Hello! We’re back and ready to start Topic 4, where we will discuss Lean Innovation And in this video we’ll take a look at the relationship between Lean Start-up and Innovation, which is the title of this video. Lean Start-up and innovation and innovation again, everyone’s talking about it, everyone wants to do it, most customers we talk to struggle to incorporate innovative thinking in their businesses We will see how a large percentage of big companies and organizations have a center for innovation, but only a few, around 17%, manage to take innovation beyond the department and reach the entire organization. As the business and digital worlds converge, and customers expect better services, those in charge of making decisions consider innovation as one of the main commercial priorities. However, most companies think of innovation as a random process that occurs spontaneously and does not need to be managed or formalized. This is fundamentally a lie and a number of theories have been developed and books have been written that refute this common belief. Innovation is as important a process as any other area within a company. Perhaps some of you are familiar with a methodology to develop startups, to begin new ventures called Lean Startup, which is the most popular theory to start a business nowadays and that was formulated by Eric Ries. This theory is directed at companies of recent creation going through high uncertainty periods that need to quickly iterate solutions to improve their understanding of the external markets and customers. Nevertheless, the concepts in this theory can also be used to manage innovation in large organizations, and I personally believe it is one of the most effective ones. The Lean Startup concept defines a closed-loop three step approach to deliver products to customers faster: First, BUILD. A Minimum Viable Product (MVP) has to be built and tested that is different from the Design Thinking prototype with real users Then, we must MEASURE. User feedback is measured. It is a stage a bit different from the empathetic stage which we can associate, but here we call it User feedback MEASURING. And LEARNING means pivoting and iterating. Measuring, then learning. Feedback is channeled in the learning process to refine the Minimum Viable Product (MVP), which is going to be tested again with users. This happens in Design Thinking, too, with the prototype: being empathetic and start iterating. It may sound like a simple and common sense-based process, but it clashes with the classic top-down financially driven management theory Lean Startup includes customer development and discovery. In existing businesses, I call that “Customer Rediscovery.” In the company, the customer gets rediscovered, we talk to the customer again. Lean Startup uses Alex Osterwalder’s Business Model Canvas and Agile Engineering, where Minimum Viable Products are quickly designed and presented to customers for immediate feedback within this process. Nevertheless, many people have asked me about the difference between Design Thinking and Lean Innovation (Lean Startup). As a general rule, lean deals with validating products or services as soon as they are created by the company, that is to say, I create the product or service and validate it in a very quick fashion. If you remember, Design Thinking starts from scratch. It is a methodology for more ambiguous topics, used by Lean Startup a lot. We use it a lot with technological products created by engineers and scientists, and helps speed up the validation process. Design Thinking, as I was mentioning, starts from the drawing board, from the discovery of a necessity. Entrepreneurs (and intrapreneurs), more often than not, need to devise detailed business plans so that investors or the top management buy the idea so they can move on. However, these plans are based on bold hypotheses and assumptions without foundation that cannot be validated unless they are market-tested. A number of large corporations we have helped are caught in the dilemma of inventing an unrealistic business case or receiving no funds. That is why Lean Startup focuses on action instead of written plans some may even call them “comprehensive paperwork”, but it encourages prototyping and the Minimum Viable Product that I show immediately to my customer before I draft a business plan. Lean Startup may be the natural option for new companies but, to be accepted by large organizations, it requires a slight paradigm shift. As a first step companies are setting up innovation labs where development teams get things off the ground quickly, with minimal initial capital investment. However, although this is a step in the right direction, this has a limited impact on the overall organization. Being lean requires cultural change, just as it’s seen in some of the videos, In addition to a structured process, innovation must be supported by the right technologies and organizational culture. Technology should not be isolated, but integrated and customer-oriented, allowing for fast paced delivery. Lean principles and technology have to be leveraged to create a “safe field” in which development teams can experiment new things. This is just the beginning of the innovation journey. Innovation cannot be limited to a team or laboratory, but it needs to become part of the indicators for the entire organization. The competitive landscape has changed and smaller, more agile startups are competing, and frequently winning against incumbents that are not able to quickly react to the changing environment. That is why companies need to act like a start-up, a gorilla must act like a start-up, it should have its smaller chimpanzees or apes. That is where innovation is generated and where we apply lean entrepreneurship, in the new apes of big gorillas, new companies within the larger company, using the right tools, processes, methodologies and culture to support innovation. If you took the Entrepreneurial Mindset Course you will be able to explore this methodology but applied to start-ups and new companies. In this course, it will be applied to existing companies, whether gorillas, chimpanzees, or medium-sized companies. The methodology will focus on understanding needs, solving problems, alleviating pains, generating profits and jobs-to-be-done that the customer wants you to do. It’s the hardest part of the process, understanding what the customer wants, for many times they don’t know what they want, and we have reviewed this in other videos. Innovation focuses on delivering customers a better value proposition. A proposition that takes care of those problems, relieves pains, and creates a profit. Remember that value propositions are benefits the company hands the customer. These benefits are the way in which we will solve customer problems and needs, profits, pains, and jobs-to-be done. That is the interaction between customer and value proposition and Lean Startup is based precisely on this interaction
