For Starters #7: 'How' Innovation and 'What' Innovation, Pick One.
This week's email was inspired by friend Dante while we were out for a run.
There's two different kinds of innovation;
Operational & Commercial
or 'How' & 'What'
or 'Remove Waste' & 'Create Waste'
or 'Edit Sober' & 'Write Drunk'
The fulcrum of each of these pairings is the customer's product experience with the outcome of production, their JobToBeDone successfully completed.
You can only successfully work on one side of this seesaw at a time. Each side takes different skills and different focus, different success criteria, and transforms the org in a different way.
Operational (How) Innovation is changing the production process to increase quality, consistency, and throughput of production - while the product itself remains the same. This is continuous improvement to reduce waste; wasted effort, wasted time, wasted money.
Operational Innovation is 100% internal change, this is Lean manufacturing practices, with the CFO and front-line production workers as the primary stakeholders and champions. Customers may not even notice the improvements directly - though they’ll likely notice increased speed in turnaround, increased quality, and lower frustration.
I find this kind of innovation inspiring because it continually reinforces the mentality that there are many paths to the same destination each with distinct tradeoffs. It also reinforces the mentality that quality is baked into the production process. Which means, everyone on the production team is responsible for identifying quality issues, inefficiencies, and bottlenecks. It also means there's a constructive, collaborative, process for addressing these issues.
The canonical book on the principles of Lean Production is the classic:
If you prefer TikTok or YouTube to a dead tree, Quantum Lean ( http://quantumlean.ca/ ) has an archive of delightful videos continually challenging my perception of waste, value, and low-cost methods of systemizing quality. Here's a small sample:
Commercial (What) Innovation is about new products, as I once oft repeated, "new value propositions to new customer segments". "What" innovation changes the organization in a more dramatic way, when done well, it brings customers closer, reconfiguring the talent and attention of the production team to the customer.
Rather than looking for waste to eliminate, the production team is looking for opportunities to delight the customer. Which, yes, from the perspective of scaling and repeatability in production - only generates waste. But scaling is not the point of the exchange - improving an individual person's situation is the point.
I’m not saying add hot dogs [1] to your product offerings, Just listen for 'hot dog' opportunities. This ad hoc product offering may turn into a regular service offering… or it may never happens again. That's up to the ongoing customer demand and the production team.
All my most successful products were things my clients asked for, I just needed to listen and be open to delighting them. As I mentioned in an earlier email, the magic is in: Listen, Sell, Build.
Too many of the founders I've worked with were prematurely concerned with the scalability of their offering. Their offering that nobody was clamoring for, let alone even knew about.
"Another reason founders don't focus enough on individual customers is that they worry it won't scale....Maybe if they go out of their way to make existing users super happy, they'll one day have too many to do so much for. That would be a great problem to have...And incidentally, when it does, you'll find that delighting customers scales better than you expected". - Paul Graham, http://paulgraham.com/ds.html
The stakeholders in Commercial Innovation are the customers.
Where as ‘How’ innovation is about reducing waste, the low likelihood that ‘What’ innovation will persist and become sustainable means it’s mostly waste. Doing something the first (or second or third) time are mostly about figuring out the ‘how’ to create a valuable outcome. First pancakes and all.
It’s not until the outcome is known, repeatable, and demanded, and fixed, that the effort shifts. Until that point - the want of developing a new outcome to delight customers and secure that competitive advantage is far more valuable than delighting them efficiently. the inefficiency is the early competitive moat. This is why I believe all early stage product companies should deliberately begin as a consulting firm.
I recall conversations w/ a machine learning exec that wanted All The Data (TM) to start, knowing that in the end, only a small fraction of the datasets explored would significantly influence the final model...he just didn't know which they'd off the starting blocks.
‘What’ innovation is at the beginning of every offering and early on is most likely expressed in pricing, sales, marketing.
‘How’ innovation presumes all those things exist and are stable - just as the product output itself is stable.
You’ve got to pick one side at a time.
1. For those of you watching The Bear, S2E7 “Forks” is an adaptation of this hot dog story.