Lean Innovation for Micro Enterprises Module 9 Is it worth implementing Lean Innovations?
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The document discusses various methods for evaluating innovations using lean principles. It describes lean evaluation as providing valuable feedback without extensive data gathering and analysis. Some key evaluation methods discussed include innovation accounting, which tracks metrics like user engagement and assumption testing. Other methods covered are scored SWOT analysis, evaluation matrices, and the business model canvas. The document emphasizes using a mixture of input metrics, like money spent, and output metrics, like revenue from new products. It advises starting with a handful of relevant metrics and sticking with them over time to assess innovation trends. Pivoting versus persevering with an innovation is also addressed.
Lean Innovation for Micro Enterprises Module 9 Is it worth implementing Lean Innovations?
- 1. Module 9: Is it worth implementing Lean Innovations? How to evaluate innovation
- 2. Lean evaluation can give You valuable feedback without spending too much time on gathering and analysing data LEAN EVALUATION
- 3. 3 1. The principles of lean evaluation: Validated learning create learning experiments, where teams follow a continuous cycle of ‘build- measure- learn’ Innovation accounting choosing key metrics that enable you to track and measure what really matters: user engagement with the product, assumption- testing, and current product value Real metrics build experiments around “real” metrics, rather than ”vanity” metrics Pivot or persevere? “pivot” means changing direction without totally abandoning previous learning or product vision Continuous testing and iteration doing real- time user testing, finding out what the customer really wants and making business decisions following user feedback 1. LEAN EVALUATION
- 4. 2. Innovation accounting The most important while evaluating new ideas Innovation accounting allows a team to: Build a model of customer behaviour over time Use that model to change the product/service and change customer behaviour Ergo, establish facts about validity of the vision and if it is sustainable The three major learning milestones in innovation accounting are: Building an MVP and establishing a baseline and feedback loop with customers Run experiments on the MVP to move from baseline customer behaviour to ideal customer behaviour Decision point — persevere or pivot, based on what has been learned 2. INNOVATION ACCOUNTING
- 5. The innovation accounting process 1. Choose your metrics The key is to keep metrics simple and easy to use If you’re wondering where to start, the above first level examples may provide an entry point Or you can prompt ideas by asking yourself these questions and then refining the answers into metrics for which the data is available: • Did we do what we said we would? • How are people working differently? • Do users see an improvement? (referring back to the original problem or need that your product is an attempt to solve) • What new sources of growth are we tapping? Source: https://www.boldare.com/blog/lean-startup-innovation-accounting/ 2. INNOVATION ACCOUNTING
- 6. The innovation accounting process 2. Monitor the data Apply your chosen metrics to the three levels Gather the data and measure progress 3. Hold the project to account Act on the data you have Is the project team performing to plan? What progress is being made, and in what direction? Is the product development still aligned to identified user needs? Source: https://www.boldare.com/blog/lean-startup-innovation-accounting/ 2. INNOVATION ACCOUNTING
- 7. 3. Input vs. Output metrics The main role of innovation metrics is to make sure you’re doing enough of the right activities to reach your goals They are typically divided into two different categories: input metrics and output metrics In other words: what goes into your innovation process and what comes out of it 3. INPUT VS. OUTPUT METRICS
- 8. 3. INPUT VS. OUTPUT METRICS You can compare Input vs. Output metrics INPUT METRICS… OUTPUT METRICS… … A R E U S E D F O R M E A S U R I N G Y O U R I N V E S T M E N T S : … A R E U S E D F O R M E A S U R I N G Y O U R R E T U R N S : M O N E Y S P E N T F O R D E S I G N I N G / T E S T I N G N E W O R I M P R O V E D P R O D U C T A S A P E R C E N T A G E O F S A L E S T H E N U M B E R O F I N N O V A T I O N P R O J E C T S S T A R T E D T H E N U M B E R O F N E W I D E A S I N T H E P I P E L I N E N U M B E R O F N E W E M P L O Y E E S T H A T N E E D T O B E I N C L U D E D I N T H E D E S I G N / T E S T I N G P H A S E O F A N E W / I M P R O V E D P R O D U C T N U M B E R O F N E W P R O D U C T S L A U N C H E D I N X A M O U N T O F T I M E R E V E N U E / P R O F I T G R O W T H F R O M N E W P R O D U C T S R O I ( R E T U R N O N I N V E S T M E N T ) O F I N N O V A T I O N A C T I V I T I E S A C T U A L V S . T A R G E T E D B R E A K - E V E N T I M E F O R N E W P R O D U C T S Watch “What is the difference between Input KPIs vs Output KPIs” You Tube Link (4.0mins)
- 9. REMEMBER! To get a more complete picture, it’s best to use a mixture of input and output metrics! For example, rather than simply measuring how much money we have spent during the design/testing phase (an input metric), you should measure this spend against the revenue generated by products recently released to the market This combined approach helps to tell both sides of the story: the investments a company is making in innovation, and the results of these investments over time 3. INPUT VS. OUTPUT METRICS
- 10. Value Metrics • Acquisition. How do users find out? • Activation. Do users have a great first experience? • Retention. Do users come back? • Revenue. How do You make money? • Referral. Do users tell others? 4. Lean innovation key metrics 4. LEAN INNOVATION KEY METRICS
- 11. Financial KPIs If You want to concentrate only on finance – use financial KPI’s • Ideation ratio - Sum total of the potential value of all creative ideas • Implementation ratio - Sum total of the actual implemented impact from all creative ideas Explanation & worked example 4. LEAN INNOVATION KEY METRICS You Tube Link I Watch “The 10 Biggest mistakes companies make with KPIs (Key Performance Indicators)” (8.0mins)
- 12. 4. LEAN INNOVATION KEY METRICS REMEMBER! Try not to use too many different metrics ! Using too many different metrics can result in a confused and inconsistent picture of company innovation So, start off nice and easy, get the right people on board, and pick just a handful of innovation KPIs to begin with Your staff will thank you Once you’ve found an approach that works, stick with it! Sticking with one measurement approach over time will ensure your results are standardised and can be compared between quarters Stick with something long enough, and you’ll be able to tell a convincing story of your innovation trends
- 13. But which innovation metrics and KPIs should you use? You should choose metrics that are consistent with your innovation strategy, and which match the areas of investment focus for the upcoming years. Consider these factors, and develop your own “metrics mashup” covering the areas of company creativity that matter most to you. To ensure you capture all elements of innovation, it is recommended to use following metrics and KPIs: 3. The number of innovative projects progressing through project milestones each quarter 4. LEAN INNOVATION KEY METRICS 1. The overall percentage of revenue generated from recent innovations (for example, products released to market in the last two to three years) 2. The percentage of staff time (including executive time) spent on high-yield innovation activities (in other words, creative efforts resulting in innovations with market potential)
- 14. 5. Methods of evaluation Scored SWOT analysis This SWOT analysis approach includes a scoring system in which reviewers give 0 to 5 points each for strengths and opportunities, and take away 0 to 5 points each for weaknesses and threats This provides a SWOT metric which can be handy for comparing large numbers of ideas Weaknesses Opportunities Threats Strengths SWOT 5. METHODS OF EVALUATION Watch “Business strategy - SWOT analysis” You Tube Link (3.0 mins)
- 15. Business Model Canvas 5. METHODS OF EVALUATION Watch “21 Lean Startup Key Metrics” You Tube Link (11.0 mins)
- 16. Evaluation matrix is a simple array in which experts compare an idea with a set of criteria. In our experience, five criteria is best as it allows for a rounded review without bogging the evaluators down in unnecessary detail. The evaluator ranks how well the idea meets each criterion (we use a scale of 0-5 points for each criterion). Evaluators are also encouraged to provide comments elaborating on their ratings and, in particular, suggesting how the idea might be improved to overcome weaknesses. The evaluation matrix provides a criterion by criterion score as well as an overall score for each idea. Assuming several ideas focusing on a particular problem or business issue are being evaluated at the same time, these scores can be compared, and the highest scoring ideas can be selected for further review. You can find the evaluation matrix step-by-step guide in the Module 9 Notes Criteria Coefficient Idea A Weighted rating Idea B Weighted rating … You Tube Link The detailed description of the procedure is here: 5. METHODS OF EVALUATION (8.25 mins)
- 17. 6. Pivot or Persevere? https://medium.com/swlh/pivot-patch-or-persevere-i-patched-the-lean-startup-206d63023b9c Persevering with your current business strategy means that you keep believing in what you set out to achieve, only you will implement small changes and updates every day to make progress toward your goals. Using ongoing build – measure - learn cycles, you try to move the drivers of the business model in the direction of a favourable outcome. Pivoting is what you should consider when you come to the conclusion that you’re not making any progress (or not enough) toward product/market fit. A pivot is a radical course correction, going in a new direction, with a new hypothesis about your product, strategy and business model. In Pivot Mode, your unit of progress is creative destruction. You have successfully pivoted when you have re-imagined what your company is for. Your reinvented business doesn’t look at all like the previous one. Therefore, a pivot is something that happens only a few times in the life of the average company. 6. PIVOT OR PERSEVERE? Watch “The Lean Startup - Time to Pivot... or Persevere? You Tube LInk (10.0 mins)
- 18. Types of pivot 1. Zoom-in pivot. This pivot can be useful when you see that one feature in your product gets far more traction and interest than the other features in your product. You can then "pivot" by offering a new product that offers only that one feature. 2. Zoom-out pivot. This is the above pivot in reverse. You broaden your product to include more features. Now what was considered the whole product becomes one (or several) features of a larger product. 3. Customer segment pivot. Your product may prove popular but not with the user segment that you had initially targeted. Therefore your product positioning may need to change and the value proposition, pricing, and channels would all need to be reviewed. 4. Customer need pivot. Imagine you use the Lean Startup framework to identify early on that the problem you are trying to solve with your product is not very important to customers. Then you must understand more deeply the job that they are trying to do and find a problem they are willing to pay you to solve. 5. Platform pivot. This talks about a change from an application to a platform or vice versa. Examples of platforms are eBay, AirBnb, Uber, Android store etc. 6. PIVOT OR PERSEVERE? Source: https://openclassrooms.com/en/courses/4544561- learn-about-lean-startup/4716471-learn-how-and-when-to-pivot
- 19. Types of pivot 6. Business architecture pivot. There are two types of business: high-margin, low-volume and low-margin, high- volume. You cannot be both, but sometimes you can pivot from one to the other. 7. Value capture pivot. This pivot refers to changes in how you monetise or earn revenue. When you change how you make money, this impacts the product, business, sales, marketing and operational sides of the business model. 8. Engine of growth pivot. Viral growth is when current users recommend other users. Paid growth is when you spend marketing money on acquiring new customers. Sticky growth is when you manage to retain most of your users and churn rate is low. You can pivot from one of these growth engines to another. 9. Channel pivot. Here you change how and where you sell your products and services (in stores, online, through partners, in-app). 10. Technology pivot. This pivot is when a new technology can be used to achieve the same outcome. This can be beneficial if the new solution has a lower cost and/or better performance. 6. PIVOT OR PERSEVERE?
- 20. The Early Pivot of Twitter Twitter actually had a different company name to begin with: "Odeo". In 2005, their product was a podcast service. Users could create podcasts, but also find and subscribe to them. However, the same year, Apple announced that iTunes would include a podcasting platform in all iPods. Odeo was never going to successfully compete with Apple. So its 14 employees started to brainstorm ideas and look for new directions. One employee, Jack Dorsey, came up with an idea to build a product for group SMS (texts). Customers could update their status to a group of friends via SMS (text) and see a timeline of their status changes. Source: https://openclassrooms.com/en/courses/4544561-learn-about-lean-startup/4716471-learn-how-and-when-to-pivot 6. PIVOT OR PERSEVERE?
- 21. Thank You and keep innovating ! The primary engine for keeping the learning process moving forward is the Build-Measure-Learn feedback loop The faster a team can go through the loop, the faster they can learn, and theoretically, the faster they can create a sustainable business Remember! 6. PIVOT OR PERSEVERE?