The Innovation Matrix | via

One of the exciting trends in innovation right now is the lean startup idea.  The basic premise is that when ventures are starting out, building a scalable business model needs to be a top priority.  People like Steve BlankEric ReisAsh Maurya and Alex Osterwalder are all doing great work in this area.

I’m all for lean startups, and if you’re building a new venture, this is an essential approach.  However, the area that I keep focusing on is this: how can we make established firms more innovative?  One of the reasons that I love the lean startup movement is this: it embeds the innovation DNA into the venture from the word go.

I’ll use The Innovation Matrix to illustrate:

As I’ve said before, most startups begin as accidental innovators.  They have to successfully execute an innovation, or they won’t survive, but they don’t have any kind of innovation infrastructure in place.  The problem is that if they don’t think about how to embed innovation, then even if they are successful, they are likely to become less innovative over time.

This is largely due to the management structures that you need to put into place as you scale.  Ben Horowitz describes this well in a great piece about how to scale effectively:

When you scale an organization, you will also need to give ground grudgingly. Specialization, organizational structure, and process all complicate things quite a bit and implementing them will feel like you are moving away from common knowledge and quality communication. It is very much like the offensive lineman taking a step backwards. You will lose ground, but you will prevent your company from descending into chaos.

Horowitz’ approach is built around managing communication above all else in building your organisation, and this makes good sense.  The problem, though, is that often the structures that we put in place end up impeding innovation as it gets stifled by other management processes.  On the innovation matrix, this is shown by the blue arrows, as the firms lose their innovation capability over time.

This is where the lean startup approach is particularly useful.  If you successfully execute one of the lean startup approaches, you will move in the direction of the red arrow.  At worst, this will leave you as a fit for purpose innovator, but in the best case, it will set you up to become a world class innovator.

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