? What is the size of the prize? These are questions that no customer will ever answer for you.
Never underestimate go-to-market
The biggest killer of ideas and new businesses in the real world is a miscalculation of the complexities and costs of acquiring, retaining and serving customers. It’s no different in innovation projects.
No matter how deeply or widely felt the customer problem is, or how well-received a prototype is, nothing can answer the viability question other than a sensible calculation of customer value.
The irony? This data exists in every organisation, tacitly or otherwise. A startup would kill to have it, and yet so many innovation teams ignore it.