It is said that change is constant and the entropy in the universe can only increase. How can companies and organization best prepare for change? The question is not if change will happen, but when it will happen. Any company, in any industry, is at risk of being challenged, disrupted, and maybe completely forgotten by market changes and powerful forces.
By infusing a culture of innovation throughout the organization, at all levels, you can be better prepared for change. We have identified six levers that drive the need for transformation. Adopting product innovation practices ensures the organization is well poised to react to any pressure generated by these levers.
Innovation is accelerating, driven by technology advancements, new business models, and disruption of old processes. Change is constant, and companies need to adapt. Mobile technologies, cloud computing, 3D printing, artificial intelligence, IoT, new materials are making change happen at exponential speed. It took 30 years to the radio to reach 50 million customers, and only 2 years to Facebook, almost one hundred years later.
Industries of all types are subject to this type of disruption. They need to adapt, or risk being left behind. Think of banking, an industry whose main product (bank accounts) was invented more than 600 years ago by Banca Monte dei Paschi di Siena, Italy [Link]. The fundamentals of that product are still the same today, but the servicing needs and customer expectations have completely changed over the years (especially in the last 20 or so years since the growth of Internet). Some banks like Gobank, USAA and Maven have even invented new business models that require no physical presence, no retail location, no traditional banker. Customers today expect to do their banking on their phones, using a mobile app, and never need to visit a bank. How have big banks adapted to these changes? How can they drive a culture of discovery, rapid ideation, and test-and-learn so to be able to reinvent themselves in a way that customers expect?
Design and architecture are built as needed, rather than with upfront big planning. Simple design, small code base, Just-In-Time development. Building a product today cannot be a long process of planning, designing, developing, and testing. Time is essential as the market is moving at speeds never seen before. Companies cannot afford to wait. They need a product in-market today, and need to adjust to any change tomorrow.
Emergent design is replacing long-term planning. Companies build minimum-viable-products – just the minimum functionality needed to validate a new concept in market. They do this quickly, using available technologies and minimizing the custom work. They launch in-market, get customer feedback, learn what works and what doesn’t, and then adjust. The product is in constant evolution, and so is its underlying architecture, to adapt to continually evolving customer needs.
Quick learning cycles
Innovation is happening so fast that we don’t have the luxury of long-term planning. We build in small iterations, validate, and adjust as needed. We make the minimum amount of planning necessary for a short time-frame – as short as 2 weeks, most commonly. We build an increment of a product, we get feedback from our customers, and then we plan the next iteration. Plans are short lived, quickly executed, and continually updated. As a result, we limit the risk of cost of change. And we deliver value to the customers, and to the business, much faster.
Customers have much more choices, access to products, and expectations that ever before. If a product doesn’t work, customers today can easily find a replacement. Products win or lose by how much they succeed in winning their customers over – and retaining them. Companies cannot base product decisions any longer just on business outcomes, and instead they need to base decisions on customer outcomes. Products are built from the foundation-up with the customer in mind. Features and capabilities are prioritized based on value and on the ability to deliver that value quickly to the customers.
Companies need to understand customer needs and build solutions they want; they need to build products that delight customers.
Respect for people
The best designs and products come from engaged, motivated, empowered teams. Create a culture of communication, collaboration and transparency. Create an environment where people can work efficiently, minimize waste, and continually learn. Create a culture where knowledge is shared, where the people doing the work have the same understanding and context of the people asking for the work, and where process does not get in the way.
Employee retention is #1 priority of big companies [Link]. Not creating an environment where people want to work can cost companies a lot in lost productivity and re-hiring cost if they lose their employees. Millennials today have very different expectations about work, loyalty, and stability than their fathers had. The workplace need to adapt to the new reality and needs.
Incumbents VS disruptors
Incumbents are continuously challenged by disruptors. They can’t sit on their throne, or they will be disrupted soon. Companies need to continually innovate and reinvent themselves. This requires a culture of discovery and fail-fast-and-learn, where new business models are tested and new ideas are valued.
Blackberry, a small Canadian company that invented the smartphone, was nimble and innovative. It disrupted the mobile phone market, sending the then-market-leader Nokia in a limbo. Apple did the same thing to Blackberry just a few years later, by reinventing the smartphone and opening up its platform to a multitude of external app developers.
Being the incumbent in a market has a lot of advantages, but also poses the risk of ignoring opportunities as they pop-up around us. Garmin was the market leader in hand-held GPS devices. A small Israeli company invented Waze (an app for smartphones) that wasn’t as refined as a Garmin device, but had one small advantage: real-time crowd-sourced traffic information. The customer value had changed overnight, and in just a few months Waze was purchased by Google, while Garmin GPS devices have been relegated to niche applications.
Change is constant, disruption is constant, and companies need to have the right attitude, systems, and culture in place to be able to adapt.