Innovation sometimes requires a lot of wasteful experimentation that may or may not yield any positive returns for the organization. At times, it looks as though it is completely against to the whole efficiency argument.
This is a common sentiment in organizations that derail many efficiency programmes. But according to the Lessons Learned by Eric Reis, it is a fundamental misconception of what lean start-ups are all about. Part of the problem lies in understanding that the difference is the distinction between lean start-ups and lean companies . In a typical lean company, waste is defined as ‘ every activity that does not create value for the customer’ . And this is 100 per cent correct. By driving this kind of waste out of your company, you actually boost creativity by eliminating bureaucracy, busy work, unnecessary hierarchy and, of course, excess inventory.
In ‘The Four Steps to the Epiphany’, Steven Gary Blank has rightly focused on the concept of ‘Get out of the building’. Normally start-ups do not fail because of lack of technology; but they usually fail because of lack of customers. This requires learning about the customer through creative processes and techniques. This is where Steve’s maxim ‘In a start-up no facts exist inside the building, only opinions’ is so applicable. Your business plan is likely to be loaded with opinions and guesses, and sprinkled with a dash of vision and hope. The second important aspect to be taken into consideration is the theory of market types. It is this theory that explains the rationale behind why different start-ups face wildly different challenges and time horizons. There are two fundamental situations that necessitate your company to create a new market: bringing a new product to an existing market and continuously segmenting an existing market. The four phases of growth that a start-up involved in innovation goes through are as follows: (1) customer discovery—to identify if there are any customers who might want your products/services, (2) customer validation— getting first revenue stream by selling the products/services, (3) customer creation—concrete strategy to launch the products/services and (4) company building—stabilization and growth phase of a venture.
The major mistake that start-ups make is to undertake a premature execution of an idea without ensuring its innovative strength and credibility in the eyes of a customer. Start-ups need time to diagnose the potential of an idea well and use creative techniques to come up with unique ideas in association with customers on a continuous basis.
Start-ups require a special kind of creativity: disruptive innovation. This is not in actual fact a matter of efficiency. By the standard of ‘customer value’, most innovation-seeking experiments are a waste. Lean start-ups operate by a different standards. In general, ‘waste’ can be defined as ‘any and every activity that does not contribute to learning about customers’. Of course, both lean start-ups and lean companies follow the same underlying principles. It is just the implementation that changes, as the focus shifts from learning to execution. On the other hand, there are great companies, such as Toyota, Xerox and IBM, that successfully incorporate innovation into their execution discipline. The true meaning of waste is as follows: ‘anything that does not carry out the company’s mission’. However, it is necessary for start-ups to realize that the mission of the venture keeps changing through the natural phase of growth. The crux lies in trying to understand waste. The process of coming up with new and radical ideas is, oftentimes, not waste.1
1. ‘Normally start-ups do not fail because of lack of technology but usually fail because of lack of customers.’ What is the significance of this statement from the point of view of creativity and innovation?
2. What is meant by theory of market types? What is its significance to start-up ventures?
3. Experimentation is not necessarily waste. Explain the significance of this statement to start-up ventures.
4. ‘Start-ups require a special kind of creativity: disruptive innovation.’ What is meant by disruptive innovation? How can creativity help in coming up with destructive innovations?