What established businesses can learn about turning ideas into money

Adam Lyness is business development director and co-founder of the Christchurch company Intranel, which builds custom software solutions and helps businesses across NZ leverage emerging technologies to enable sustainable growth.

OPINION: Conversations about improving our collective prosperity are often linked to productivity growth at a national level.

Innovation (broadly, “creating value from new ideas”) is a pivotal driver of growth, especially in the tech sector.

It’s a big subject, but there’s an acceptance that we can do better– NZ’s R&D spend sits well down the OECD average.

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If we can innovate more efficiently and improve returns to business, we can build a better economy.

Techweek this year hoped to showcase the innovation present in Aotearoa that could drive this growth for established companies and start-ups alike.

You can do this!

In my role at Intranel, I’ve worked with a huge range of clients, from two-person start-ups to organisations with 100,000 staff.

Innovation isn’t just for Elon Musk types and young graduates.

The most successful entrepreneurs tend to be over 40 and have worked in the industry for some time.

Established businesses like Amazon often have effective innovation machines with a clear strategy for creating successful spin-offs. Think of Amazon’s Web Services, now one of their most lucrative products.

Most new start-ups fail because developing capability, product-market fit, and building a customer base is difficult and risky.

Established businesses have major advantages over start-ups–chances are you’re already a domain expert, you’ve got deep knowledge of your market space, and (most importantly) you have customers.

Any innovative ideas that filter through are likely in response to a real validated need from your operations.

Think like a start-up, learn how to fail-fast

Despite their advantages, established organisations often have cultural, resourcing, and leadership constraints that can cramp innovation.

Thinking like a start-up can clear these hurdles and help test and evaluate new ideas efficiently (learn how to fail fast, in start-up lingo).

Start-up methodologies have evolved to minimise the cost of evaluating whether an innovative idea can translate to a successful product.

While established businesses have borrowed start-up concepts (e.g. agile methodologies) execution is often lacking.

So what key ideas can we borrow from start-ups?

In a single word, focus.

Start-ups are tight on resources, so focus is essential.

Having more to spend and a complex existing business model can make that focus harder to achieve.

Organisations may need to start with a focus at the leadership level to establish what innovation should mean for them:

• Revolutionary innovation or more incremental improvements?
• Who’s going to eat your lunch if you don’t innovate? And yes you can buy them (innovation by acquisition) but this works better before they’ve eaten your lunch.
• How can you take advantage of emerging tech?
• What should you be spending on innovation projects, and over what time horizons?
• Is your organisation a sports car or an oil tanker? (be honest)

Establish your ‘innovation pipeline’ to get some ideas

No, a suggestions box won’t cut it, although you probably don’t have to fly everyone on a retreat to Bali.

Understanding challenges at the coal face from staff and customers can be a gold mine of opportunities.

How you incentivise your team to think about the business and get creative with ideas is unique to every organisation, although the more people who engage with this, the better.

How to evaluate opportunities? Give key people time outside the pressures of routine business to focus on fleshing out ideas (easier said than done, I know). Goals can be modest–think Japanese-style Kaizen concepts of continuous improvement.

The best opportunities will likely win an elevator pitch competition. Get people to explain what the project is and how it creates value in one minute (although there are many more elaborate lean canvas-type tools).

A good innovation project doesn’t crush people’s will to live, so don’t be like the NHS and spend $20 billion on a failed IT revamp.

OK, so MVP then?

For me, identifying an MVP (Minimum Viable Product) means thinking lean with a razor-sharp focus on the simplest, fastest way to evaluate an idea.

Here at Intranel, this process starts with generating about 4 million cool features, which are filtered down to 10 essential MVP ones, with the nice-to-haves buried safely in a product backlog.

An MVP should be market testable but shouldn’t be scalable from day one or form a critical part of your existing business processes. Patience, grasshopper.

Enter the bean counters…

Agile development aligns spending with ongoing value creation rather than starting with arbitrarily fixed budgets and delivery times.

Letting go of a detailed budget and project plans at the start of a project is difficult.

Just accept you’re going to do this because uncertainty comes hand in hand with innovation.

The good news is that once a project gets going, you’ll start to get more useful data on velocity (how quickly features are getting delivered).

Innovation requires a different mindset from routine operations, so get your innovation team away from risk and process-driven business areas.

This could include creating a fire-walled sandbox to develop and build ideas in a risk-managed way.

Thunderbirds are go!

When business is good you may have the capital to invest in innovation but be buried delivering to existing customers, and vice-versa.

It’s OK to bring external resources in to help out, although key leadership and product owner roles should reside within your organisation and have time to focus.

Building a team requires first identifying knowledge or resourcing gaps. Navigating resourcing and expertise can be a challenge. For tech projects, this is where I put my hand up–particularly when a business is exploring emerging tech like AI.

However, government and regional business development partners can help with facilitation, with established businesses often eligible for funding through agencies like Callaghan Innovation.

Yay, we’ve built a prototype. Now what?

Time to get that MVP in front of real customers. Suppose you’re not at least a bit embarrassed to release it.

In that case, it’s probably not an MVP (obviously don’t apply this to air traffic control systems).

As an established business, you’re exposed to reputation risks at this point, so it’s important to communicate clearly and be honest when a product is in beta phase and things might go wrong.

You can mitigate risks by segmenting your client base or finding some friendly users keen to try new stuff and provide honest feedback.

You’ve got time to collect data, see how things go, and do a few product improvement iterations. When to declare success or failure is a judgment call, but don’t spend too long flogging a dead horse.

Ah damn. Turns out it was a s… idea

Congratulations! You failed fast, learned something, and minimised costs.

Whoa, we’re on to something

Congratulations! You haven’t invested too much at this point. Still, you’re potentially investment ready as you’ve demonstrated a growth path for your business.

The third-party investment could let you spread risks as you look to scale your idea.

Adam Lyness presented at Techweek22 – New Zealand’s national festival of technology and innovation. Visit techweek.co.nz to check out the full programme of events and replays of the best talks on TechweekTV.