It has been a torrid few months for startup founders who bet on innovation. Higher interest rates and lower valuations has made growth capital scarcer, and I worry about the medium to long term impact on startup innovation. Unless you are around Generative-AI, it’s harder than ever for an early-stage tech venture to get on the funding radar.
Generative-AI is grabbing all the headlines. ChatGPT’s explosive global popularity has given us AI’s first true inflection point, everyone can see the technology’s disruptive potential for themselves. But establishing whether the value will accrue to upstart innovators or the existing technology giants is tricky – having a head start in a whizzy new tech is not the same as being able to make money from it.
Indeed, most of the recent excitement about Generative-AI has focused the potential as a new technology to be deployed, not as startup ventures. Existing tech firms are now spending enormous sums on AI, suggesting they should be well-placed if the tech does turn out to revolutionise business, and the market advantage will end up as a new string to the bow of already giant tech firms.
‘AI fever’ is fuelling a hype cycle that is potentially distracting other innovation thinking. With new stunning capabilities from machine learning seemingly released every other week, AI hype is escalating at an even higher rate. So take the route less followed: it’s time to step back and not let the glare emanating from this glitzy technology obscure the need for startups to focus on their own innovation, not just jump on the AI bandwagon.
You need to start with clarity on your innovation strategy and what you want to achieve to give focus to resource allocation and outcomes. There are times when this approach works, and ad hoc experimentation should be avoided, but founders who commit to the first promising route they see leave themselves vulnerable to competitors that take a less obvious but ultimately more structured route to innovation. Shai Agassi, for example, spent $1Bn building an ecosystem to develop ‘swappable batteries’ for electric cars. Musk’s more deliberative, stepwise approach to developing an integrated, highly reliable battery turned out to be a smarter strategy.
So, is there a way to think through your innovation options, be curious and experiment, without slowing down the process too much, and avoid dead ends? Here are my thoughts on the ten pillars of execution for smart innovation in a startup.
Many entrepreneurs operating in the fog of uncertainty and restricted cash worry that the R&D risks in innovation will delay commercialisation, and thus often opt for the first practical outcome that emerges, but for me, build your own moat and an Intellectual Property strategy is the best approach. It’s disruptive. It involves a decision to compete directly with incumbents, emphasising commercialisation of the idea. The heart of this strategy is the ability to get ahead and stay ahead, but an entrepreneur’s identity is all about hustle and verve, failure is okay and success is rewarded. If things are not failing, you are not innovating enough.
1. What is your innovation strategy – build a moat or storm a hill?
Innovation opportunities for new ventures can be seen in two dimensions: build a moat of pure innovation for yourself or storm the hill and go after the exiting market with something better. This guides decisions regarding resources, timing, customers, technologies, identity, and competitive space. It’s both a dilemma and an opportunity.
2. Establish an innovation culture from the outset
Establishing an innovation culture from the outset is key to a successful innovation strategy. Give your folks free reign to be creative and form a safe space for idea generation. Value-creating innovations attract imitators as quickly as they attract customers. Rarely is IP alone sufficient to block these rivals – consider how many tablet computers appeared after the success of Apple’s iPad.
As imitators enter the market, they create pressures that can reduce the value that the original innovator captures. The way to stay ahead is creating a culture and commitment to innovation that sparks curiosity and a drive to keep ahead, overcoming the prevailing winds of competition.
3. Schedule time for innovation
Innovation can be one of those tasks that everyone wants to do more of but somehow they don’t have time for. Devoid of deadlines and a sense of urgency, innovation can get pushed behind ‘business of today’. However, this is dangerous, you should be creating the ‘business of tomorrow’ for yourself, so make time for innovation by setting aside regular hours each week. Schedule a weekly brainstorming session or allocate a number of weekly hours for your team to spend on innovation. As a result, you’ll be better at discovering creative solutions and able to move the business forward.
4. A DIY ethic drives innovation
Adopt a Do-It-Yourself approach to innovation. Don’t quite make it up as you go along, but experiment to determine product-market fit, working out where your audience is. Success is achieved by a host of variables, none more so that sheer-bloodied single-mindedness to get up there and make it happen – talent rocks, but attitude is king. It’s about conviction and determination to make it happen – by doing it yourself.
5. Authenticity inspires customers
Start with a bold expression of your own, be truly authentic, not seeking to copy or replicate others. The startup leadership lesson here is one of my favourites: you can be confident and competent all you want, but if you’re not having a point of difference in what you offer customer, you won’t inspire a following. What’s your signature tune and tone of voice?
Just copying and tweaking something is no good, unless you just want to be a tribute band. It’s vital to keep playing around and pushing yourself in your vision, create your own product. Don’t be afraid to build a business or revenue model that plays to your strengths, even if it’s non-conventional – for example, is there anything else quite like a Swiss Army Knife?
6. Be your own image
As an innovator you want to be noticed, so establishing a reputation, brand promise, and creating an image is vital. Can you make your product or service stand out? It is held that consumers have mind-space for just three brands in any given category: the leader, the challenger, and the other one lucky enough (or hard-working enough) to be noticed. The rule of three may or not still be true, but the sheer proliferation of brands flooding a sector can starve everyone of oxygen and make it especially difficult for any startup innovation to stand out.
Sheer clutter can be a more powerful distraction to potential customers than any competitor’s offering. Your brand and how it connects to customers that matter to you is a key in differentiating yourself from your competition. John Pasche, who designed the ‘tongue and lips’ logo for The Rolling Stones in 1971, originally reproduced on the Sticky Fingers album, is an exemplar of brand messaging.
7. Playing it safe gets you nowhere
If you don’t take risks, you’ll never excel. Playing it safe all the time becomes the most dangerous move of all. Deviate from routines. Rote activity doesn’t lead to innovation. Factory Records never played it safe, Netflix were bold, Airbnb outlandish proposition – invite strangers into your home to stay, or go and stay in a strangers home – all invoked traditional customer thinking.
If you want to stand out from the crowd, give people a reason not to forget you. Are you unreasonable? Here’s one good reason why you should be: The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. So said George Bernard Shaw in his play Man and Superman back in 1903. The same is still true for anybody innovating and making positive change.
8. Turn your back on competitors
Yes, ignore them. They aren’t running your innovation agenda. You are. Don’t let them set and constrain your thinking of the art of possible. You end up worrying about them, not creative thinking. Instead, focus on your customers. Be empathetic. Know them inside and out. Learn what makes them tick, how they feel, what they need. Then knock their socks off with something that only you can provide.
9. Open mindedness
The ability to create genuine uniqueness is a key trait of any entrepreneurial business. Not all of your experiments will work, but your willingness to try out new ideas, knowing that not all will triumph, is a trait every founder needs. A startup mentality keeps everyone looking for breakthroughs at all times. It empowers people to bring innovative ideas to the table. You cannot create wonders without thinking unconventionally.
Your innovators should be able to create bootstrapped mini experiments with rapid prototyping, to run low-cost tests of ideas in real-time. Startups need to create a culture of no distraction and full immersion to enable focused idea generation.
10. Leverage smaller teams
Establish a small innovation team and empower them to make their own decisions with strong leadership and adequate resources. Make it inclusive, the greater diversity of thought the better. Focus on ideation and getting to proof-of-concept stage to market quickly. Remember, a group of small boats can change direction faster than a big ship.
Create small initiatives in response to market needs, and pivot when needed. Start small and scale rather than going big too soon. Small teams challenge the status quo, made mistakes, but aren’t afraid of change and adapt swiftly.
A startup leader is a dealer in hope, but hope is not a strategy. Innovation is. As founder you need to curate and share a personal mindset of innovation. You can’t just talk about innovation, I view that in a very practical fashion: it’s got to be more than philosophy and ideology. Creating the right culture has to start with the founder and a rabid dedication to innovation.
Your research and development should be a relentless and thorough process. Spend substantial time immersing yourself in your market and be astutely aware of your target audience. You should be so tuned in to the wants and needs of your consumers that you can anticipate their needs before they are even aware of them.
Innovation is inherently risky and getting the most from innovation initiatives is more about managing risk than eliminating it. Since no one knows exactly where valuable innovations will emerge, and searching everywhere is impractical, startups must create some boundary conditions for the opportunity spaces they want to explore.
The process of identifying and bounding these spaces can run the gamut from intuitive visions of the future to carefully scrutinised strategic analyses. Thoughtfully prioritising these spaces also allows startups to assess whether they have enough investment behind their opportunities. Within this, one of the hardest things to figure out is when to kill something.
You need to see what everybody has seen and think what nobody has thought, and don’t live your life in the rear-view mirror – it tells you where you’ve been, not where you can go looking forward.
It is important to regularly re-evaluate your innovation ideas objectively. Being blinded by the story behind an idea is dangerous and it is all too easy to become emotionally attached to an idea. This does not necessarily mean it has merit. Always keep a distance and approach ideas with a critical eye so that only the best concepts make it to fruition.
Finally, it’s not just about the idea. A great idea will only get you so far, it is about executing a plan to drive success and growth. Innovation starts with ideation but is only fulfilled with execution, it’s hard yards from start to finish.
