The most viewed and commented article on this website is, by far: 12 Topics for Entrepreneurs
Therefore, I deduce that the topic generates a lot of interest and I allow myself to update an article I published for the Prevent Foundation, some time ago.
Creating a new company is an exciting process in which, from the beginning, two factors should not be missing: innovation and agility.
A new company is, in reality, transform a good idea into reality so that it generates benefits in the economic or social field and lasts over time. And it better be an innovative idea put into practice with agility.
In organizations that have been around for a long time, good ideas are scarce because there are often significant barriers to their growth and development. Therefore, starting from the beginning, in this case, is still an advantage.
Innovating today is a necessity and an urgency. It is difficult to conceive of a new company, which does not contribute with some innovation, to find its place in the market. In an environment of cyclical or sudden crises, of constant and accelerated change, I would say that there are some basic resources for the just starting companies, and also for small companies in development phase, to be able to consolidate and be successful.
- Innovation. Whatever type it is. It is an essential element. It allows differentiation, being in a line of technological leadership, market positioning or cost.
- Agility. It is the heart of the future survival of the company. It means that from the beginning simplicity is sought in all processes, that all of them are focused on creating value for the client. It doesn’t just mean reacting quickly to changes, but proactively looking for opportunities and getting to them faster and more efficiently.
- A right value proposition to the customer. The first step in creating a company is to identify the client, his position and what value proposition we are going to offer him.
- A global vision oriented outward. It means thinking globally, considering external markets as something not foreign. A greater specialization or differentiation a greater need to contemplate broader markets. Something that is not yet in our immediate environment does not mean that it does not appear at any time and therefore we must know and value it.
What is innovate?
There are many definitions, but in practice, innovating is a process that must be implemented to start or create an “innovative culture”. It is a process strongly supported by knowledge and intangible resources, technology and the analysis of external information and its trends. It must cover all areas of the company.
It is based on exploration, the search for opportunities, research, risk, trial and error, on individual skills and also on the work of highly efficient teams.
From the beginning I propose to consider innovation as a structured and continuous process, oriented to the future. In the same way that the operational processes are oriented to obtain short-term results.
Types of innovation
Innovating means obtaining results in one or more of the following fields:
- Do something new. Innovate in products or services.
- Positioning in the market or segment in a different or new way. Innovate in the value proposition to customers and in what we call positioning in the market.
- Do things differently. Innovate processes.
- Change or create a new paradigm. Create a new “mental model” or category.
As a process, we see innovation as iterative, continuous and not eventual. We represent it in a circular way, as in the image:
In summary, the continuous process is specified in the creation and maintenance of a portfolio of innovation projects that should constitute a constant flow.
And finally, if we look at the activity that the new company is going to focus on, such as sector, market, segment, type of products/services, etc. Other types of innovation are emerging as well. In the graph we represent the evolution of the volume and prices of one of the previous fields, (sector, segment, etc.) and its relationship with the type of innovation described below:
- Breakthrough or radical innovation.
Creation of a new product or service that opens a new paradigm or category. We are in the initial phase of the life cycle curve, quantities are still low, prices and margins are high. We are creating a company, an activity, a product or service and we do it by innovating from the beginning, with a new technology, a new concept or design.
- Growth or incremental innovation.
We are in the phase of high growth of the activity or product. The important thing is to grow and maintain or increase market share and, if possible, leadership. Maybe in the end we want to explore new segments. We carry out incremental innovations on the same existing concept and we improve it, turning it into something different, which puts us in a better position.
- Innovation for a new business model.
New business models are new ways of generating resources by taking advantage of new or different customer experiences. As a radical innovation, it can also transform the structure of the market by changing the paradigm, expectations, attitudes and buying patterns of customers.
- Innovation for a new startup or company.
The fourth type of innovation arises when a company recognizes that it is necessary to explore and develop an entirely new market, and realizes that the best way to do so is through a new brand, a new division, operating in a different sector or parallel or perhaps with a new company. Consequently, innovations in new companies are long-term oriented.
The same company in the course of its beginnings or evolution can apply two or more of the four types of innovation at the same time, but taking into account its resources and the need to maintain little dispersion of efforts, especially in the beginning.
What is the object of the innovation portfolio?
The innovation portfolio or pipeline essentially has two purposes.
First, it is a learning system that will improve our methods to achieve our project development for the future. Through the innovation strategy, it will also help us deal with the problems of uncertainty and change.
Finally, and at the same time, it also reduces the unavoidable risks inherent in the innovation process itself. It does so by structuring the process of creating new products, services and business models for the future.
Ideas and selection
It is difficult for the company to emerge from a single great idea. however, there are well known examples, but it’s much more likely and fruitful to emerge from a careful process of selecting and evaluating various ideas. Therein lies the importance of what we call “business filters” to focus this selection and assessment process, after the generation of ideas.
On the other hand, the generation of ideas is not only a creative act arising from the imagination, but a structured process that brings together exploration, research, opening up to potential clients, the external environment in general, the creation of models, team discussions and analysis of opportunities and risks, skills, strengths and weaknesses.
Good ideas can come from people individually, but in many more cases they come from teamwork. A multifunctional team is convenient, that is, working in an interdisciplinary way. We organize these teams so that they are trained in some methodologies that favor their work.
We keep in mind that there are environments that crush new ideas and in others they seem to flourish effortlessly. There are a series of barriers that need to be eliminated and a series of common patterns that we find recurrently in unusually fertile teams and environments.[i] The generation of ideas can be accelerated through methods that facilitate the connection between different ideas, the opening and the simulation of models and prototypes. Common guidelines are usually:
- The possible adjacent. In practice: create graphics with linked and open concepts starting with a central idea. In reality, the concept of “adjacent possible” is like opening successive doors from the position in which we find ourselves and in each one the doors to open and the discoveries are opened and multiplied. Its limits grow as we explore.
- Liquid networks. The practice: Create creative communities, groups or environments. This concept arises from the study of the human brain. An idea is a network, it is produced in our brain by a multitude of neural connections. In the same way, the close connection of the different individual knowledges produces a network that favors the construction of ideas. The concept of liquidity implies that there is closeness and plasticity in the network, that is, the ability to adapt new configurations, without losing distance or communication. Therefore we speak of creating “creative environments”.
- The persistent hunch. In practice: evaluate and share intuitions or “lingering hunches”. An idea that is often supposed to arise from a sudden inspiration, from the classic “eureka”, actually comes incubating as a hunch according to the information existing in memory. This hunch, incubated for sometimes long periods of time, can be shared and result in another. Most of the hunches that become important innovations take their time, they become strong by establishing new connections, until one day they come to light, when it is time, thanks to a newly discovered factor or data, a newly established association that strongly opens the real possibility for “that” initial hunch.
- The happy find. “Serendipity”. It is about the coincidences that are generated in the state of chaos or doze, at the individual level or in discussions without end or apparent script, at the group or team level. Robert Thatcher in 2007 pointed to a concept that the brain needs periods of order, but also periods of chaos. And that the more disorganized a brain appears, the smarter its owner. Without a clear explanation, it is assumed that the electrical noise that gives rise to the chaotic mode allows the brain to investigate new links between neurons that would never otherwise have connected. Accidental connections and their potential for creation have a word “serendipity”.
- The error. It would be difficult to find something that helps innovation and the generation of ideas more than trial and error. And yet in our companies the error is punished. Consequently, no one wants to make a mistake, this is an important brake on all innovation. In this environment ideas are crushed. Thomas Edison was wrong about 6,000 times before he had an almost final version of his “invention”, the electric light bulb.
- The exaptation. Complicated name that means to borrow a gadget or an idea designed and used for one purpose, to apply it to another completely different. Coming from a term in biology, an “exaptation” is simply an example of a characteristic that has evolved, but is not considered an adaptation to the environment. The first known presses were to press the grapes and facilitate the wine process: The German Gutenberg adapted it for the first printing press that allowed large-scale printing of books. he had to complete it with the “movable types” that already had precedents.
- The platforms. Platforms are fertile ground in which living beings collaborate and turn the system itself into something much more efficient than if they worked separately; the example with which it is illustrated is the coral platforms. Nowadays, the Internet is also a new form of platform in which information flows, is recycled and reused for purposes other than those initially intended. Platform building is, by definition, a kind of exercise in emergent behavior. When a platform is open, information flows freely through it; it is based on the previous assumption that good ideas can come from anywhere.
Portfolio selection and construction
We assume that we have started from 0, or from one or few initial ideas, since we are a really new company. We carry out an initial design of an innovation portfolio. We select ideas arising from any of the above forms through filters. The following graphic is a simplified schematic of several commonly used filters.
Actually, we design our portfolio incorporating the selected ideas and turn them into formal innovation projects. And sometimes we will eliminate one or more of the projects from the portfolio, because we no longer consider it useful to invest more in them and that is how it has been decided in one of the ‘doors’ of the ‘stage & gate’ process.
Once we have a first selection of possible projects, (First cut), we introduce external factors such as “risk” or internal factors such as “resources” or “capabilities” in a similar way to the following graph:
To summarize, 6 steps are usually considered in this design:
- A strategic alignment. Is or is not our portfolio in line with our innovative strategy? It is a topic to consider, discuss and above all, evaluate.
- Is the selection process still fit and proper? Do we really take into account what is necessary to face possible changes and imaginable scenarios? We may need to modify the selection criteria and templates to the current reality.
- A review of our investment model. Is the investment in accordance with the expected benefits? And this in general and in each of the types of innovation or projects.
- We review project by project, to check if your objectives, budget, degree of progress, expected results, etc. are still valid. And we do it with our agile methodology, adapted from recognized best practices.
- We plan new sessions to analyze future scenarios, and structured idea generation systems, to deal with these scenarios.
- Finally, it is necessary to learn from the entire process, explain the lessons learned from successes and errors or failures, in the process and in each project, to recycle them in the future. Continue measuring the results of the launches and pointing out the first benefits obtained. With measures and indicators. Not forgetting that we are not in a linear process but rather a concurrent and iterative one, and that in some cases we need to pivot towards an alternative model or project.
The value proposition
Any company, consciously or unconsciously, propose some a value proposition to its customers. We use the “value proposition or discipline”[ii] model to help understand and apply the concept as a useful strategy tool.
The company can basically focus on 3 different areas or disciplines that represent its value proposition to the customer. Each one is based on a different offer:
- We compete on price. It stands for operational excellence.
- Product innovation and leadership. It means we offer the most innovative product with high quality.
- Client intimacy. It means knowing customer needs before and better than anyone else.
The diagram represents a typical company focused on customer intimacy, without neglecting its product innovation proposal, but that does not compete on costs or prices.
It is known that to be competitive, companies must be competent in all three disciplines (the minimum threshold in the diagram, in green), but to be a market leader, a company excel in only one discipline (in red in the diagram). diagram). Furthermore, a company cannot excel in all three disciplines, because the basic corporate culture, structures, people, facilities, processes, and business models that lead to excellence in any one discipline are strongly contradictory to achieving excellence in others. .
- Product Innovation
It is characterized by products that are the most innovative in their market and highly valued by customers. It becomes leadership in the segment. Focus on innovation, the flow of new products and the highest quality, above customer expectations.
- Compete on prices. Operational Excellence
Competing on prices means that at the same price than the competition, we have higher margin. Therefore, through operational excellence, push systems, “lean” or others, we have lower costs than our competition and a service without problems. Focus on design, production and supply chain.
- Customer intimacy
It means that we know better and before anyone else the needs of our clients and we anticipate them. It can be by geographical proximity or of any other type. We provide all the service. Focused on service and customer relationship.
In all phases of innovation, including the generation of ideas, we can apply the concept of agility. The origins are coming from “lean” methodology, but in new companies, “Lean Startup”.
The winning innovation is often the ability to pragmatically take on an opportunity at the right time, with good organization and resources. It is specifically about making an “agile” innovation.
What do we mean by “agile” innovation? [iv]
The essential reference points for the company to focus its innovation in an agile way would be:
- Integrate innovation as essential in its medium/long-term vision. Integrate it into your strategy.
- Knowing how to learn and establish knowledge, both internally generated and from the external environment.
- A capacity for anticipation and permanent reconfiguration
- Do not consider innovation as an “expense”, an “R&D” issue or an investment for which we should be subsidized, but rather a vital resource, a source of transformation and income
- Create and maintain an internal culture of competitive differentiation
- Maintain a culture of openness and networking with the environment
- Lean on collaborative design to increase internal knowledge and know-how
- Use projects and innovation as mobilization and motivation of teams and people
- Know how to create alliances and external collaborations balanced with innovation resources.
- Perpetuate its development as a continuous flow of projects
A global vision oriented outward
As we have said: it means thinking globally, considering external markets as something not foreign. And with greater specialization or differentiation, there is a greater need to contemplate broader markets.
The most useful way to put it into practice is to use what we call “strategic intelligence” which consists of selecting and processing a large amount of data and information relevant to our activities. It will serve to discover possible trends and facilitate decision making. See:
These concepts, already applied in many companies seeking to become more efficient in an environment of crisis and accelerated change, also serve to create a company from scratch. With the advantage that there are no acquired habits or initial barriers, except in the mind of the founder or entrepreneur.
Taking a holistic view of the business from the start is essential.[iv] Integrating innovation, design, customer experience, value proposition, and supply chain operations into a single, agilely designed governance process .
[i] Innovation agile! J.F. Lacoste-Bourgeacq, Philippe Crapart, Gilles Lauga, Patrick Morin. AFNOR, 2007. ISBN: 978-2-12-475571-4
[ii] Design Thinking. Ed. by Thomas Lockwood. 2010. ISBN: 13-978-1-58115-668-3
[i] Steven Johnson. Las buenas ideas. Turner Publicaciones. 2011. Original: Where good ideas come from. ISBN 978-84-7506-289-1
[ii] Michael Treacy & Fred Wiersema Value-Discipline Model. Harvard Business Review article “Customer Intimacy and Other Value Disciplines,” (c. 1993) Book: “The Discipline of Market Leaders”. 1995