When Brant Cooper typically speaks to innovation practitioners, he usually tells them to “stop innovating”. He says this because they typically fail to define what they mean by the word innovation. At #mtpcon San Francisco, he helped product practitioners to understand what innovation is, why innovation programs fail, and how we can help to change the conversation.
What Does Innovation Mean?
To many people, innovation involves hackathons, idea pitches, lots of sticky notes, and perhaps a Nerf gun or two. But when companies don’t take the time to define what they mean by innovation they end up running programs that don’t have a clear direction or sense of what they are trying to achieve.
The problem in managing innovation arises because companies don’t understand the differences in levels of uncertainty at different time horizons of the product lifecycle. To innovate effectively, you have to be able to differentiate between the known and unknown problems you are trying to solve, and adjust your operations accordingly.
Known vs Unknown
Some areas of business strategy are relatively well known – we understand the problem, we can trust what our customers say on the topic, and the solution is fairly clear. There is an existing market and general knowledge on how to bring value in that space. For these types of problems, operations should be focused mostly on validation and execution; we know what we need to build, we just need to do it.
Other areas are more uncertain – the problem is not well understood, the market is not well known, and there is no existing blueprint for how to be successful in this space. We have to learn how to market and sell, and create a roadmap that can eventually be transitioned into an execution mode.
In reality, no product falls cleanly into either category. Even in a known space, there may be a portion of uncertainty. A team may be tasked with increasing profit by 10%, and may be 95% certain of the roadmap to get there. That leaves 5% that is uncertain, and we have to operate differently in the unknown than we do in the known.
The Entrepreneurial Spirit
To be successful, we have to operate like an entrepreneur in the unknown. Three key elements of the entrepreneurial spirit are:
- Empathy: understanding your customers deeply
- Experimentation: testing insights through behavior and reducing risk
- Evidence: making decisions quickly based on data, insights, and customer behavior
The good news, Brant says, is that over the last few years, product managers have really embraced these mindsets and absorbed this thinking into their work. So how do we take this spirit and use it to improve innovation practices within companies?
The New Horizon Framework
In the concept of “horizon planning”, there are three horizons that we should be developing products for. Too often, innovation teams are charged with delivering breakthrough innovation that should come with a longer time horizon, but they’re asked to deliver the return on investment immediately like companies expect from products with a short-term horizon. This just isn’t possible, and Brant encourages us to redefine what the horizons are. There are four horizons under his New Horizon Framework:
- Horizon 0 (h0): the core internal processes inside your company that need to be aligned for innovation to happen. Finance, HR, IT, Legal, and Compliance all need to be able to apply the entrepreneurial spirit to enable innovation.
- Horizon 1 (h1): incrementally improving our existing products, and should be focused on optimization.
- Horizon 2 (h2): a little longer-term investment that looks to provide new growth over several years by asking “Where is the growth going to come from for our company?” This could be strategies like launching existing products into new markets or better serving existing markets.
- Horizon 3 (h3): breakthrough innovation – looking for the next “unicorn”. Horizon 3 looks for non-linear growth. The goal is to figure out where to invest money early so that you achieve great growth within the next five years.
How can Product Help?
So how can product managers help companies better manage innovation within these differing horizons? Brant gives us four tips for better innovation.
Tip 1: Be Bold in Experiments
Too often, we rely on A/B testing as the only method of experimentation. But it is only one way of experimenting, and is purely good for optimization. We should take a rigorous approach – brainstorming assumptions, prioritizing the riskiest assumption by asking “What must be true for this product to work in the marketplace?” – and design an experiment that measures customer behavior to validate or invalidate an assumption. When designing an experiment, Brant encourages us to look for ways to test behavior without building product. These types of experiments will provide a better insight into customer behavior and de-risk the project sooner.
Tip 2: Go Deeper in Empathy
As product teams, we often talk about finding “empathy” with our users. Brant points out that what we really need understand are not just our users’ feelings, but their aspirations and motivations as well. Simply asking customers what they want is not enough; we also need to spend time observing their behavior and determining what drives them. This research will derive insights that not only helps you to understand how to incrementally improve your current product, but also inform your h2 and h3 innovations.
Tip 3: Move Beyond Vanity Metrics… Internally
In modern product development, we talk a lot about metrics and data. We’re at a point where we understand that we shouldn’t be using vanity metrics to measure the success of our product. However we still use vanity metrics in the way we work inside our organizations. As we try to move beyond waterfall ways of working and being measured by outputs and long-term forecasts, what measures can we track that indicate our leadership buys into this new way of working? What can we look to as an indicator that our teams are fully adopting new goals like achieving deeper empathy, rather than just measuring velocity? How can we see that we are not just optimizing, but running big experiments that might help us to accelerate growth? As we transform our teams, we need to turn our product techniques and metric knowledge internally to ensure that we are actually changing team behavior.
Tip 4: Implement Radical Restructuring
The way we structure our companies today tends to be based on the assembly line of the industrial age. We focus on specialization of trade, and split teams accordingly: marketing, sales, development, facilities, etc. The very nature of that structure is what makes us slow and keeps us from being able to adjust our processes when we get new information. Culture comes out of the structure of the company. Brant surmises that the companies that will survive long-term are the ones that are able to radically restructure the way they operate.
Rather than building silos based on specialities, Brant encourages us to look at cross-functional teams who are focused on a specific mission tied to a metric, and have all the specialities needed to achieve them. The specialties may loosely associate in the form of a “guild” to keep up with best practices, but the power moves to the team.
The End Result
The conversation shifts when organizations are able to implement these tips. Rather than expecting innovation teams to gain quick ROIs, the product teams who are focused on the h1 horizon are better equipped to move the needle in the core business. Once leadership is able to see the results, they are able to free the innovation teams to focus on the h3 breakthroughs. The end result is a win for everyone. Product teams are able to be more effective in their roles, and innovation teams are allowed to focus their efforts where they can provide the most value: the h3 horizon.