The Three MVPs of Innovation

You have heard of Minimal Viable Product, a term coined by Eric Ries to describe a version of a product that offers maximum learning at minimal effort. This post will introduce two additional MVPs and the corporate stages to use such strategies to innovate.

I’ve been fortunate to learn from companies at different phases of development, from early-stage startups to F50. As companies scale from startup to enterprise, systems, processes, and technology evolve due to the people and complexity in an organization. I’ve been in awe of the level of risk tolerance and speed at which innovation occurs in startups and, equally, the manufacturing capabilities of large multinationals.

To help me think about company growth and scale, I came across a framework called the rule of 3 and 10. This rule used by Hiroshi Mikitani, CEO of Rakuten, states that as a company grows in multiples of 3 and power of 10, systems and processes begin to break down in organizations. So what works with three people does not work for 30. And what works for 30 doesn’t work at 90, 270, and so forth.

I have not researched this framework to determine whether this is an optimal sequence for a corporation to scale. Still, I generally agree with the premise for all functions except one, product and business model innovation.

The Scale Challenge

The startup challenge is finding a product/market fit with minimal distractions. This means failing fast, shipping MVPs (product), absorbing customer feedback and iterating. There is little time for planning beyond simple frameworks. Expensive tech stacks, processes, systems, and hierarchies can wait.

Once companies find product/market fit, sign up initial customers, are capitalized, and start to grow. Then some basic systems and processes are implemented to drive productivity, or profitability becomes unreachable. The scale challenge for SMB growth companies is not to grow up too fast. There is a gravitational pull to add process, planning, and technology for future growth or add to the market appeal. Scaling infrastructure too soon can overheat resources, burn capital, and distract the company from growing revenue. In addition, innovation suffers because of the added processes which cause additional fricition.

Years of adding products, new businesses, technology, systems, rules, traditions, processes, etc., turn enterprises into giant hairballs (popularized by the book “Orbiting the Giant Hairball: A Corporate Fool’s Guide to Surviving with Grace” by Gordan Mackenzie). An ecosystem of people, processes, technology, and planning that consciously or subconsciously attempts to wring out risk throughout the organization. Employees execute defined routines and workflows with little upside to innovate and take risks. Innovation becomes incremental product improvements versus finding disruptive or radical new products and business models.

Two New MVPs on the Block

Minimal Viable Process and Minimal Viable Planning are equivalents to Minimal Viable Product. It is natural to have minimal processes and planning activities in the startup phase, so innovation functions are front and center. However, as companies grow, processes and planning adapt to the changing needs of the workforce. Marketing, sales, customer service, and operations adapt by adding more advanced planning, technology, and processes to support personnel growth. And companies grow out of the MVP culture.

Innovation management functions, like new product development and R&D, also scale processes and planning. As a result, five-year plans, stage-gate funnels, layers of reviews and approvals, six sigma, and organizational layers form. I posit that adding these entanglements in this arena is a mistake.

I argue that organizations should resist scaling processes and planning (strategy) specific to innovation functions at all growth stages. Instead, minimal viable product, process, and planning should be the permanent state for new technology, product, and business model innovation. Innovation culture should not grow up but maintain an MVP vitality forever.

Allow me to digress. Elon Musk, love him or hate him, is one of the greatest innovators of our lifetime. He routinely wills a general concept to a billion-dollar business across industries. These same Ideas that, if introduced into most organizations, I suspect, would die immediately. Why? Because IMO, Elon thinks in first principles and asks questions in much the same way a child would but with advanced intellect and experience. That is his differentiator, along with his bias for action.

Maintaining an MVP Innovation Culture

Here are some ideas and observations to keep an organization’s innovation engine humming.

• Smaller Teams — Keep product development teams small (less than 10) and independent and help them maintain autonomy to chase seemingly crazy ideas. In my experience, it is better to have five teams of five working on the same problem than one team of 25.
• Agile Innovation and Product Development — This methodology is standard in startups, especially developers, but it is less common in enterprises that still hold on to established waterfall processes. Invest in Agile training across functions.
• Business Model Canvas — Use simple frameworks to create new business models. I’ve grown fond of the business model canvas because it is visual and straightforward. However, if planning is more than a page, it is probably too much in the early stages.
• Build VC Funding Mechanisms — Many larger enterprises have built out corporate VC capabilities to invest externally. Allow internal innovation teams to tap the same funding mechanisms. But keep the process simple.
• Resist State Gates Innovation Processes — This is hard for me as I’ve advocated for stage-gate processes for most of my career. As an alternative, develop a simple prioritization framework and start working on the best ideas.
• Resist Vertical Hierarchies — Layers of organizational structure hamper a team’s ability to make decisions quickly. Stick with horizontal designs as much as possible.
• Protect the Mavericks — I’ve heard the talk in large corporations about accepting risk-taking and embracing entrepreneurial culture. But I have not experienced it. Risk-taking and failure lead to corporate exits, voluntary or involuntary. The same as antibodies attacking a virus, mavericks are considered the virus. There are ten employees (antibodies) rooting for the failure of each maverick. In startups, everyone is a maverick, or they would find less risky jobs that pay more.
• Simple Financial Modeling — I’m guilty of building complex financial models in the early stages of product development. However, my learning is a simple model works just as well to determine if you are on the right track.

Summary

Companies scale and add systems, processes, technology, people, and planning. And that is okay, assuming the company sees positive returns from these additions. However, innovation is a different animal — an animal that needs to stay a little wild. As companies grow, they tend to try to cage the innovation animal. Resist!

I hope this post helps you consider an alternative approach to innovation management. I lead a boutique consulting firm that helps organizations work through challenges in their innovation playbook. If you would like to discuss this, please DM me, and we can set up some time to chat. In the meantime, what are your thoughts on innovation?

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