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Innovation at 50x

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Innovation at 50x Steve Blank @sgblank www.steveblank.com


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What is Innovation?


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Innovation ? Incubator Innovation ? Accelerator Innovation ? Startup Innovation ? Lean Anything Innovation ? Open Innovation ? Reorganization


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Innovation ? Incubator Innovation ? Accelerator Innovation ? Startup Innovation ? Cafe’s These are all physical places to do innovation


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Innovation ? Incubator Innovation ? Accelerator Innovation ? Startup Innovation ? Cafe’s These are all physical places to do innovation Having them does not guarantee any innovation will happen


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Innovation Development Places: R&D, Engineering, Incubators, Accelerators, Hackathons, Open Innovation, etc. Methodology: Waterfall, Agile, Lean Pedagogy: Lean LaunchPad/I-Corps, Case-studies, Mentors Metrics: KPI’s, StateGate®, ECV, Pivots, IRL, TRL, … Funding SBIR, VC, Corporate VC, M&A, etc.


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Innovation Development Places: R&D, Engineering, Incubators, Accelerators, Hackathons, Open Innovation, etc. Methodology: Waterfall, Agile, Lean Pedagogy: Lean LaunchPad/I-Corps, Case-studies, Mentors Metrics: KPI’s, StateGate®, ECV, Pivots, IRL, TRL,… Funding SBIR, VC, Corporate VC, M&A, Incremental, etc.


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Innovation Is? Satisfying users current or future wants/needs by turning an idea into a product or service


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Innovation Is? Satisfying users current or future wants/needs by turning an idea into a product or service with speed and urgency, using minimal resources and costs


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Innovation Succeeds Where there is a path to adoption When it fits into the overall mission and strategy Because it performs, has metrics, … It is managed as an innovation portfolio And has management support (the spirit of “yes”)


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Continuous disruption requires Continuous Innovation Steve Blank


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Continuous disruption requires Continuous Innovation Steve Blank what’s this mean? ?


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Continuous disruption requires Continuous Innovation Steve Blank ? what’s this mean? External Disruption U.S. Navy assumed carriers would always defend the Western Pacific Asymmetric warfare = “Carrier-killer ICBMs” = disruption


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Continuous disruption requires Continuous Innovation Steve Blank ? what’s this mean? Internal Disruption The military built encryption hardware to protect classified data Waterfall development process and long device lifecycle Now they post software that enable their customers to implement their own solutions Using commercial off-the-shelf software broke the traditional model = Disruption


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Our Competitors Speed is a Threat technology, channels, etc.


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Our Competitors Speed is a Threat Our Speed is the Mitigation Continuous innovation, adaptability, lean, etc


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Continuous Innovation requires new management tools Steve Blank


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Continuous Innovation requires new management tools Lean Innovation Management Steve Blank


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Why Lean Innovation Management? 10x the number of initiatives in 1/5 the amount of time 50x


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The Problem


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Agencies Start as Innovation Engines New/Disruptive Innovation Disruptive Business Model Innovation Better/faster/cheaper Innovation requires no restrictions by plans, procedures or processes Success = finding a repeatable and scalable business model Grows and scales Steve Blank Continuous Innovation


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Success Creates “Debt” Success creates Technical debt Organizational debt Steve Blank New/Disruptive Innovation


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Type of Innovation Innovation Becomes Execution Process Execution Disruptive Innovation Success means scale Scale requires plans, procedures, processes, incentives, KPI’s Innovation becomes execution Refactoring Group Steve Blank Continuous Innovation


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Type of Innovation Innovators Leave or Start New Initiatives Process Execution Disruptive Innovation Founders/early employees don’t fit in execution organizations Short-sighted companies: innovators leave Far-sighted companies: they start the next cycle of innovation Refactoring Group Steve Blank Continuous Innovation Disruptive Innovation


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Can You Create an Organization that Executes and Innovates?


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Can You Create an Organization that Executes and Innovates? It’s Called an Ambidextrous Organization Source: James March, Charles O’Reilly, Michael Tushman


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An Ambidextrous organization achieves breakthrough innovations Source: James March, Charles O’Reilly, Michael Tushman


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An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute current business model Source: James March, Charles O’Reilly, Michael Tushman


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An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute current business model and serve existing customers Source: James March, Charles O’Reilly, Michael Tushman


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An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute current business model and serve existing customers = We can chew gum and walk at the same time


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Here’s How


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Types of Company Innovation Steve Blank


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Three Horizons of Innovation Source: Baghai, Coley, White our established capabilities


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Three Horizons of Innovation Source: Baghai, Coley, White Product Product Product


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Three Horizons of Innovation Source: modified Baghai, Coley, White Products Products Products programs capabilities our established capabilities


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New Three Horizons of Innovation Known Unknown Partially Known Level of innovation is defined by whether the business model is being executed, extended or explored! Execute Explore Extend


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Three Horizons of Innovation Existing Business Model: Process Innovation Execute Core Mission Known Mission- Critical Projects


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Three Horizons of Innovation Existing Business Model: Process Innovation Execute Known Partially Known New Opportunities via Business Model Innovation Extends Core Mission Mission- Critical Projects


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Three Horizons of Innovation Existing Business Model: Process Innovation Execute New Opportunities via Business Model Innovation Execute/Search Known Unknown Partially known New/Disruptive Business Model Explores Mission- Critical Projects


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Three Horizons of Innovation Existing Business Model: Process Innovation Execute Programs Continuous Improvement New/Disruptive Business Model Makes MVP’s New Opportunities via Business Model Innovation Runs Pilots Make Prototypes Known Unknown Partially known Mission- Critical Projects


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Capabilities/Risk Assessment Existing Capabilities Low Risk Need New Capabilities High Risk Some Capabilities Moderate Risk Known Unknown Partially known Mission- Critical Projects


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Innovation at All 3 Horizons Existing Business Model: Process Innovation New/Disruptive Mission Model New Opportunities via Business Model Innovation Known Unknown Partially known Mission- Critical Projects


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Innovation Portfolio Process Innovation Disruptive Innovation Continuous Innovation Build Buy Partner Open Types of Innovation Innovation Portfolio Horizon 1 Horizon 2 Horizon 3 Steve Blank


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Process Innovation Product Mgmt Is the Current Process for Horizon 1 Horizon 1 Extend the core Product Management Known Stakeholders Use traditional methodologies for Horizon 1 projects Steve Blank


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Process Innovation Disruptive Innovation Continuous Innovation Lean Is the Process for Horizon 2 & 3 Innovation Horizon 1 Extend the core Horizon 2 Horizon 3 Speed & Urgency Lean Use Lean Methodologies for Horizon 2 and 3 projects Steve Blank


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Managing Three Horizons of Innovation - Current Existing Business Model: Process Innovation Execute New/Disruptive Business Model Search New Opportunities via Business Model Innovation Execute/Search Known Unknown Partially known Lean Innovation Mgmt Process Mgmt


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Managing Three Horizons of Innovation - Goal Existing Business Model: Continuous Innovation Execute New/Disruptive Business Model Search New Opportunities via Business Model Innovation Execute/Search Known Unknown Partially known Lean Innovation Mgmt


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Disruptive Innovation Continuous Innovation Lean Means Getting Out of Your Office Horizon 2 Horizon 3 Speed & Urgency Lean Steve Blank If you’re not talking to 10’s of customers, it’s not lean If you’re not building iterative and incremental minimum viable products, it’s not lean


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Horizon 3 Horizon 3 Needs To Leave Home Process Innovation Continuous Innovation Disruptive Innovation Physically separate from operating divisions Company Incubator, etc Their own plans, procedures, policies, incentives and KPI’s They operate with speed and urgency Goal is to find a repeatable and scalable mission model Steve Blank


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Intrapreneurs are (Good) Rebels Source: Carmen Medina www.rebelsatwork.com


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Horizon 3 Protects Mavericks Horizon 1 Fires Mavericks In Horizon 1 Pains in the butt Always looking at something different Doesn’t get with the program In Horizon 3 The head of your innovation project Invents your next capability


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Horizon 1 Procedures Meets a Horizon 3 Project Steve Blank


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Horizon 3 Project


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Horizon 1 Management


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Horizon 1 Management


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Horizon 1 Management


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“Get to Yes” Corporate support of Innovation in All 3 Horizons Process Innovation Refactoring Group Company support orgs Steve Blank Task Support Organizations to work inside Horizon 2/3 Assign Finance, Legal, HR, etc. Job is helping all Horizon projects “get to yes” leverage existing assets and capabilities is critical Disruptive Innovation


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Success Creates “Debt” Success creates Technical debt Organizational debt Steve Blank New/Disruptive Innovation


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Horizon 3 Refactoring is an Integral Part of Innovation Process Innovation Disruptive Innovation Horizon 3 takes shortcuts Technical shortcuts add up and become what is called Technical debt People/process shortcuts are Organizational debt Refactoring “cleans up” debt by restructuring it You need a process organization dedicated to refactoring Horizon 3 projects Refactoring Group Steve Blank Horizon 1


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Company Incentives & Goals In support of Innovation in All 3 Horizons Disruptive Innovation Steve Blank Companies operate on goals and incentives Incent mavericks, incent support, incent adoption Process Innovation Refactoring Group Company support orgs


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Company Incentives & Goals In support of Innovation in All 3 Horizons Disruptive Innovation Steve Blank Company operates on goals and incentives Incent mavericks, incent support, incent adoption If there are no Horizon 2/3 incentives in the company then there is no real commitment to innovation Process Innovation Refactoring Group Company support orgs


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Agency Incentives & Goals In support of Innovation in All 3 Horizons Disruptive Innovation Steve Blank Company operates on goals and incentives Incent mavericks, incent support, incent adoption If supporting Horizon 2/3 is not part of Company goals & incentives then there is no real commitment to innovation Process Innovation Refactoring Group Company support orgs Positive – Financial Awards, Performance Bonuses, & Honorary Awards Negative – You can lose product funding


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Type of Innovation Innovation Becomes Execution Horizon 1 Adopts Horizon 2 & 3 Process Execution Steve Blank Horizon 3 support orgs Refactoring Group Continuous Innovation Success means scale Scale requires plans, KPI’s procedures, processes, incentives Innovation becomes execution Disruptive Innovation Horizon 2 Horizon 3 Horizon 1


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Why Innovation Fails


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Shiny Objects Technical founder enamored with new tech (shiny object) Abandons core Horizon 1 business Treats Horizon 1 as the “old guys who don’t get it” Company is still dependent on Horizon 1 until new tech gets adopted Apple and the Mac Research In Motion and QNX Solution: Can’t demoralize current product team Need transition plan Make sure that $’s, people, and infrastructure are in place to cross the Tech Transfer “Valley of Death”


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Leadership is Focused on Now Leadership managing agency for current mission Not investing for the long term CEO and/or mgmt incentives all on current mission and goals No incentives for CEO or mgmt on innovation for Horizon 2 or 3 Solution: Need a Corporate Chief Innovation Officer who understand innovation Need Chief Innovation Officers in all Divisions


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Innovation Is a Buzzword Stop using it to describe everything Solution: Use the Horizon 1, 2 & 3 metaphor Understand that Incubators, Cafe’s, Shark Tanks, etc. are just the innovation vehicles Lean is the methodology for acceleration I-Corps is the way to implement it


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Failure is Career Retarding A failed project is to be avoided at all costs Projects/programs are expensive (years, lots of $’s and people) In a Lean organization failure is part of the process It’s acceptable because failures are MVPs Very low cost Happens Rapidly It’s how we get to 50x Pivoting from a failure gets us new learning


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Horizon 1 Uses “Innovation” to Reinvent What Works Loses sight that the goal is to move forward, not reinvent what works Rebuilds work already done by others and already available as a service Doesn’t team with others Build competing architectures Use different source repositories, different standards, different ticketing systems, etc Fundamental Problems: Confusion about the goal of innovation in Horizon 1


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Innovation Has No Incentives No divisional incentives for Horizon 3 No divisional or Senior-level job description for Horizon 3 No strategy/tactics for integration of Horizon 3 into operating divisions Solution: Develop meaningful incentives for Horizon 3 Develop written job description for Horizon 3 support Develop strategy/tactics for integration of Horizon 3 into the rest of the organization


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Bottleneck: The Intransigent Middle Turning Go into No Top of the organization says, “Do it” Bottom of the organization (innovators) ready to go Middle management kills it Actively Sabotage Benign Neglect Innovation programs die Steve Blank Innovation Groups Ready Middle Mgmt Barrier Executive Buy-In GO NO


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Why the Bottleneck? Threat Power, ownership, turf, prestige, pay Confused Job spec’s are still the same No training on how to support, participate No incentives to change behavior No penalty for ignoring it Steve Blank


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Removing the Bottleneck Prove that this can work Then: Communicate, communicate, communicate Big idea – shared goal/mission Strategy – big picture of how the pieces work together Tactical implementation Update job specs to include innovation support Change incentives to include innovation support Shower those who came before with appreciation Support those who try and fail and try again Steve Blank


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Sales Freezes Talking to Customers Sales says “no one can talk to our customers” Valid concern of pitching new capabilities in place of ones that exist Belief that they understand all the users needs But Customer Discovery is not pitching new products It’s about understanding user problems/needs and how they use current solutions Almost impossible for a single individual to predict all of users needs now and the future Steve Blank


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Engineering Is Not Talking to Customers Engineering believes innovation is about technology Just talks to the Subject Matter Expert, or.. To the same small group of users they’ve talked to for the past 5 years They’re not talking to the total available market, and so they miss solving the bigger problems Solution: Focus the organization on understanding customer problems Focus on solving current or future problems Steve Blank


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What We Now Know


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Horizon 2/3 Projects Are Not Smaller Versions of Horizon 1


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Startups Are Not Smaller Versions of Large Companies Horizon 1 Executes Known Business Models


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Startups Are Not Smaller Versions of Agencies Horizon 2/3 Search for Unknown Business Models


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We Can Build a Process to Search Before we Execute


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Lean Innovation Delivers Products and Services that users want and need in a fraction of the time


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Lean Works for Everyone Gov’t Agencies, Corporations, Startups


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Adopted by the NSF (National Science Foundation) 550+ teams, 1,700+ team members Taught by 50 NSF Sponsored Universities


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Lean for Life Sciences at UCSF Therapeutics Diagnostics Devices Digital Health 75 teams, 350 clinicians and researchers


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Lean at the NIH (National Institutes of Health) Pilot with: NCI, NHBLI, NINDS, NCATS


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Lean at the DOE (Department of Energy) LabCorps – first teams this Fall


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Goal of I-Corps in Companies Horizon 1 and 2 Validate that products and services are what customers want and need With speed and urgency Horizon 3 Validate that products and services customers never imagined were possible Do all with minimal resources (time, money, people) in a fraction of the time


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The Lean Methodology


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Lean = 3 parts Business Model Canvas Part 1 Value Proposition Activities Resources Partners Costs


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Business Model Canvas = summary of the hypotheses of how you create and deliver mission value for the company and its stakeholders Part 1 Value Proposition Activities Resources Partners Costs


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1. Frame Hypotheses Frame Hypotheses ?


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1. Frame Hypotheses Frame Hypotheses Business Model Canvas ?


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Business Model Canvas


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2. Test Hypotheses Frame Hypotheses Test Hypotheses Business Model Customer Development ? ? Customer Development is how you search for the model


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Customer Development Turning the Business Model Canvas Into Facts


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9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess


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Customer Development is Hypothesis Testing


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3. Build Incrementally & Iteratively Frame Hypotheses Test Hypotheses Build the product incrementally & Iteratively Business Model Customer Development Agile Engineering ? ? ?


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The Minimum Viable Product (MVP) Smallest feature set that gets you the most … - learning, feedback, failure, orders, … - incremental and iterative It is not a prototype It is not a deployable version with the fewest features It is whatever enables us to validate/invalidate a stated hypothesis Early on it may be a drawing, a slide, a wireframe, clickable workflow, etc…


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The Pivot Definition: A substantive change to one or more of the business model canvas components Iteration without crisis Fast, agile and opportunistic Weeks and $100K


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Pivot Cycle Time Matters Speed of cycle minimizes cash needs Minimum feature set speeds up cycle time Near instantaneous customer feedback drives feature set Customer Discovery Customer Validation Company Building Customer Creation Execution Search Pivot


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Part 1 Agile Engineering + Part 2 Part 3 Elements of Lean Startup


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Lean Startup Part 1 Agile Engineering + + Part 2 Agile Engineering Part 3


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How to Start an Innovation Engine- 0 Reorganize around Mission + Innovation Each Horizon 1 division needs a Chief Innovation Officer Drives Continuous Innovation Finds Horizon 2 opportunities Starts and Funds 10x the new initiatives for MVP’s Each Company needs a deputy director of Innovation Runs/funds Horizon 3 incubators with I-Corps methodology Runs open innovation incubators Provides staff and infrastructure support for Divisional Innovation Steve Blank


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How to Start an Innovation Engine- 1 Identify Lean Innovation Vehicles R&D, Engineering, Incubators, Cafe’s, Accelerators, Hackathons, Open Innovation, etc. Adopt Lean Product Development: Digital Services Playbook.. Adopt Lean Metrics: Hypotheses tested, Pivots, IRL, TRL, … Adopt Lean Funding and acquisition: TechFar .. Adopt Lean Pedagogy: Lean LaunchPad/I-Corps Use Lean Mgmt processes Agree how to “Hand-off” and “scale” small efforts (hard) Develop organizational processes/procedures/incentives that support innovation (hard) Steve Blank


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Start an Innovation Engine - 2 Educate the company on Innovation Communicate goals Communicate process (hard) Everyone expects detailed specs like Horizon 1 - bad Consolidate innovation efforts (hard) Recruit teams (3-4 people) Recruit mentors - one per team (hard) Get divisional cooperation (hard) Train the Trainers Steve Blank


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Start an Innovation Engine- 3 Design Programs Emphasis on speed, urgency, evidence, pivots 1? day “Train-the-Trainers” 6/8-week “I-Corps” programs Investments and adoption of H1 and H2 by divisions Run Programs Steve Blank


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Start an Innovation Engine - 4 Rally around a mission not theory Pick something everyone agrees is a good goal and congruent with the company’s mission Legitimatize the need for exploration and exploitation For example, for a cybersecurity software company: “Advance and promote real-time security to protect information and outmaneuver hackers” Steve Blank


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Start an Innovation Engine -5 Leadership that is capable of managing the issues associated with multiple simultaneous Horizons Resource allocation Incentives Etc. Needs to balance a culture of risk taking, speed = mitigation, quick to opportunities, receptive to innovation Steve Blank


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Summary Lean Innovation Management is not about efficiency and innovation It’s about developing the capabilities necessary to offset competitors who may have equal or better technologies It’s how to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments It’s about survival in the 21st Century


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Thanks! sblank@kandsranch.com


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One More Thing


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Innovation Metrics


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NASA


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NASA/DOD Technology Readiness Level (TRL) Formal Way to assess project maturity Quantify Relative Risks Data Driven Adopted by NASA, DOD, FAA, ESA…


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NASA/DOD Technology Readiness: Levels 1 & 2 Basic Technology Research Basic principles observed Technology concept formulated Concept


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NASA/DOD Technology Readiness Levels 3 & 4 Research to prove Feasibility Experimental proof of concept Breadboard validation in lab Research Concept


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NASA/DOD Technology Readiness Levels 5 & 6 Demo Prototype Breadboard validation outside the building System demo in real-world Research Concept Demo


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NASA/DOD Technology Readiness Levels 7, 8, 9 Deployment System Development System deployed in real-world Research Concept Demo


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What Can We Do With All This Data? The Investment Readiness Level


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Investment Readiness Level


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Investment Readiness Level We can do the same for new ventures


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Investment Readiness Level We can do the same for new ventures Emphasis is on data


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Investment Readiness Level A Formal Way to Quantify Relative Risks Data Driven Analog to NASA/DOD Technology Readiness Level (TRL) Use IRL as a way to establish immediate funding increments


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Investment Readiness: Levels 1 & 2 Hypotheses Value Proposition summarized Canvas hypotheses articulated Hypotheses


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Investment Readiness: Levels 3 & 4 Problem / Solution Fit Problem Solution fit Low fidelity MVP Hypotheses Problem/Solution


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Investment Readiness: Levels 5 & 6 Validate Product/Market fit Right side of canvas Hypotheses Problem/Solution Product/Market fit


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Investment Readiness: Levels 7 & 8 Validate Left side of canvas Hypotheses Problem/Solution Product/Market fit


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Investment Readiness: Levels 9 Metrics That Matter Hypotheses Problem/Solution Product/Market fit Left side of the canvas


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Thanks! sblank@kandsranch.com


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