Friday, March 08, 2013

Agile Innovation

Continuing on the product review of Blackberry 10, and the possibility of Blackberry regaining its market leadership. It is clear today that even in the best case scenario Blackberry will have to compete for the third place! Even the race for third place will be tough - with Microsoft/Nokia, LG, Sony & HTC competing for the same third place. As the first & second place positions are already decided, the winner for the third place position will have to bleed in the brutal price war with HTC & LG, so even winning the third place will be a hollow victory. But then, Blackberry 10 and BES 10 are truly innovative products. So what went wrong? How can an innovative company introduce a truly innovative product and still fail?

The answers to these questions is: Speed of Innovation, or the lack of speed in innovation. By the time Blackberry developed Blackberry 10 OS, BES 10 and Z10 handset, Samsung released close to 30+ models of Smart phones and 10+ models of tablets. Apple released four new versions of iPhone and Tablets, developed Siri and iCloud and expanded its retail network globally. In other words, Blackberry was too slow for the market.

Today, Samsung has set the a scorching speed for introducing new products and Apple has set the high bar for quality and innovation. So for Blackberry to regain its market dominance, it must beat both Samsung in terms of new product launches or beat Apple in Total Customer Experience. Which is a tall order for any company, and hence Blackberry is forced to fight for third place.

Using Blackberry as an example, I want explain one of the principles of success with innovation called Agile Innovation.

What is Agile Innovation?

In a simplest terms Agile Innovation is innovating faster than the competition. But this is a lot harder and lot more complex than it sounds.

Innovation is an outcome of creative thinking (1% inspiration) and hard work (99% perspiration). So there is a built-in paradox with Agile Innovation! One cannot be fast and be creative at the same time. For example, if you try to write a creative poem in 30 minutes - I am sure, even with your best effort, it will be a lousy poem (or a copy of a popular poem/song).

The speed is spurred by competition and ambition to succeed, it is extremely difficult - except by sheer chance - to come up with a truly creative new idea under pressure.

Creative work needs time! Period.

But the market demands new & innovative products to be introduced faster than ever before.

So enter the world of Agile Innovation. A whole new process centric approach to innovation.

Agile Innovation is process of releasing new and innovative products at a regular intervals - while each release of a product has an incremental innovation over the previous release.

The concept of Agile Innovation has its roots in "Kaizen" the Japanese principle of continuous improvement and Agile product development.

With Agile Product development, companies can introduce new products at regular intervals and with Kaizen, the product is improved in each release. So Agile Innovation is method that ensures that each release of the product has innovations and it is possible to make course corrections - if the innovation is not well received. So instead of having one big-bang innovation - Agile Innovation splits it up into a number of smaller innovations spread over time, which enables market corrections when needed.

Another way to look at Agile innovation is to compare it with building a BIG Pyramid Vs moving one stone at a time. Each stone helps build the final pyramid - and in a phased manner - with the option of changing the plan if needed.

Need for Agile Innovation

Today, the markets and investors demand higher earnings and faster innovation. Companies have to cut the lead time required for innovation by 50% or more and offer differentiated products. Throughout business history, it has been noted that the first movers get the advantage of higher market share and higher returns. Also having multiple product releases leads to faster feedback from customers and enhances the learning cycle. Finally, Agile Innovation increases the capacity for innovation.

Agile Innovation is best suited for new product development - particularly in areas that has higher levels of uncertainty. Be it totally new technologies such as Cloud computing or renewable power etc. or in areas which is seeing massive growth and intense competition - such as cell phones.

For products that have long development cycles,  agile innovation is risky. Therefore it is best to try to break the long development cycle into shorter cycles - with the first cycle delivering the minimum features needed to release the product.

For stable & mature product areas - where there is little new development and products are mostly in sustenance mode, then Agile innovation is not the right choice - as the cost of release (& development) is often much higher then the incremental revenue.

How to implement Agile Innovation? 

As it becomes clear for companies that Agile innovation is the way to go, it raises the question: How to implement Agile Innovation. Implementing Agile Innovation is not easy. It takes a strong commitment from the entire organization - from the board of directors to front-line employees. The top management must commit to the required investments and organization changes. The front-line teams must be trained in agile methodologies and empowered to act independently. Top management must create adequate financial structures to closely monitor the success/failures of agile product releases. In short, the entire organization must be geared up for the agile world.

Its almost impossible to list and document all the steps needed, but here are the major ones needed.

Step-1: Create an agile ecosystem

Agile innovation relies on active interaction between users and developer. The first step is to create an  environment that allows for free interactions. Empowerment and collaboration are an absolute must. Rigid process or hierarchy does not help.

Creative ideas do not come from a lone inventor. Most of the creative ideas come constant interactions between creative people. Ideas take time to mature and evolve from a vague concept to something concrete that can be implemented.

Agile Innovation requires responsiveness to rapidly changing business environments and customer needs and so empower front-line product development staff to collaborate across organizations silos - this will encourage meeting the business objectives with a skilled, motivated, and self-organizing teams.

Step-2: Create an Innovation Pipeline

The long development cycle and long product life cycle requires  arduous research and development cycles which increases risks. With Agile Innovations, firms must shift their strategies to a more rapid understanding of customer needs and quick delivery of new products and services.

This means that firms must have more products and services in the innovation and development pipeline than ever before, and must launch more new products and services to keep pace with demand and competition.

With Agile Innovation, greater profits is possible with a shorter period of time as companies can respond faster to competition and deal with faster obsolescence of products. This, in turn, reinforces the need for the efficient use of ideas, which will drive new product and service creation.

Step-3: Focus on a single user persona

Since the basic principle of Agile Innovation is to opt for a larger number of releases instead of one big release, each release will have to concentrate on a small set of features. So each release must concentrate on meeting the needs of a particular user group. The first release concentrates on early adopters, the subsequent releases then concentrate on widening the market base by concentrating on features/innovations needed to please this new market segment. The second release concentrates on customers in the adjacent markets while retaining the early adopters and so on.

Main benefit of focusing on a single user persona is that the scope and hence scale of each release is minimized - which in turn lowers the risks involved and maximize profits. In many cases the exact requirements of a particular user group may not be well understood or known - say for example while the company is developing the product in the US, the target customer is in Japan. In such cases the new product releases may have to be tweaked in subsequent releases through focused experiments.

Step-4: Develop Focused Experiments

New product development is inherently risky. So when the user requirements are now clear or when the core technologies are not well developed, it is better to have some focused experimental products to test the market or core technologies. This way, the main product line is not impacted by a failure of an experiment. For example, Samsung released Galaxy Note - to experiment the market reaction to phablets - the hybrid between smart phone and Tablets. Developing a separate product and separating it from the main Samsung Galaxy S series was a great way to experiment.

Step-5: Iterate, Iterate & Iterate

Traditional product development tends spend a lot of time in defining a perfect product and then spend a whole lot of time and money executing it. By the time, the fist customer views the finished product - a while lot of time and money would have been spent. Like in case of Blackberry - which took about 2 years to develop. And by then, the market requirement could have changed or the competition could have changed the market landscape.

Agile Innovation calls for having multiple releases - releasing in shorter time and with each release learning from customer feedback - which is then applied to the next version of the product. This ensures that the product is at all times kept close to the needs of the customer. Which makes for a better product.

Agile innovation allows for several iterations to run in parallel - which in turn speeds up innovation. New technologies developed in each iteration can be applied in subsequent iterations. The parallel development increases the speed to innovation - while minimizing risks to other projects.

Agile Innovation is characterized by experimentation, and rapid prototyping. Each release is like a beta release which is used to test the product and improve on it. This approach allows the companies to experiment a lot and scale up on things that work.  Agile Innovation is inherently adaptive and allows for incremental development that minimizes risk, and keeps better control on costs.

Closing Thoughts

Agile Innovation has its roots in Agile project management - but it is not processes. It is a compete redesign of innovation, designed to help organizations react better and faster to changing market landscape.

Agile Innovation focuses more on outputs, outlining a product vision that has a strong customer focus  and minimizing the risks.

As a shining example of Agile Innovation, Samsung, Today, sells more mobile phones, and more smart phones, than any other company. It competes in all markets, from the high-end down, and is pouring its record profits into expansion and advertising. Samsung is now among the most valuable brands on the planet.

Samsung rose to prominence by out-grinding rivals in commodity markets, and it approaches phones and tablets the same way, by quickly pumping out handsets with incremental tweaks and improvements.

We are in the middle of a paradigm shift towards Agile Innovation. Any company that still relies on traditional innovation process will suffer. Companies will have to tweak its existing business models and methods to support agile innovation.  Now is the time to determine new business models, use of customer insights and feedback and to create new products and become more nimble, more agile and more innovative with Agile Innovation.

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