As entrepreneurs, business owners, and innovators, we are connected to our customers now more than ever before. Since we live in a fast-paced world that is in constant flux, businesses have to adapt their innovations to remain flexible and relevant. Customers consume, demand, and interact with products—they want to be co-creators and they want value delivered to them continuously. This shift is happening in every industry, and it fundamentally changes how products need to be built and presented. So, how can we harness this connection to our customers and use it to constantly be innovative? The key is in Continuous Innovation—a process businesses need to adapt in order to stay relevant and current in their industry. Let’s dive deeper into the topic of continuous innovation to learn what it is and how to adapt to the mindset.
What is continuous innovation?
Continuous innovation is defined as the momentum of innovation that can continuously push a company forward. It’s the constant flow of innovative ideas, both large and small ones, that keep a company experimenting and adjusting their product to meet their customers’ needs. Coined by Leanstack, continuous innovation is the modern way successful companies grow and stay relevant.
Although continuous innovation has been around for over ten years, many companies have failed to adapt and still work in the Agile framework of the 90s and early 2000s. A few companies even work in the Waterfall framework of the 70s. Due to this lack of transformation in mindset, 52% of Fortune 500 companies have gone extinct within the last 15 years.
The old way of building products used to work at a time when there were huge barriers to entry and few competitors. Even if you got the product completely wrong, you had time to course correct and get back on track. But fast forward to today, with the Internet, open source, and cloud computing, it has become cheaper and faster than ever to introduce new products which means there is a lot more competition than before—both from incumbents and new companies starting up all over the world.
According to the 2019 Global Entrepreneur Monitor (GEM) report, more than 100 million startups are launched every year all over the world, which is about three startups per second. It used to be that failing to deliver what customers wanted led to failed projects. But now, failing to deliver what customers want leads to total business failure.
What is the continuous innovation process?
The process of continuous innovation in business can be seen in these rules: outlearn your competitors, fall in love with problems instead of the product, tackle the risks first, build a fluid business model, run multiple tests, and finally, use customer transactions as a measure for progress. Let’s dive into each of these topics a bit deeper.
Outlearn Your Competition
The speed of learning is the new unfair advantage. When you outlearn your competition, you get to uncover what customers want first and then build products that matter, winning the innovation race. The important part is to be continuously learning. Winning the competition once gets you a great product launch, but keeping the innovation process ongoing is what keeps your business model growing.
Focus on a Business Model, not a Business Plan
Heavyweight, static business plans rarely work. They involve so much uncertainty and are projecting so far out into the future. But in the modern world where customer’s needs are in motion, it’s hard to actually know what’s true today, let alone what will stay true. When a startup is moving fast, there’s a lot that is unknown, which requires a more fluid, dynamic mode so entrepreneurs can pivot and change instead of sticking to a static plan.
A business model is a one-page version of the business plan that is a lighter way of getting an idea across. This allows you to launch without having to forecast numbers or ideas that become outdated as times move on. A business model is a snapshot of an idea of what a customer might want, or what might be a solution to a problem you’re solving.
The power in this kind of modeling at Next Studios is that we can quickly communicate an idea and then we can start the process of testing that idea.
Love the Problem, Not the Solution
Start with the customer problem before you develop the solution. The challenge isn’t building more products, it’s finding out exactly what to build. If you start with the solution, it’s like building a key without a door. Instead, flip the approach around and start with the problem. Not only does the process of innovation become easier, but you also build keys to doors that you can actually open.
Tackle the Riskiest Assumptions First
It’s generally a myth that entrepreneurs love taking risks. When building a complex technical product, the best-practice is first tackling the risks associated with the product, then working out the kinks of it quickly to protect the downside. Based on our work with entrepreneurs, most of the biggests risks today are not product risks, but the customer and market risks.
Test, Test, Test
The perfect plan is a myth. Since the early stages of an idea are often filled with unknowns and uncertainties. In the business world today, successful startups use a new approach—Model, Prioritize, Test. In this approach, we work with entrepreneurs and their dynamic model versus a static plan, then work to prioritize your riskiest assumptions, and then use a series of multiple, fast tests to refine your idea and business model.
Use Customer Transactions as the Measure for Progress
Progress used to be measured on outputs like meeting budgets, build velocity, and plan execution. But is executing a flawed plan that results in a product no one wants on time and on budget considered successful? Of course not.
Instead of focusing on outputs as a measurement of progress, focus on outcomes. Use customer traction as the measure of a successful business model. Customer traction is a much more reliable metric for progress than even revenue and profit. This is because revenue and profit are nearly non-existent during the early stages of an idea. Later, revenue and profit are trailing indicators that tell you something worked—but they don’t tell you why. When you use traction as the measure of progress, you can tie business model outcomes to specific causal activities that then allow you to repeat and scale the next great ideal.
Innovate continuously with NEXT Studios
NEXT Studios is a venture studio of experienced entrepreneurs who are dedicated to helping other leaders and thinkers shape and grow their ideas through innovative practices. With programs for intrapreneurs and entrepreneurs, we offer a suite of Lean services for corporations and entrepreneurs to optimize chances of continual success. If you’re ready to learn more about how NEXT Studios can help you innovate, connect with us today.