Building In-House Innovation Teams: When to Stop Innovating and Start Scaling

Should you hand off?
Should you hand off?

In parts I and II of this series I discussed the qualities that make up successful in-house innovation teams and the need for those teams and their colleagues to foster a culture of transparency if they are to succeed. In this article I want to discuss how to decide when these in-house innovation teams need to shift their focus from pure innovation and move into scaling. More so, I want to discuss whether these teams should continue into scaling or hand off their work to a different team.

I saw Steve Blank present once at the Lean Startup conference and he showed a slide that discussed how most startup CEO/founders don’t make the transition to big company CEO’s. It seems that startup founders are great at solving problems but when the solution has been found and the time comes to scale it out into a full-blown business, these founders get bored. Coming in to work every day not knowing what the team will come up with is exciting. Coming in every day to do the same thing only on an ever-increasing scale is, well, boring – at least for this unique set of folks.

 

The same dilemma faces in-house innovation teams. At a certain point the team will happen upon a viable solution and the company will want to expand the idea beyond it’s minimally viable state. How does the team decide it’s time to shift focus to scaling up? Should the same team that found product-market fit be the team that turns the idea into a viable business? How will a hand-off to a different team affect the morale of both the innovation team and the product’s new caretakers?

 

When to stop innovating

As with any product effort the first thing your in-house innovation team should agree to is the success criteria for the product. These criteria should be objective, quantifiable and most importantly measurable. They should focus on an explicit business problem. By focusing on objective metrics (KPI’s) the team and its funders have a clear gauge of the product’s progress and ultimate chances for success. Conversations about the idea’s viability shift from subjective ones (e.g., I think we should include the invitation feature) to objective ones (e.g., we’ve seen significant clickthrough on the Invitation button in our experiments).

 

By being transparent the team can, at any time, have an informed conversation about the success and failure of their innovation efforts. The organization then has to decide whether it wants to fund the product discovery effort any further. Once the thresholds have been reached for the product’s success criteria, the team is faced with a difficult decision. The product has reached its targets in its nascent stages and has proven that it could potentially be turned into a “real” product. It’s at this point the company needs to make the decision to stop the innovation efforts on this product.

 

There is clear traction in the market. Customers are using the MVP and feedback is coming in. Product-market fit has been found. Given the qualitative and quantitative insight the team is collecting on the MVP the organization can now decide if this product should be scaled. If the decision is to scale the product, the team is now faced with a new question. Who should take the fledgling idea and grow it into a successful part of the business?

 

Should the innovation team scale the product?

There is a natural tendency to think that the same team that birthed the idea should take it to the broader market. They created it. They brought it to life, nurtured it, gave it water and the TLC needed to bloom from seedling to sprout to fruit-bearing tree. From the rubble of 1000 post-it notes, it formed, one experiment and pivot after another. Who better to make it into the industry juggernaut it deserves to be than its parents?

 

Thinking back to Steve Blank’s presentation, the question becomes a bit more salient. The dedication, improvisation and fun the team put in to get to product-market fit may not translate appropriately to the decision-making needed to scale the idea. New success criteria is put on the product – like profitability for example. New, even more ruthless choices need to be made that those who are too heavily involved in the current state may not want to make. A hard-fought win in the UX may be too costly to scale en masse. Will the team that fought for that feature be able to make that decision?

 

Ultimately the right decision here is based on context and, let’s face it, resource availability. If there is a team that is tasked with bringing fledgling products to broader markets then the handoff is clear. If not, it becomes a bit murky.

 

The other consideration here is morale. On the one hand, splitting employees between innovation teams (where seemingly all the fun is had) and scaling teams (where seemingly all the grunt work is done) can lead to a cultural divide and hurt feelings (why are they on the fun team?). I experienced this first hand when I worked at AOL in the early 00’s. The R&D team there was made up of a bunch of black turtleneck wearing hipsters who never had to attend any of the soul-crushing design reviews the rest of us did. They had their own office and created fantastical product concepts that drew ooh’s and aah’s from the crowd at each all-hands meeting. The rest of us slaved away at spec documents and bug scrubs. From that perspective, we had a pretty deep divide in morale between those two teams. But from the organization’s perspective that team had the freedom and mandate to try new things, fail and learn so the rest of the organization could get better.

 

If the decision is to keep the product with the founding team they have to be clear on their new mandate and on the fact that they are no longer looking for new products. This will radically shift the way they work and their success criteria (and subsequently their performance evaluation). And the question still stands whether they’ll be able to make the right decisions for the business as they grow their product into a business line.

 

Intel makes this process very clear in their horizon management approach. It’s covered in detail at the link above but the short of it is that they have 3 horizons of product management with a set number of resources at each horizon. Horizon 1 products focus on innovation and product market fit. If a product graduates from there it moves to another team, Horizon 2, to find out if there’s a business there. If it meets those success criteria it moves to Horizon 3 where most of the company’s resources are to scale it out into its own business line.

 

I think it’s important for companies to declare their product management strategy when it comes to sustaining their innovation efforts. Declare clear success criteria for your in-house innovation teams and when they reach those, they’ll be prepared to transition the product to a scaling team or to take their work further themselves. Stay objective and be transparent with the process to ensure team stay motivated in their respective roles.

 

[Jeff]

We have an amazing lineup of speakers leading and building cultures of innovation in the enterprise at Lean Day: West in Portland, OR, USA this year. Tickets are selling out. Get yours with a $200 discount with code BLOG at www.leandaywest.com.