Scaling Up Experiments

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The Scaling Up Phase is the first time that an innovation is managed by the line organization (the Business Owners) under the supervision of the Continuous Innovation Board (CIB). The goal of the Scaling Up Experiments is to test the innovation in an operational business environment and to grow its use to full-scale operation. During the Scaling Up Phase, the innovation is still considered to be an experiment and is continuously validated for its business value delivery.

Details

Innovations start as an Idea for a particular product or service, or the application of a technology in a product or service. During the Experimentation Phase, this idea is first validated for its feasibility. Once a number of experiments have proven that the idea can work in the market, the focus should shift from validation of the principle idea to learning how to create business value from the innovation in the market. During the Scaling Up Phase, the experiments first focus on validation of the business value of the innovation (the ‘value hypothesis’) and second on the growth potential (the ‘growth hypothesis’)

In most situations, bringing the innovation into the line organization is more difficult than it may seem. The further away from the established processes, the innovation is, the more difficult this is. Even when the initial business value of the innovation has been established, most organizations will likely have difficulty to adopt, or even reject the adoption of the innovation in the line organization. The key reason for this is that the line organization is optimized to use the solutions that the innovation will likely replace or change. This brings with it a need for Organizational Change, and changing routines and behaviors is notoriously difficult.

Management Ownership and Performance Measurement

The Scaling Up Phase ends when specific growth performance objectives have been met and when ownership of the innovation has been transferred from the Innovator to a Business Owner in the line organization. Hence, during the Scaling Up Phase, two key objectives are to be met:

  1. To grow the innovation to deliver sufficient, measurable business value
  2. To foster ownership of the innovation from the Innovator to the line organization

Ad 1. Grow the innovation to deliver sufficient, measurable business value

Obviously, there is no ‘default’ growth objective for innovations. As the innovation gains traction in the market, the Innovation Team will not be able to sustain the growth by itself. The innovation will become more reliant on corporate resources and experience and will require more organizational support to carry its weight. This requires input from many stakeholders who will be working with the innovation in the field, such as salespeople, technicians and support and even clients.

Extract learnings from the Experimentation Phase

During the Experimentation Phase, the Innovation Team has used a rigorous method of validation of either one of two types of hypotheses. One is the feasibility hypothesis, to test if the innovation can be put to practice in a real-life environment, the other is a value hypothesis, to test if the innovation offers real business value to real customers. The learnings from these validations offer valuable insights into the way in which the innovation can be scaled up. Most popular Validation Methods, such as Osterwalder’s Value Proposition Design or Ries’ Lean Startup method incorporate an explicit learning phase: the VPD ‘testing’ phase includes so-called ‘learning cards’, through which learnings are extracted from real market experiments which offer a starting point for the formulation of new testable hypotheses. The Lean Startup method uses the ‘build-measure-learn’ cycle, in which learnings form the basis of the expansion of the Minimum Viable Product.

The learnings from the Experimentation Phase can be made explicit through trainings and workshops in which the Innovation Team exchanges experience with business teams. Even more effective though is the continuation of the short-cycled, iterative way of working adopted during the Experimentation Phase in SWICHs throughout the Scaling Up Phase. Especially the use of the demo at the end of each SWICH is an effective way to communicate learnings to a broad audience and apply them immediately in the next stages of development.

Growing through stage gates

The Scaling Up Phase is a structured phase of measurement of growth. Based on these measurements (as explained in Innovation Metrics) the Innovation Team can make adjustments to the features, marketing, and deployment of the innovation, with the aim to increase or speed up growth and profitability. In this way, the organization can decide to continue investing in the innovation, change course or stop working on the innovation at regular intervals.

During this process, each innovation passes a number of stage gates. These stage gates describe the natural stages of growth of an innovation and are useful to keep the organization on track of the speedy development of the innovation into a ‘business-as-usual’, embedded solution. The five stage gates describe the growth stages for an innovation from the initial idea to a profitable business.

  1. Empathy: In this stage we prove that problem we are solving is real and that a market exists
  2. Stickiness: We prove that the solution works and users are willing to pay for it
  3. Virality: We prove that our innovation keeps users engaged and on board
  4. Revenue: We prove that users and features fuel organic and artificial growth
  5. Scale: We prove that we can build a sustainable, profitable business

The five stage gates provide a powerful process for data-driven decision-making. Each stage gate is used with its own set of metrics, allowing Innovators to measure the success and growth rate of their innovation. By predefining success (such as in the value hypothesis), the scope of each stage gate can be clearly defined and the result of progress clearly measured. The advantage of this data-driven approach is that it keeps the Innovation Team focused on scaling up successfully as quickly as possible, rather than on building the most extensive product.

Since the scaling of the innovation through the stage gates is primarily defined by metrics, the growth phases are described in the Innovation Metrics section.

Develop growth targets for measurable business value

A key factor in the definition of business value are the metrics used. There are many ways to define metrics, and the Continuous Innovation Framework favors none. However, there are multiple metrics methods and strategies available, such as Key Performance Indicators (KPI’s) or AARRR (better known as Dave McClure’s Pirate Metrics). Such metrics are discussed in more detail in the Innovation Metrics section.

Create a mandate and drive for change across all organizational functions

For the innovation to be able to scale successfully, that is to say, for it to grow and become part of the standing organization, it requires an expanding group of people to work towards the same goal and with the same mindset. This ‘entrepreneurial mindset’ is different from the ‘business-as-usual mindset’ in the sense that it requires a rule-setting mentality rather than a rule-following mentality, or, even worse, a rule-enforcing mentality. The entrepreneurial mindset is necessary to develop the required best practices to effectively scale and run the innovation.

As the innovation scales, more and more ‘regular’ business teams will be confronted by it, such as sales, marketing and service departments. With them, more supporting functions will become involved, such as finance and HR. Each of these teams will need to learn to work with the intricacies of the innovation in such a way that their work contributes to the growth targets set for the innovation. To do so, business teams will need to be informed about the innovation, its value and growth targets. And each team will need to be mandated to take positive action to support this growth, even when such action contradicts their own performance targets.

Business teams cannot be ‘ordered’ to support the innovation’s growth by providing them with challenging targets. With no experience or track record at scale for the innovation, the business teams will most likely be required to discover such targets themselves. They can only do so when provided with the right mandate by senior management, represented by the CIB. This mandate is the prerequisite for the entrepreneurial mindset and drive (some would refer to this as the ‘innovative culture’) that the team needs to work to scale up the innovation. This mindset is further enhanced by frequent transparent communication of vision, goals, and progress between the Innovator, the Innovation Team, the CIB Ambassador and the Business Owners and teams. This communication happens primarily through the continuation of the SWICH demo’s throughout the Scaling Up Phase and by the permanent availability of scaling metrics to all involved in this process.

Ad 2. Foster ownership in the line organization

During the Scaling Up Phase, the innovation will increase in value and impact but it will also increase in cost and demand on the organization. This cost and demand are likely to be disproportionate to the value delivery. Early in the Scaling Up Phase cost and demand are high, as investments need to be made to scale up such things as continued development, production, marketing, sales effort etc. At the same time, the innovation will demand time and energy from people to get acquainted with the new product or service. Inexperience with the innovation requires people in the organization to learn new things, adapt procedures, change their perspective on existing solutions, devise new interactions with clients and perhaps even find new types of clients. There is a significant chance that the line organization will not quickly experience the benefits of the innovation, especially since initially the goals or targets of the line organization do not include the growth of the innovation. It is almost certain that the introduction of the innovation into the line organization will be regarded by the line organization as a blocking issue to achieving these goals and targets. It is therefore imperative that the ownership of the innovation is transferred to the line organization with its appointed Business Owner as quickly as possible.

This requires not only a mandate for line management to decide upon the fate of the innovation. It requires that the line organization experiences the mental ownership of the innovation and adopts it as if it was its own. The only way to achieve this is to include clear goals and targets for the innovation as part of the total line organization’s objectives. During the Scaling Up Phase, the line organization should be able to absorb the cost and organizational demand, including a reduction of efficiency and effectiveness in its traditional goals and targets. At the same time, the scaling up of the innovation should be driven by clear and measurable objectives.

Achieving mental ownership of the innovation is not a matter of setting goals. In the Scaling Up Phase, teams in the line organization should work with the Innovator to learn about the innovation and set realistic objectives and measurements. Then, the line organization should be able to adjust and expand the innovation to scale according to their best judgment. Mental ownership can only be established when the line organization has the mandate and capability to make changes to the physical product.

In practice, there is a potential pitfall in this reasoning: if the growth of the innovation is insufficiently reflected in the line organization’s goals, there is an incentive for the line organization to reject the innovation. At the same time, if the required effort to scale up (cost and demand) are not adjusted for in the goals and targets of the existing business, then the innovation will be regarded as a threat to the achievement of the existing goals. In both cases, Business Owners will either attempt to circumvent the scale up of the innovation or it will adapt the innovation to meet the existing goals rather than strive for change and innovation. As an end result, the innovation will be absorbed into the existing line organization and most likely die a quiet death.

Ambassadors and the transfer of ownership

During the Scaling Up Phase, ownership of the innovation is transferred from the innovator to the line management/ Business Owner. This is both a psychological and a hierarchical moment. Psychological because the innovator, who has been involved in ideation and experimentation, will have to let go of his pet idea. Hierarchical because line management needs to accept responsibility and the accompanying changes in the process and scope of its existing mission. Many factors can impede both. To secure the smooth transition from one to the other, an ambassador is appointed from the Continuous Innovation Board. The task of the ambassador is to assure both the psychological and the hierarchical transfer of ownership. In addition, the ambassador is responsible for setting the initial realistic targets for the growth of the innovation. Obviously, if ownership of the innovation is to be transferred to the business, so the responsibilities for management of the innovation should be transferred to the business. To do so, the innovation scale up should be managed by a cross-functional team of business representatives including direct operational functions such as sales, marketing and services, and indirect supporting functions such as finance and HR.

Transfer knowledge and learnings from the innovator to the line organization

One should not underestimate the experience and learnings that are generated during the experimentation phase. Both the innovator and the innovation team collect insights, and experiences that will be invaluable when realizing growth during the scale up phase.

References

  • Ries, E. (2017). The startup way. New York: Currency.
  • Osterwalder, A., Pigneur, Y., Bernarda, G., Smith, A. and Papadakos, T. (2015). Value Proposition Design. Somerset: Wiley.