Lessons on Innovation
Next week Regtick will be in London attending the ‘Northern Ireland Business and Innovation Showcase’ in the Queen Elizabeth II Centre. As part of Northern Ireland’s centenary celebrations, the event will bring together and showcase the broad range of companies that have chosen Northern Ireland as the centre of their innovation strategy.
As Regtick has recently marked its first birthday, I thought it would be good to share our innovation design thinking and what we have learned about innovation at this early stage of our company’s development.
So - what is Innovation?
Innovation is an essential process within any successful organisation – from young start-ups to established enterprises. But, before we get into the lessons learned, it is important to be clear on what we mean when we think of innovation. A quick check with?Wikipedia?shows that there are over 60 definitions of the term. For our purposes, let’s make it simple:?
“Innovation is the process by which ideas are transformed into value.”
I’m deliberately using the word ‘process’ – which means that there are inputs, outputs and tasks or activities performed on the inputs to generate the outputs. Here the inputs are ideas, the output is value. I’m also deliberately not defining what ‘value’ is. For you or your organisation, value may mean something that is quantitative and easily measured - such as an increase in revenue, a reduction in cost, or something that is more qualitative - an improvement in control, increased collaboration, or a less ‘siloed’ culture. I am also deliberately not defining to whom the value is being delivered. It could be to internal staff, external customers, or even the wider community, society and environment in which we live.?
As we talk through the lessons learned, have a think about your organisation’s value proposition. Why does it exist? What is its purpose? To whom is it delivering value?
Lesson 1 - Dream Big.
The critical part of any innovation journey is to have a clear idea of what it is you are trying to achieve. Every organisation should have a BHAG – A Big, Hairy, Audacious Goal. Something that is aspirational and perhaps inspirational. Something that you, your staff that you will need to recruit, your customers that you will need to acquire and retain, your supporters and wider stakeholders that you will collaborate with – can all align to and support unequivocally.?
Having something that is clearly defined helps make sure that every piece of work that you, your team and your ecosystem partners work on, is aligned to this overall Vision.?
If you haven’t got a Vision statement already, try to think of one in terms of senses – picture yourself in the future having achieved the Vision – how do you feel? What do you see, smell, taste, hear? If you have not already watched it, check out Simon Sinek’s TED talk on ‘Start with why’. People don’t buy what you do, they buy why you do it. So ask yourself what is your ‘Why’? What is your organisation’s burning passion? What is it that will drive you and your teams every day? Having a clear vision also allows you to create momentum. Being able to change the world on your own is probably impossible but if you can create a movement strong enough to motivate co-creators and collaborators to come on your journey with you then you can achieve so much more. Take the time to define your organisation’s Vision in simple terms. I like Steve Jobs quote?
“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.”
For Regtick, our Vision is ‘The Simple, Clear Path to Compliance’. Making things simple is critical to our value proposition. We take complex regulations and transform them into simple to follow tasks using new and easy-to-use visual software. We also create a path, blaze the trail, model the way, define the steps – that people need to take in order to achieve and evidence Compliance with the regulations. Everything we do, we ask ourselves – ‘Is it simple? Is it clear? Does it model the path forward?’.?
Your vision statement will be your compass throughout your innovation journey. Over the years ahead, the tactics that you employ or the decisions that you make will need to change depending on the environment and conditions you face at that time, but you will always need to know that every decision that you make aligns towards the Vision. Your Vision will provide your ‘true north’. Are you ready to change the world?
Lesson 2 - Start Small.
If you are working in a large, established enterprise, then start to think like an entrepreneur. Imagine that any input (Time, Resource, Energy) available for your company innovation is scarce. The activities that you choose to spend these resources on must be the ones that are critical to the success of your company’s innovation Vision. There is no room for any waste. In LEAN manufacturing, TIMWOODS is a useful technique to help identify wastes. It is derived from the Toyota Production System (TPS), designed by Taiichi Ohno and is particularly applicable to established manufacturing processes. We can apply the lessons of LEAN Manufacturing to our Innovation process:
Firstly, create a list of all the assumptions that must be true in order for the innovation idea to succeed. Secondly, order this list of assumptions by the riskiest (at the top), to the least risky (at the bottom). For the riskiest assumption, agree a set of metrics that can be measured and must be met in order for the assumption to be true. Make sure you agree your metrics before you start your tests, otherwise you’ll introduce the risk of Confirmation Bias. All set? Now get ready to go out and test your assumptions.
For Regtick, our Assumptions included:
Lesson 3 - Test Early & Frequently
The earlier that you can perform each test to validate or disprove your assumptions, the less waste that you will incur and the more tests that you will be able to run within your funding runway. When designing your tests, how can you design and run them with the least Time, Resource and Energy possible? Helpfully, we can follow in the paths of many successful companies that have designed a number of techniques for us to use. Consider Groupon – the billion-dollar volume discounts company. When Groupon wanted to test if shops would accept a discount coupon, they created one in PowerPoint and printed it using their office printer, before taking it to the Pizza shop underneath their office. For Zappos, the on-line Shoe Company bought by Amazon for over $1Bn, the founder, Nick, needed to prove if people would order shoes on-line. Rather than buying up lots of stock, he agreed a deal with a local shoe store that each time someone bought a pair of shoes online from his ecommerce site, Nick could buy the shoes directly from the shoe store and fulfil the order. This cut down his inventory cost and allowed Nick to validate his hypothesis before scaling. This technique is called the ‘concierge’ approach to Minimum Viable Product (MVP).
For Regtick, rather than building out the whole platform before we could seek customer feedback, we were able to accelerate the testing of our assumptions by just building simple wireframes. We then created screen transitions in PowerPoint. Then using PowerPoint animations, we were able to create the effect of workflow between screens in the ‘system’. This allowed us to validate the assumptions faster, which then allowed us to iterate the product quicker and ensure that any features we developed added value to our Innovation. This technique is called the ‘Wizard of Oz’ approach to MVP.
Testing early allows you ‘Pivot or Persevere’. If the results of your test show that your assumptions cannot be met, then it is time to pivot. The number of times you can pivot is limited only by your funding runway. The shorter time to test, the more experiments you can run within your available funding and the more likely you will be able to identify product and market fit.
Lesson 4 - Scale Quickly
Nail it and scale it! There are a number of drivers which will influence the scaling of new innovations within your company. These will depend on factors such as the market sector you operate in and how you provide value to your customer base.?
Scaling your innovation quickly involves three phases – Build, Measure, Learn. This is a never-ending cycle so that you will always be adapting and improving your innovation based on early feedback from your customers. The new features that you develop will add value to your customers who will be willing to pay more for the increased value. Measuring how customers use the new features will allow you to learn which add the most value and which ones do not. With each Build-Measure-Learn cycle, you can continue to elaborate your platform or service, incrementally adding value in as short a time as possible for use by your whole customer base. Continued iterations will enable your innovation to reach product and market fit.
According to Eric Ries, in The Lean Startup, there are three drivers of business growth: Viral, Paid and Sticky.?
Viral growth is achieved through referrals and is often suited to innovations that benefit from network-effects. For example, the telephone or fax machine requires another fax machine user in order for it to work. The value of the product increases as the size of the network of users increases. In modern day terms, think of video conferencing platforms such as Zoom, which have grown rapidly during the pandemic.
Paid growth depends on low customer acquisition costs (CAC) and high customer lifetime values (LTV). It requires investing in paid channels to acquire new customers. As long as the customer LTV exceeds the acquisition costs, then you will make a profit – which can then be re-invested in acquiring new customers.
Sticky growth is where you are offering a must-have solution with high rates of expected customer retention (also described as low customer churn). The key here is that you expect your customers to be with you for the long term and that there is little incentive for them to switch from you.
For Regtick we are testing our SaaS model as being a ‘Sticky’ engine of growth. There are many factors, specific to regulatory reform in financial services (our chosen initial market) which have helped us make this decision. However, we are also testing paid and viral growth methods to determine if these are applicable now or could be in the future.
You may find that your engine of growth may be a mixture of all three. You may find that your engine of growth changes over time as the value of your innovation changes – perhaps through a subsequent pivot. My advice is to run these as tests, just in the same way that you have already done so to ‘test early’. Then build, measure and learn from your growth model to enable it to scale quickly.
I hope that these lessons that we have learned may be of some use to you as you embark on your innovation journey. If you have any lessons to share on innovation, post them below, or get in touch!
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