Start-up insights: Collaboration offers the best chance (Part 1)

Today (worldwide) consumers spend around $30 trillion per year. Over the next 5 years it is predicted that consumers will generate over $10 trillion in new spending. Half of this will be across key sectors focused in three markets: the USA, China & India. Against that backdrop, encouraging and supporting innovation through collaboration is fundamentally important to ensure our payments landscape remains fit for purpose. Having co-founded Onebanxs with Duncan Cockburn, I wanted to give you a flavour of the unique impact that startups and innovators play in the payments landscape. This is the first of a series of articles on this topic.

Part 1 - Getting started?

Too often, companies don’t develop innovations in an orderly or reliable way. Big breakthroughs happen only because of one person’s heroic efforts or a huge dose of serendipity (“happy accident”)—or sometimes both.

Some firms try to spark innovation through ad hoc initiatives such as hack-a-thons, contests, and task forces. But these efforts often prove fruitless—or generate ideas that don’t fit the strategy. A few companies, including P&G, go to the other extreme. They’ve built so-called innovation factories so they can attack the problem on a very large scale. But that requires a lot of time and money, new hires, and new organisational structures.

There is a more practical middle ground: a minimum viable innovation system. It borrows from the lean start-up approach, which introduced the idea of creating a “minimum viable product”—a stripped-down prototype—to test new offerings with customers. A minimum viable innovation system includes only the essential building blocks for a reliable and strategically focused innovation function.

Everyone can set up and deliver innovation, it's not just for start ups. By following straightforward basic steps, you can do it all with minimal investment and without hiring anyone. But it will require support—in particular, the attention of senior leaders within the industry. Each step involves a couple of tasks, performed by a variety of people. Completing all the tasks will take you just 90 days. But, to be clear, this doesn’t mean you’ll have fully baked innovations ready to take to market in three months. What you will have is an efficient way to identify the right ideas and develop them.

STEP 1 – CORE V NEW GROWTH There are many types of innovation, but strategically, all innovations fall into one of two categories: core or new growth. Core innovations improve the existing products or operations of the business and should offer rapid returns. If your growth gap is really big, you may want to divide your new growth initiatives into two or three categories. Once you’ve figured out broadly what kind of innovations you need, the next step is to zero in on a few strategic opportunities.

STEP 2 - STRATEGIC OPPORTUNITIES After all, by definition, a minimum viable innovation system involves minimal resources. So you need to make the most of them. How should you pick the right opportunities? Dedicate about three weeks’ worth of research beginning with meeting with at least a dozen customers to probe for unmet needs. You should also look closely at developments in and around the firm’s industry and at ideas currently bubbling up inside the company, because organic initiatives sometimes point to strategic objectives that could use more management attention. Once the research is done, identify two or three opportunities that meet these criteria:

• A job that many people need to get done—but that no one is doing well.
• A technology that will help customers do that job faster, more cheaply, or more conveniently, or a regulatory, economic, or social shift that intensifies the need for it.
• A capability that gives you an advantage in seizing this opportunity, or know-how that competitors can’t copy.

STEP 3- THE DEVELOPMENT TEAM As you’re figuring out what opportunities to pursue, you’ll also be deciding who will pursue them and how, Since you’re creating a minimum capability, having everyone in the organisation set aside some time to innovate might seem like the way to go. But think about these statistics:

• 75% of venture-backed start-ups fail to generate a return to investors?
• 50% of start-ups don’t make it to their fourth year.?

If teams that are dedicated full-time to new initiatives can’t succeed, what hope do part-timers have?

STEP 4 Though your core innovations can be managed under your main business planning and budgeting systems, new-growth initiatives need a separate system—one that can manage strategic uncertainty.

By day 90, your minimum viable innovation system should be in place. You’ll know how much you need to focus on new growth. You’ll have identified a couple of strategic opportunities and put together a development team and an oversight group. And by now, operations should have kicked into gear. That means one innovation project is under way, and the oversight group has conducted its first review. But remember, setting up the system is just the beginning of the process. Once you see signs that your innovation system is bearing fruit, you can then consider your next steps. Are certain elements working well? You may want to wire them into more-formal systems.

SOME FINAL ADVICE How you treat failure is more important than how you reward success. If you try to avoid failure or hide it, you’ll just spawn zombie projects that suck up all your resources. A minimum viable innovation system won’t prevent failure but it will help you increase the productivity of your initiatives. And that will strengthen your company and its prospects for the future.

This article is by David Hensley, Director, Enryo.