LB1: Innovate1000: Double Growth Through Innovation

Your enterprise may be growing at present. But, you can be certain that innovation and disruption will erode what have been successful services or products. We see this at work all the time.

Years ago, videos came on a cassette tape. Then DVD’s and now streaming services. Your enterprise will decline without innovation. This innovation program will keep your enterprise thriving.

Innovation is a longer term project. Hence, Innovate1000. “Double Your Growth Through Innovation in 1000 days (3 years). Achieve this through innovative new products.

This is a blue belt topic.

Contents

Your Enterprises Future in a Bulls Eye

Expectation of Your Current Product Mix

• Downsize the Dogs
• Question the Question Marks
• Milk the Cash Cows
• Aim for the Stars
• Your Need for Innovation

The Innovation Strategy Smorgasbord

• Plenty of Choice for Innovation Strategies
• Matching Managers to Innovation
• Rationing Other Resources
• Customer Reaction to Innovation

Wrap-up

Resources

Your Enterprise’s Future in a Bulls Eye

Think of your enterprise like an innovation bullseye target with 3 rings.

1. Centre ring: Your existing activities, or “core business”.
To grow this group as fast as possible use strategies like Grow 365.
Grow365 aims to double your growth over a 12 month period.
Go to the Course introduction: Grow Your Enterprise in 365 Days (Grow365)

2. Middle ring: Your time horizon for the next 1-3 years.
Experts say this is the length of time required to identify a new innovation.

• Make sure that it is economically viable.
• Then begin to grow it to a point where it can be imported into your “core business” activities.
• It will then become part of your everyday enterprise product mix.

Many innovations that are attempted don’t succeed. These are not failures in a bad sense. They are the natural result of experimentation.
Darwin’s theory of evolution shows modifications that didn’t work; and the species died out.

There is a body of knowledge about the most efficient way of approaching startups. This is called Lean Startups.
Go to the article: Profitable Startups. Scroll to Lean Startup Theory.
 
Lean Startup Theory uses the concept of a Minimum Viable Product (MVP) to prototype a new enterprise concept.
It will allow it to fail quickly without costing a great deal of money; if indeed it is going to fail.

3. Outermost ring: On your innovation roadmap bullseye is a period of 3-5 years.

Innovation and disruption can damage your existing products in this longer period. You may consider “Blue Sky” products.
These may be radical departures from what you already have or radical extensions of what you do have.

Example:

Apple was first famous for its iPod. Several years later, it introduced iPhones and then iPads. Several years later again, they introduced the Apple Watch.
Apple knows the importance of innovating products:

• In particular the products there competitors aren’t yet copying. 
• This counteracts the market share erosion from new competition.
• First, their very profitable MP3 player iPod and then their iPhone.

The term Innovate1000 refers to “Doubling Your Growth yet again over 1000 days or roughly 3 years”.

This is the middle ring in your innovation bullseye.

Unlike Optimise100 and Grow365 Courses, a far-sighted Manager will run Grow365 and Innovate1000 at much the same time. You are addressing different types of growth opportunities.

Go to the Course introductions: 
C2.0 Optimise Your Business Enterprise in 100 Days (Optimise100)
Introduction to Grow Your Enterprise in 365 Days (Grow365)

Expectations of Your Current Product Mix

As a going concern, your product mix will be at various places within the three innovation rings above.

Action:

Stocktake your products life expectancy using the Boston Consulting Group Growth Share Matrix (BCG Growth/Share Matrix). 

The Boston Consulting Group pioneered a way of describing the products in your enterprise portfolio.

They categorise products into:
“Stars”, “Question Marks”, “Dogs” and “Cash Cows”.

Go to the Article: Boston Consulting Group Matrix.

Downsize the Dogs

Has innovation and disruption already bitten into some of your products and services?

Action:

Group these core products in the “Dog” section of your matrix.
Some of the “Dogs” may have never started. 
Others will have been viable enterprises.
Due to innovation and disruption, they have become less viable. This can be to the point of being unprofitable.

Consider:

• The main street video rental store which has virtually disappeared.
• The main street store selling records – then cassettes – then CD’s.
• This is the result of innovation bringing new technologies.
• The main street recorded music shop is a real “Dog” due to streaming and file downloads. It is virtually extinct.

The theory is that you should get rid of the “Dogs” – they have already exceeded their life expectancy.

As a going concern, they will be in the “core” ring of your bullseye.

Remove them by either:

• Closing them down.
• Selling to someone needing them as a complimentary product.
• Selling to someone buying them to scale their core and/or gain access to your buyer list to boost their sales.

Question the Question Marks

Action:

• Do you have products/services in your enterprise that you are not clear about their future prospects?
• Are they not earning much money?
• Do they seem to have some growth left in them?

It is a judgement call about whether you hang on to them or let them go.

Sentimentality might encourage you to hang on but remember:

• They are consuming resources like money and staff.
• They have uncertain future prospects.

Ask yourself:

Could these resources be better used with your known “Stars”?

Milk the Cash Cows

The “Cash Cows”:

• Are the operations in your enterprise that are suffering from a lack of innovation.
• They may not be able to continue to evolve because of a change of circumstances.

Action:

• Keep these in your portfolio, they generate plenty of cash but have little or no growth prospects. 
• They are likely to have innovation and disruption further erode them.
• They will turn into “Dogs”.

These will also be “core” – centre ring.
They are the heartbeat of the enterprise and invaluable for their cashflow.

The managers of these “Cash Cow” enterprises:

• Tend to be solid, reliable types.
• They are skilled at continuously removing costs from a steady-state enterprise.
• This will keep it as viable as possible.
• We will revisit this staffing issue shortly.

Aim for the Stars

The exciting enterprises in your portfolio are the “Stars”.
These have both high growth and high profit.

Unfortunately:

• Competitors will look over your shoulder and see that this is a profitable niche to be in.
• They will move to occupy it and take away some of your customers.
• This may be intentional as a blocking strategy to slow down your growth rate.
• They may not make a great deal of money out of it but:
  • They will syphon buyer-funds away from you.
  • They will weaken you as a competitor.

Example:

Enterprises, like Amazon, launch a mobile phone:

• This is against products already available from Apple and the Google Android ecosystem.
• In this particular case, the Amazon phone didn’t work out too well.
  • It was quite likely launched as a blocking strategy.

Your Need for Innovation

The only products with any reasonable life expectancy are your “Stars”.

Their natural tendency is to be replaced overtime by other disruption and innovation.
If you are lucky, they will move to the “Cash Cow” quadrant.

You will need more “Star” innovations if your enterprise is to have longevity. 

The Innovation Strategy Smorgasbord

The need to innovate is a very real problem for enterprises.
Experts over the years have developed methodologies for handling innovation.

Plenty of Choice for Innovation Strategies

There are around 14 different innovation strategies documented by these experts.
You can associate these with various parts of your core enterprise.
Innovate1000 explores these many innovation strategies and which ones may best suit your enterprise, in other articles.

Matching Managers to Innovation

Problem with innovation in an established enterprise:

• The mind-set of the managers of existing products in your enterprise.
• Those enterprises in the central “core” of your operation may be your “Cash Cows”.

The managers of these “Cash Cows”:

• Are likely to be resistant to any finance or other resources being “stolen from” their product group to fund innovation.
• They would much rather keep that money and try, often futile, line extensions on their existing core product range.

People who are content with running a steady-state enterprise:

• May not have the right mind-set to cope with uncertainty.
• The 2 innovation rings on our innovation bullseye will have dramatic uncertainty.

There is a vast gulf between:

• How comfortable people feel in a steady state environment.
• How comfortable people feel in a very fluid and dynamic, start-up, environment.

This is not a criticism of those managers.
They are vital in the “Cash Cow” environment.
It is a warning to choose the right personality for each type of activity in your enterprise.

Therefore, Innovate1000 addresses the issues on how to staff your innovation bullseye to take account of these personality issues.

Rationing Other Resources

There is also a very real challenge for our enterprise CEO’s.

Growth consumes money and other resources.
Because of its high failure rate, much of that money and other resources are “squandered”.

Difficulties:

• Owner-operators reducing their take-home profit by funding innovation.
• Employed senior managers explaining to their bosses why the profit level is not as high as it might be.

Your enterprise reports to its stakeholders:

• The stakeholders will not like their dividends reduced.
• They may reduce the amount of innovation an enterprise takes.

Ignoring innovation is a short-term strategy.
Many investors/stakeholders are happier with a bird in the hand rather than the prospect of a few more birds in the future.

The CEO will need to lead the innovation project personally and carefully. They will need to tend to its rather fragile ‘shoots”.

As discussed, opposition will come from several directions.
The most senior manager is necessary to foster what are, essentially, in-house start-ups.

Customer Reaction to Innovation

Way back in the 1940’s, 2 researchers wrote about “The Diffusion of Innovation”.

They observed that the introduction of new crop varieties followed a lifecycle that:

• Began with very early, risk taking, adopters (named Very Early Product Adopters or VEPA’s).
• These are roughly 10% of the customer base.

Then:

• Moved to “Early Adopters” who “looked over the fence” to see how the early adopters (VEPA’s) went.
• These are roughly 25% of the customer base.

Then:

“Late Adopters” took on the new crop varieties after several years of experience with the VEPA’s and Early Adopters.
Approximately 50% of the customer base.

Finally:

A certain percentage of them never took it on at all (“Non-adopters”).
The cropping success of the non-adopters deteriorated.
The more productive crop varieties took over the market share.

Go to the article: Diffusion of Innovation AKA Crossing the Chasm

The theory of the Diffusion of Innovation is still very much alive today; and just as true.

• It is your customers who will be at different points on the innovation consumption curve.
• Tune your marketing and service departments to service the requirements of customers at each point in the lifecycle curve.
• Target different buyers at each stage of an innovation lifecycle. Those buyers have different expectations of the product.

Departing the VEPA quadrant for Early Adopter territory:

• Is the most difficult time for an innovator.
• VEPA consumers are very tolerant of products with some flaws. Mainstream customers are not.
• Many products fail to make this transition from innovation to mainstream.
• Experts call this stage “Crossing the Chasm”.

Example:

• The early Apple Newton Palm Pilot type product that flourished briefly.
• It never caught on with the mainstream market.
• Years later, we have Apple Newton functionality in our iPhones and iPads.

Wrap-up

Innovate1000 is shorthand for a 3 year (1000 days approx.) innovation campaign.
This innovation campaign ensures your enterprise can continue to grow – or at least survive – in a disruptive world.

More content and resources will follow.

Resources

One of the best known authors in this space:

Geoffrey Moore: – is an American organisational theorist, management consultant and author.
Go to the Wikipedia article for further information and book links.

And a classic:

In 1997, Clayton Christensen wrote “The Innovator’s Dilemma”.
Go to the Wikipedia article: The Innovator’s Dilemma.