The other day I blogged about pivots, outlining arguments for and against pivoting. Pivoting is controversial because there are different theories of innovation, and opposing beliefs about success factors and likely risks.
Pivoting is considered a healthy strategic maneuver by proponents of lean startups. They see pivots as an invaluable course correction that enables startups to recover from poor product concepts, or faulty assumptions about customers and buying processes.
A Religious War over Innovation Theory?
This disagreement boils down to different philosophies about where innovations should originate: with ideas and novel concepts, or customer needs.
Startups: Idea-Driven Innovation
Most startups owe their founding inspiration to a product vision that the founders want to bring to life. During their formative years these are idea-driven businesses. Startups, especially tech startups, are the chief exemplar of idea-driven innovation.
But the problem is, 90% of idea-driven startups will fail if they apply product development, sales and marketing approaches originally designed for large companies. They will run out of cash before they fully understand why their business model isn’t working, why their ideas don’t resonate with customers. The failure of this outmoded model is eloquently described in The Startup Owner’s Manual, using Webvan as the poster child for how not to manage a startup.
Hence the need for customer discovery and development processes that recognize the uncertainties and unknowns that are baked into entrepreneurial ventures. Because startups face so many unknowns, they must have graceful ways to recover from faulty assumptions or things that are simply unknowable in advance.
Hence the pivot. Pivots take place when founders recognize that their current assumptions don’t fit customer or market realities, so they need to adjust their product concept, pricing, customer selection, or go-to-market strategy.
The methods and practices detailed in The Startup Owner’s Manual will help founders increase their chances of success, according to entrepreneurship thought leaders Steve Blank and Bob Dorf, the book’s authors. These methods are intended to help founders reduce mission-critical business risks: customer/market risk, product/market fit, and the need for a repeatable sales model and a business model that can be scaled as the company grows.
Strategyn has patented an innovation method they call Outcome-Driven Innovation(R) or ODI. It is a customer-centered, disciplined approach to uncovering new opportunities; one that views everything through the eyes of the customer. ODI starts with a rigorous analysis of customer needs, applying a jobs-to-be-done lens to the discovery process.
Strategy’s research suggests that customers consider somewhere between 50 and 150 metrics when assessing how well a product or service meets their needs, in the context of the job-to-be-done. Companies that understand those metrics and can deliver a value proposition that satisfies them, will be 5 times more likely to succeed than those that operate under traditional innovation theories, Strategyn claims. (Idea-driven innovation being one of the theories that Strategyn says has high failure rates.)
Because of the disciplined nature of the ODI process, the need for ODI discovery and analysis to precede product development, the ODI method is more likely to appeal to established enterprises than to startups. (How many startups do you know that relish disciplined processes early in their life cycle?)
Read the Books
The good news is, both of these innovation theories are well described in books and blogs. Entrepreneurs and innovators can learn a lot from these models by reading the following books, which I highly recommend: The Startup Owner’s Manual, The Lean Startup; What Customers Want, and Service Innovation. (The latter two describe Outcome-Driven Innovation.)