The Three Stages of Innovation
Innovation forms a continuum ranging from maintaining an existing product to creating a brand-new one. To select the right practices, I find it helpful to divide the continuum into three stages: a maintenance stage, a new feature stage, and a new product stage, as the image below shows. The diagram is inspired by Nagji and Tuff’s HBR article “Managing Your Innovation Portfolio”.
In the image above, the degree of uncertainty and innovation rises from left to right. Whereas stage three focuses on protecting existing assets, stage one and two are about investing in the future.
The three innovation stages correspond to the product’s lifecycle: Every product starts in stage one. After its launch, the product moves into stage two, and eventually arrives in stage three.
Understanding the Innovation Stages
Stage 3: Maintaining a product means making small incremental updates to ensure that the product stays competitive and profit goals are met. The product management focus is typically on maximising the return of investment: to minimise cost and increase revenue. The innovation is low, and there is little uncertainty about what the product should look like and do, and how it is built. Experimentation and failure are hence not desirable. Planning the work and executing the plan works well. Most products in an established company fall into this category, and companies often optimise their processes and structures for this stage.
Stage 2: One or more new features are created. This enhances an existing product, for instance, to increase the market share, or to enter a new market. Creating new features may require dealing with a new target group or addressing new needs, changing the user experience, or employing new technologies. Consequently, there is a significant amount of uncertainty present. Experimentation and failure are helpful to acquire the necessary knowledge and to develop the right features in the right way.
Stage 1: A brand-new product aimed at a new or an existing market is created. Developing the product may involve addressing a new target group or new user needs, creating a new user experience, employing new technologies or a new business model. There are many more unknowns than knowns. The innovation present is high to very high. Rapid experimentation is a must, as it helps the team fail fast to succeed sooner: to create the right product for the right people. The stage-one products usually form the smallest group in a mature enterprise.
Employing the Right Practices
Distinguishing between the three innovation stages enables us to choose the right practices. These include the process and the project organisation employed, and the way product ownership is implemented. The table below summarises my observations.
As stage three aims to maximise ROI, a linear process tends to work well – it facilitates efficiency. Employing a Kanban-based approach that leverages pull, collaboration, and visualisation is usually beneficial. The product ownership may be shared amongst several individuals, for instance, a product marketer, a product manager, and a project manager or business analyst. Collocated team members is a plus but often not mandatory.
In stage two the focus shifts form efficiency to effectiveness: quickly resolving uncertainty by acquiring the relevant knowledge. This requires an iterative process that supports experimentation such as Scrum. A single product owner is beneficial to enable effective decision-making. The team members should be collocated, and product owner and team should collaborate on an on-going basis.
In stage one, effective experimentation becomes even more important. Scrum with short sprints, or Lean Startup combined with Kanban work well. The latter allows running experiments in varying lengths in parallel, but it tends to be more difficult to master. Product owner and team should form an incubator, a new, temporary organisation that is loosely coupled to the rest of the company. This provides the team with the freedom to try out new things and to literally think outside the box.
The following image visualises the three innovation stages and the different practices:
Choose your innovation practices to suit your needs: Your mature products are likely to benefit from practices that facilitate efficiency such as a linear process. To develop new features or a new product, you should select different practices, practices that help resolve uncertainty and acquire new knowledge. Applying an iterative, experimental process, and enabling collaboration will be key.
You can learn more about employing the right agile and lean innovation practices by attending my Agile Product Management training course.