Turbocharge Your Innovation Project with Lean Startup

by Steven Snyder on September 15, 2014

Break Through PictureOver the past several decades, lean management techniques such as value stream mapping and root cause analysis have yielded untold billions of dollars of savings, helping businesses run more smoothly and efficiently.  Still, these approaches center mainly on optimizing existing operations and provide little guidance for those who wish to introduce radical innovation in their organizations, like introducing a new product line or entering a new market.

Fortunately, a new set of tools—inspired by lean principles—are emerging to help organizations grapple with this messy and unpredictable world.   This new approach, called Lean Startup (or Lean LaunchPad), emanated as a tool to help budding entrepreneurs, but is increasingly being tapped by forward-thinking organizations who aspire to increase revenue and profit through breakthrough innovation.

At the core of Lean Startup is the recognition that uncertainty and unpredictability are inherent in the process of discovery and invention. Thus, organizations who seek to improve their innovation capabilities need to become experts in navigating the inevitable risks that stem from the unknown.

Lean principles focus on eliminating waste.  With innovation projects, waste comes from continuing to invest time and resources on a strategy that ultimately turns out to be wrong or suboptimal. The earlier you can detect these mistakes, the earlier you can pivot to pursue a more appropriate course of action.

How does Lean Startup help you detect and correct mistakes early in your innovation journey?

With Lean Startup, you first explicitly identify all the assumptions inherent in your new business venture, specifying them in the form of testable hypotheses.   Then, you systematically test the most crucial assumptions through carefully constructed experiments designed to confirm or refute your hypotheses.  The more quickly you gather data on your most critical assumptions, the more likely you are to discover errors early, and not waste valuable resources on dead ends.

To help you organize your hypotheses, Lean Startup comes with a new vocabulary, the Business Model Canvas, consisting of the nine crucial elements that often distinguish between success and failure. Through the Business Model Canvas, you delve into questions such as: Which customer segments are you targeting?  What is the value proposition you are offering each customer segment?  What revenues do you expect to derive from each segment?

Recently, the Mayo Clinic ran six teams, each with a new business idea, through a Lean Startup bootcamp. One of the teams was piloting a radical new invention for healing wounds. Before starting Lean Startup they were quite sure that they clearly understood the market opportunity.  To their surprise, when they began to interview doctors, they found that the market segment they thought would be most receptive to this new technique actually showed little interest.  But, when they began to explore a different type of wound, doctors responded much more enthusiastically.  In fact, their interviews revealed that the economic value of their procedure in this new market was ten times more than they previously imagined.  The team pivoted, and is now refocused on this newly discovered, more profitable, target market.

Lean Startup brings clarity, precision and focus to a world historically inhabited by wild guesses and miscalculation. Both the National Science Foundation and the National Institutes of Health have endorsed Lean Startup/Lean LaunchPad as the preferred method for invention commercialization. Over 5,000 teams have benefited from this approach, testing over 100,000 hypotheses, resulting in over 20,000 pivots.

It is well known that human beings tend to be overconfident that their beliefs are correct.  The power of Lean Startup is to force you to go out and test the implicit assumptions you might otherwise take for granted. You will probably be surprised by what you find.

Evidence Based Innovation Comes of Age

by Steven Snyder on May 23, 2014

Sometimes when you get a first glimmer of something radically new, you just know it will change everything. VISICALC, the Mac, the Netscape Navigator, and of course the iPhone, all come to mind. Last night, I had a similar feeling at the Mayo Clinic. Something big has arrived, allowing large organizations to dramatically accelerate their innovation pipeline.

What’s new is a mixture of software and process stemming from Steve Blank’s work on the lean startup. Blank observed that startups waste precious time and resources by generating business plans that have nothing to do with reality. The solution was to create a dynamic customer discovery process, promoting successive hypothesis testing to drive needed refinements and pivots on nine essential components of the business model.  Through a curriculum known as Lean LaunchPad, this method has been incorporated in nearly 100 entrepreneurship programs including Stanford, Berkley, and Northwestern. Already over 3,600 teams have generated over 100,000 hypotheses, conducted over 90,000 customer interviews which resulted in over 17,000 pivots.

The event I witnessed last night at the Mayo Clinic was an early effort to inject the entrepreneurial wisdom gleaned from start-ups into the innovation and commercialization processes of large organizations.  Six teams were selected to undergo an intense 62-day process, culminating in last night’s “lessons learned” gathering and celebration. In their presentations, the teams candidly reflected on their initial hypotheses, many of which, after being subjected to rigorous customer interviews, turned out to be false. Every team told of dramatic pivots after they confronted the stark evidence discovered through meetings with real customers. 

The six projects ran the gamut of health-care innovations, from human genomics, to operating room scheduling, to new wound healing techniques. The projects were in varying stages of development: some were recently hatched ideas, whereas others were more developed and had already entered clinical trials.

Collectively, the six teams, comprising just 18 team-members (plus six mentors) conducted an amazing 575 customer interviews, unleashing a radical process of discovery. Some teams found that they had dramatically underestimated the market potential and price points of their inventions, where other teams needed to scrap their initial idea completely and start afresh.  

Beyond the accomplishments of these six teams come some larger lessons for innovation initiatives in large organizations—in particular, the maturation of an evidence-based approach. 

The principles of evidence-based innovation are simple and have been around for many years. This approach eschews armchair theorizing in favor of a dynamic process driven by inquiry and real-world data. But, through Lean LaunchPad, this process has been crystalized and can now be delivered to accelerate and focus corporate innovation. Here’s how it works:   

  • Projects are selected from many teams who apply for a limited number of slots. Through pre-screening, resources can be focused on the most promising teams and ideas. 
  • All of the selected teams go through the discovery process concurrently, creating the positive dynamics, support and community of a cohort of peers. One of the interesting findings is that the the Lean LaunchPad approach can benefit teams in any stage of the innovation cycle–anywhere from projects with only an abstract concept to those which are readying large scale deployment.    
  • The process is rigorous and intense, focusing on customer interviews to garner support for critical hypotheses in the business model.  Pivoting is not seen as a negative, but rather something to be expected and even celebrated.  There are weekly virtual meetings with the instructor, and additional meetings with a designated mentor who is able to add substantive value, either through content/domain expertise or process knowledge. Critical metrics are tracked, including the number of customer interviews, hypotheses tested and pivots. The software maintains an archive of the entire process, which can be studied, analyzed and tuned in future groups.
  • At the end of the process, there is a “lessons learned” presentation, fostering community and celebration. All teams share a brief video of their journey and then recap the highlights via a PowerPoint presentation. Certificates of achievement are awarded to each participant, and special recognition is given to those teams conducting more than 100 interviews. (At the Mayo, three of the six teams exceeded this critical milestone.)

I had a chance to informally talk to some of the team members both before and after the presentations. It was clear from the way they recounted their experiences that the process was both energizing and productive. They freely admitted that their initial hypotheses, in which they frequently had a high level of confidence, were often refuted by the data. I found it remarkable that virtually every team-member also had a “day job” at Mayo—day-to-day responsibilities which they performed in addition to their 62-day innovation journey. 

While still in its early phases, Lean LaunchPad is a promising new approach to accelerate innovation in large organizations. Through a rigorous team process, evidence-based innovation may finally have come of age.  

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