The Three Faces of Innovation

 Posted by on Sep 29, 2011  Add comments
Sep 292011

Innovation is part of the curriculum in just about any Agile engagement I carry out for Cutter. To my way of thinking, the linkage between Agile and innovation is straightforward. Agile enables affordable experimentation. Experimentation begets discovery. Discovery is the first step toward innovation.

Just about everyone of my clients responds heartily to this simple-minded derivation, and for a very good reason. Clients crave innovation as it gives them competitive advantage through the life cycle of the product. Hence, enhancing innovation is a very appealing message. I still have to meet a client who would say “well, you know, our problem is too much innovation…”

Short-term engagement do not usually give me the opportunity to watch the progress a company makes, or fails to make, with innovation. In long-term engagements I am noticing more and more that the {Agile –> Affordable Experimentation –> Discovery –> Innovation} is a necessary but not sufficient condition for innovation. The team knows it could and should experiment, availing itself to the affordability ensured by Agile methods. However, many teams fail to marshal the sufficient part of the innovative process – the keen understanding of their clients, segments, and value chains.

In the good old days, a company could successfully define the sector it is in in terms of the supply side. A company might produce such things as automobile parts, electrical motors, fabrics or fertilizers. The need for such items tended to be both reasonably stable and fairly uniform. Marketing, of course, would be applied to help generate demand. But, the ability to produce and distribute the goods usually sufficed to drive business. A supply side view of the business worked quite well for most companies who opted to define themselves in this manner. Witness the Operational Excellence category in The Discipline of Market Leaders.

These days, the nature of both the segment and the value chain needed to satisfy its needs are changing dramatically:

  1. Markets are getting hyper-segmented; moreover,
  2. Hyper-segmented markets are fleeting; and,
  3. Much of the know-how required to serve these fleeting hyper-segmented markets is not singularly owned by the company. It has shifted to a network of suppliers, customers and prosumers.

To succeed nowadays, a company needs to define itself in terms of the demand side. For example, Target and other companies offer various medical care services. We are not talking “just” about medicines, flu shots or wheelchairs. We are talking about step-in clinics offering a wide variety of services before or after a customer picks a shirt, a bar of soap or fresh blueberries for home.

The ‘secret sauce’ missing for numerous Agile teams who strive to innovate  is the intimate knowledge required to put themselves in the shoes of such clients as the Target shopper. Certain amount of the required knowledge is provided by the product owner and by the subject matter expertise a team acquires over time. However, more often then not members of the team primarily define themselves as “testers,” “front-end engineer” or “back-end engineer. Their focus is still on the supply side.

The phenomenon is particularly painful in companies that moved aggressively into off-shoring. A team in Bangalore, or Beijing or Kiev does not usually posses intimate know-how of a brand new segment evolving in South of Market in San Francisco.

The irony is that a team in Bangalore possesses infinitely deeper understanding of customer needs in India than a US team. Moreover, many, if not most of the more promising growth opportunities actually reside in the countries where these teams reside. To innovate for the market segments evolving there, the local teams need to be empowered to do so. For this to happen you actually need to enhance the affordable experimentation through Agile with full fledged empowerment of the local teams to define and implement products suitable for their markets.

Various companies accept the premises above but get stuck on the perceived need to centralize planning and oversight of the global business. Such a company could, for example, be headquartered in the US. It has, of course, various regional managers who have a say in what products will be developed. However, more often than not, these products turn out to be poor cousins of the US originals.

To succeed with innovation, you need to simultaneously address all three aspects.

  1. Affordable experimentation through the Agile process.
  2. Empowerment of (self sufficient) local teams.
  3. Let go of the hierarchical control concentrated in corporate headquarters.
  • In a way, all three are manifestations of the key principle that has been followed by the Agile movement at the team level for over a decade now: Less [Control] is More.

Israel Gat

Israel Gat served as Cutter Fellow and the Director of the Agile Product Management & Software Engineering Excellence practice from 2008 until 2015.


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