I’ve worked with big companies and the US government to help them innovate faster, not just fast enough, but 10x more initiatives in 1/5 the time. Rather fast 50x acceleration.
Over the past five years, “Lean Startup” methodologies have enabled entrepreneurs to effectively create a startup by research for product / market fit rather than blindly trying to execute. Companies seeking innovation can buy, build, partner or use Open innovation. But try to find a unified theory innovation that allows established companies to innovate internally with the speed and urgency of startups has escaped us.
The first time a few brave business innovators tried to layer the Lean tools and techniques that work in start-ups into an existing business, the result was chaos, confusion, frustration, and ultimately failure. . They ended up with an “Innovation Theater” – big projects, wonderful press releases on the company’s innovation – but no real substantive change in the trajectory of the product.
By working with Greg Hannon, the innovation manager at WL Gore, I found two business strategy tools developed by other smart people useful for bridging lean startups and business innovation. The first, the notion of “ambidextrous organization“from O’Reilly and Tushman, postulates that companies that want to do continuous innovation must execute their core business while innovating at the same time. In other words, in an ambidextrous business, you have to be able to “chew gum and walk at the same time”.
The second big idea of corporate innovation is the “Three Horizons of Innovation” of Baghai, Coley and White. They suggest that a company divides its innovations into three categories called “Horizons”.
– Horizon 1 are mature companies.
– Horizon 2 are fast growing companies.
– Horizon 3 are emerging companies.
Each horizon requires a different focus, different management, different tools and different objectives.
The Three Horizons provided an incredibly useful taxonomy. However, in practice, most companies have treated the Three Horizons as if they were just an incremental execution of the same business model.
Although these theories explain how to think about innovation in a business, they don’t tell you how to achieve it.
Fast forward to today. To accelerate innovation, we now have 21st century tools – Business model canvas, Customer development, Agile Engineering – all added to a Lean Startup. We can adapt these starter tools for use within the company.
To do this, we’ll keep the concept of three unique innovation horizons, but reframe and combine them with what we’ve learned about Lean startups. The result will be:
– a new Lean version of the Three Horizons of Innovation
– an ambidextrous society, and
– a way for existing organizations to build and test new ideas at lightning speed
The Lean definition of the three horizons of innovation
In this new model, the Horizon innovation level is defined depending on whether the business model is executed or researched.
– Horizon 1 activities support existing business models.
– Horizon 2 focuses on expanding existing businesses with partially known business models
– Horizon 3 focuses on unknown business models.
Horizon 1 is the core business of the company. Here, the company runs a known business model (known customers, product characteristics, competitors, price, distribution channel, supply chain, etc.). It uses existing capabilities and has a low risk of releasing the next product. Management in this Horizon 1 works by creating repeatable and scalable processes, procedures, incentives, and KPIs to execute and measure the business model. (And if they’re smart, they’ll teach Horizon 1 teams to work with mission and intention, not just the process and procedure.)
Innovation and improvement happens in Horizon 1 on processes, procedures, costs, etc. Product management for Horizon 1 uses existing product management tools such as StageGate® or the equivalent.
In Horizon 2 a company extends its core business. Here, the company looks for new opportunities in its existing business model (trying a different distribution channel, using the same technology with new customers or selling new products to existing customers, etc.) Horizon 2 mainly uses existing capabilities and presents a moderate risk of getting new capabilities to get the product out of the gate. Management in Horizon 2 works by pattern recognition and experimentation in the current business model.
Horizon 3 is where businesses put their entrepreneurs crazy. (In companies, it’s the mavericks you want to fire so you don’t have access to the program. In a startup, they would be the founding CEO.) These innovators want to create new and potentially disruptive business models. Here, the company is basically incubating a startup. They work with speed and urgency to find a repeatable and scalable business model. Horizon 3 groups need to be physically separate from operational divisions (in a business incubator or in their own facilities.) And they need their own plans, procedures, policies, incentives, and KPIs. different from those of Horizon 1.
Product management for Horizon 2 and 3 uses existing Lean innovation management tools such as Lean LaunchPad®, NSF I-Corps ™ or equivalent. prod mgmt for Horizon 3 By using these tools in-house, a business can achieve startup speed and urgency. Horizon 3 organizations organized in small teams (
The activities of Horizon 2 and 3 are not entirely separate from the corporate structure. Go to Yes To help Horizon 2 and 3 organizations navigate all of the processes, procedures, and metrics the company has created to support Horizon 1 business, people in support organizations (legal, financial , purchasing, etc.) are assigned to work within Horizon 3 organizations. Their function is to help Horizon 2 and 3 organizations navigate to a “Yes” inside the company.
Horizon 1 works on goals and incentives. And Horizon 1 managers should be encouraged to embrace and support the innovation underway in Horizons 2 and 3. Businesses need their Horizon 1 managers to encourage mavericks to come up with projects, as well as ” to support the Mavericks, then to drive adoption and scale of Horizon. 3 projects.
If Horizon 2/3 support is not among Horizon 1’s goals and incentives, then there is no real commitment to business innovation.
Oh no! Yes! We have succeeded
What happens to the successful innovations of Horizons 2 and 3? Either they are adopted by a Horizon 1 organization (a division, a P&L, a functional organization), they grow large enough to become a stand-alone group, or they can be sold / distributed. For this to work, executives and managers of Horizon 1 need incentives and job descriptions to support the business of Horizon 2 and 3.
One of the biggest complaints from Horizon 1 managers is that successful Horizon 3 innovation projects leave a mess of technique and organization debt that a Horizon 1 organization must clean up. refactoring This is no exception; in fact, it is a natural part of business innovation.
What is missing is the awareness that there must be a group of companies dedicated to refactor (clean up) the debt of successful innovation projects.
Do it again !?
When a Horizon 2 or 3 program is successful, it can either grow on its own (and thus become their own divisions), or the founders and early employees can fall back into a Horizon 1 organization that will evolve the program. Usually this is a bad idea for everyone involved. In short-sighted companies, the innovators of Horizon 2 and 3 are frustrated and leave.
In visionary companies, they are starting a new cycle of disruptive innovation.
Lean is the language of business innovation
We have a common language and execution process – product management tools, financial reports, etc. common language and process of innovation and search for economic models.
We can adopt the Lean Vocabulary-Business Model Canvas, Customer development, Hypotheses, Pivots and Minimum viable products and Evidence-Based Entrepreneurship as a corporate language of “search versus execute”. And we can use Lean Metrics (Investment readiness level and Technological maturity levels) and Lean portfolio management tools to provide rigorous funding decisions. Finally, we can use the open source lean course of National I-Corps Science Foundation and Stanford / Berkeley Lean LaunchPad course to carry out Horizon 3 projects.
Lean is the engine of the ambidextrous organization
An ambidextrous company simultaneously manages a large number of Horizon 2 and 3 projects while continually improving the way it executes its current business model and serves its existing customers. This happens when senior executives share a common strategic intention, a common vision, explicit values and identity, and they are paid for the two the execution of the current economic model and the search for new models. They also realize that operating across the three horizons will force them to tolerate and resolve conflicts.
– Business innovation needs Lean tools
– When combined with the business model canvas, the three innovation horizons provide a framework for business innovation
– Horizon 2 and 3 (new / disruptive innovation) are executed with the speed and organization of Lean Startup
– Lean innovation management combines three innovation horizons with Lean Startup to offer an ambidextrous organization
– The whole organization must be encouraged to value and adopt not only continuous improvement, but also successful innovations