Innovation Fundamentals - Radical Collaboration & the 3H Model

Pascal Dennis, co-author of Harnessing Digital Disruption

Radical collaboration entails engaging & aligning three very different personalities – the Hipster, Hustlers and Hacker. Laurent Simon

Laurent Simon, my Innovation mentor & co-author introduced me to the ‘3H’ concept. Innovations usually fail. The famous ‘hockey stick’ curve – nothing, nothing, then fantastic – is rare. And one the most common failure modes is not having the 3H’s on the proverbial bus.

Innovation thrives when three very different personality types - the Hipster, Hustler and Hacker - are present & in full flow. If one or more are absent, our innovations are likely to be flat, or even worse, over-complicated & irritating. This may help explain why startup Failure Rates are so high – (e.g., 80 to 90% in Consumer Goods).

Each of these characters correspond to a fundamental question or test each innovation must pass. If our idea fails to pass the test – Stop! And decide, do we persevere, pivot, or kill the idea? Here are the three questions & corresponding personality:

1. Does it wow? Hipster
2. Can we make money? Hustler
3. Does it work? Hacker

The sequence of questions reflects hard-won wisdom:

• If the idea doesn’t wow the customer, why bother? Indeed, why make a product that nobody wants?
• If you can’t make money, why build it? Remember, we’re talking about commercial enterprises here.
• Don’t spend a lot of money building something unless the idea has passed the first two tests. The ‘better mousetrap’ metaphor is flat out wrong! In fact, nobody cares about our freakin’ mousetrap.

Here are some corollaries:

• Wow means the customer wants it right now. “Here is my credit card. Put me on the list – I want it now!”
• Talk is cheap – the customer has to put money on the table. (We call this our ‘Mafia offer’)
• Demonstrate the product without spending a ton of money on it. DropBox famously confirmed customer appetite with a 2-minute YouTube video and a paper simulation.
• ‘Can we make money?’ often entails a ‘soft launch’ during which you confirm customer appetite for the product, pricing, projected volume, distribution and the rest of your value stream
• ‘Does it work’ entails building not only the product, but also the production & distribution system, and usually entails a full launch in a representative market.

‘Radical collaboration’ means the Hipster, Hustler and Hacker are fully involved from beginning to end and have a strong say in critical decisions. Another common failure mode is engaging the Hipster early in the process, only to exclude them from critical decisions later in the process. “We don’t really need these features, do we? Let’s drop them - we need to ship next week!” And so, the Hustler or Hacker jettison the very features the created the Wow - and wonder why nobody buys the product.

The opposite scenario is also common. Hackers, enamoured with the technology, fight to add more proverbial bells & whistles, none of which the customer asked for. The tragicomic result: the customer actively hates the product. Not only do we fail to create value, we destroy it!

In articles to come, I’ll do a deep dive on each of the Hipster, Hustler and Hacker personalities, and tell some war stories. The creative interplay between these very different personalities is interesting, and often quite funny. Each of us typically has a dominant tendency but sprint after sprint, you may find your own personality deepening & extending.


Best regards,

Pascal Dennis

E: pascal.dennis@leansystems.org

PS: To learn more about my executive mentoring programs: Exec 101 - Protecting the Core Business, and Exec 201 – Igniting New Growth, feel free to drop me an e-mail.




In case you missed our last few blogs... please feel free to have another look….

My Hockey Stick Curve, part 1
OpEx/Lean, Innovation and Wakefulness
The Difference Between Protecting Your Core Business & Igniting New Growth
The Control Tower – Learning to See What Is

My Hockey Stick Curve, part 1

Pascal Dennis, co-author of Harnessing Digital Disruption

In the world of startups, everything is a hockey stick curve. Not in real life, of course, but the ones you see, at least. Nothing, nothing, nothing – then fantastic. Bjorn Jeffery

I’ve lived the hockey stick curve, first as a startup founder, and then as a mentor. As Bjorn Jeffery suggests, we usually fail. The ‘nothing, nothing, nothing, then fantastic’ trajectory is rare! Here are typical failure rates in different industries:

Industry-Specific Startup Failure Rates

• Information Industry: 63% failure rate after five years. (Forbes)
• Transportation and Utilities: 55% failure rate after five years. (Forbes)
• Retail and Construction: 53% failure rate after five years. (Forbes)
• Manufacturing: 51% failure rate after five years. (StartupTalky)
• Finance, Insurance, and Real Estate: 42% failure rate after five years.

And as I’ve discussed in earlier articles, new product launch failure rates in say, consumer goods, typically range from 80 to 90%.

Full disclosure: two of my five startups (40%) made money - which means we’ve been extraordinarily lucky. My success rate as a startup mentor is not quite as good, but that’s no big deal. I work with Laurent Simon, my friend, innovation sensei, and co-author. We cull loser ideas quickly, and pivot fluidly based on what we’ve learned. (‘Fail fast & fail forward’.) We work with splendid people around that world, in great industries, and have a hell of a good time. It’s an unusual path for a former Toyota factory rat, no?

So, what have I learned about Innovation and the hockey stick curve? Here’s an overview, detailed in our book, Harnessing Digital Disruption:

• Three phases:
• Confirm traction
• Soft Launch
• Full launch
• Each phase entails answering a key question:
• Confirm traction – Does it wow?
• Soft Launch – Can we make money?
• Full launch – Does it work?
• Working our way up the curve entails answering three questions (and many related sub-questions):
• Who is the customer?
• What does the customer value?
• Why does the customer buy (or not buy) from us?
• Working our way up the curve requires rapid, inexpensive (‘lean’) experiments through which we:
• ‘Discover’ answers to our questions, and
• ‘Validate’ what we have discovered
• This process is iterative, continuous, and entails the disciplined application of the scientific method (Hypothesis – Test – Observation & Reflection – Learning)

And here are some other learning points. None of this works without good visual management. We have to make the invisible ‘information elephant’, visible. None of this works without a disciplined, iterative process – day after day, week after week and sprint after sprint.

Lastly, Innovation and the hockey stick curve are highly abnormal. They’re like fragile hot-house flowers vulnerable to cold winds, harsh chemicals, and dry infertile soils. That’s why we insist on ‘Executive Air Cover’ – to give the flowers a chance to root & grow. We have to protect Innovation and create space for it – physical, financial, strategic, cultural and temporal space.

Some companies are lucky and have the ‘startup gene’ in their DNA. More often, Innovation is foreign and triggers corporate antibodies. As in nature, these antibodies are doing what they’re designed to do. But actions meant to be protective sometimes turn out to be destructive. (Thank you, Clayton Christensen). More to come.

Best regards,

Pascal Dennis

E: pascal.dennis@leansystems.org

PS: To learn more about my executive mentoring programs: Exec 101 - Protecting the Core Business, and Exec 201 – Igniting New Growth, feel free to drop me an e-mail.




In case you missed our last few blogs... please feel free to have another look….

OpEx/Lean, Innovation and Wakefulness
The Difference Between Protecting Your Core Business & Igniting New Growth
The Control Tower – Learning to See What Is
The Hardest Thing - Seeing What Is

OpEx/Lean, Innovation and Wakefulness

Pascal Dennis, co-author of Harnessing Digital Disruption

We spend our lives asleep. George Gurdjieff

OpEx/Lean is at heart is about wakefulness. Sages throughout history have argued that we are sleepers in a dream, and that our grasp of what's actually happening is, at best, tenuous. Many schools of philosophy and religion include prayer, meditation, or exercises, designed to "wake" the sleeper. Stoicism remains relevant today not in the least because it emphasizes regular reflection aimed at virtue and self improvement.

I’ve practiced regular reflection for decades now using the PDCA cycle, which surely Epictetus & other Stoic masters would find simpatico. OpEx/Lean methods like visual management, 5S and standardized work are all meant to jolt us out of our slumber. Defect-proofing usually entails a visual tool that loudly signals the abnormality – Wake up! - allowing us to contain it before it becomes a defect.

Strategy Deployment, essentially the application of PDCA to our enterprise, is also about wakefulness. Our Control Tower and operating rhythms, for example, entail stand-up meetings in front of visuals that make ‘hot spots’ obvious. All my business novels, include the latest, Harnessing Digital Disruption, entail the protagonists' gradual awakening.

Pema Chodron, the American nun and Buddhist teacher challenges us to see what’s there. Her practice entails disciplined meditation – sitting still, recognizing the many attachments that distract our minds from what’s there. And lest we forget, Socrates famously advocated ‘know thyself’, believing this to be essential for a good & virtuous life.

Innovation is also about wakefulness, and seeing what the customer actually values – even though they may not see it themselves! (Steve Jobs famously said, ‘The customer doesn’t know what they want, until I show it to them.’) And then envisioning & designing an entire customer journey – one that will blow the customer’s mind. This was surely another of Jobs’ superpowers. Did Jobs’ interest in mysticism and meditation, combined with his artistic temperament not enable his creativity?

Best regards,

Pascal Dennis

E: pascal.dennis@leansystems.org

PS: To learn more about my executive mentoring programs: Exec 101 - Protecting the Core Business, and Exec 201 – Igniting New Growth, feel free to drop me an e-mail.




In case you missed our last few blogs... please feel free to have another look….

The Difference Between Protecting Your Core Business & Igniting New Growth
The Control Tower – Learning to See What Is
The Hardest Thing - Seeing What Is
Fundamentals of OpEx/Lean, Part 2

The Difference Between Protecting Your Core Business & Igniting New Growth

Pascal Dennis, co-author of Harnessing Digital Disruption

The future belongs to the ambidextrous – those who can both protect the core business with OpEx/Lean AND ignite new growth using the magic of Silicon Valley & Singapore. Our biggest challenge is understanding the very different mindset behind OpEx/Lean & Innovation. Our biggest challenge: OpEx/Lean and Innovation live in very different worlds first articulated by Aristotle 2,500 years ago.

OpEx/Lean Lives in the World of Necessity

This is the world of things that cannot be other than they are. Think Physics, Chemistry and Math; think PDCA, process management, and the Theory of Constraints. The Pareto principle – 80% of the problem is caused by 20% of the causes – is a cornerstone of this world. I absorbed this iron principle as a young Toyota manager. Up until then, like all young managers, I was prone to ‘blah blah blah’. Today I’m lucky enough to advise Boards & C-suites and guess what? The Pareto principle remains fundamental in Board decision-making.

Innovation Lives in the World of Contingency

This is the world of things than can be other than they are. Think fashion, taste, public opinion and culture. Igniting new Growth entails answering questions like:

• Who is the customer?
• What does the customer value?
• Why do they buy, or not buy, from us?

After a few Innovation sprints I realized I was ‘no longer in Kansas’. The principles of OpEx/Lean I’d worked so hard to internalize could be helpful, but were not sufficient, by a long shot! Sometimes they applied – and sometimes not! For example, customers would confidently tell us what they valued – and then ignore it when presented with our offering. And then they’d change their mind again.

Standards & analysis were helpful, for example, in the clever crafting of Discovery interview scripts (‘What hypothesis are we testing?’), and astute qualitative & quantitative analysis. But intuition and gut feel played a far bigger role than in the world of Necessity.

Pareto charts often went out the door. We would identify what we believed were the key Satisfiers and build a kick-ass offering. And then realize our approach was a dead-end because our competitors had done exactly the same as we had done.

Igniting new Growth means finding the proverbial ‘Blue Ocean’ – the place where nobody else if fishing. My Innovation mentor & co-author, Laurent Simon, taught me the magic of Discovery & Validation Interviews through which, with practice, I learned to uncover the hidden pains & needs that might truly delight the customer. These are often so obscure that not even the customer knows them!

For example, one of our projects entailed creating value in the Wealth Management division of a major bank in east Asia. Our Discovery & Validation interviews uncovered a profound, yet unspoken need of customers – anxiety about their elderly parents. We turned it into a kick-ass offering that opened up our ‘Blue Ocean’.

And this is why ambidexterity is such a challenge: Board & C-suite members have to recognize Aristotle’s two worlds and apply the methods & mental models that suit the situation. It took me a decade to understand how to protect the core business with OpEx/Lean. It has taken me another decade to understand the topsy-turvy world of Contingency and Innovation.

It’s worth it for the organization and the individual. In the age of AI, leadership, flexibility and creativity will be the key to sustained prosperity. Understanding how to navigate the worlds of Necessity and Contingency, and how to engage a high performing team (of both human & AI agents) will be a superpower.

Best wishes,

Pascal Dennis

E: pascal.dennis@leansystems.org




In case you missed our last few blogs... please feel free to have another look….

The Control Tower – Learning to See What Is
The Hardest Thing - Seeing What Is
Fundamentals of OpEx/Lean, Part 2
Fundamentals of OpEx/Lean, Part 1