In order to capitalize on the opportunities created by IoT and connectivity, organizations must change the way they look at innovation. Many large organizations, however, continue to look at innovation in purely an incremental way. They are looking for the next version of something or the evolution of where they are already comfortable by exploiting existing competencies. They make few bets and, when they do, they invest heavily in research and development and marketing and sales strategies, as most of the market dynamics are known.
Incremental innovation still has its place, but it can’t exist purely on its own. The missing partner is fast-paced exploratory innovation. This approach to innovation, which has been used by lean startups for some time but is new for large, mature businesses, features continuous recursions of hypotheses, validation, learning, new hypotheses and more learning. It requires an entirely different mindset than incremental innovation, with a laser focus on areas like business modeling, customer journey and user experience.
The challenge becomes how to bring together the concepts of incremental innovation and exploratory innovation—or the lean startup approach—in a large, process-driven and mature business. These two types of innovation are like two gears spinning at different speeds, and if they are forced together without any sort of speed regulation, the differing forces work against each other in a destructive way. Just as gears require a transmission to regulate power output, organizations need a dedicated approach to successfully bring together incremental innovation with a lean startup approach.
University of Michigan professor Jeff DeGraff, Ph.D. details this challenge in his Competing Values Framework, where he outlines how individuals in an organization have different priorities and how the tension between competing forces can be brought together to create positive movement.
Putting It Into Practice
As early as 2012, Bosch in North America was investigating how we could bring these two values together. We worked with experts like Dr. DeGraff on what would work for our culture. The result was the Innovation Framework, a vehicle that allows ideas from all areas of the company, primarily our associates, to be quickly validated similar to lean start-ups.
In the Bosch Innovation Framework, associates enter a several-months-long curriculum in which they learn the different tools to develop their idea into a potential business opportunity and can pitch their idea and learnings to a panel of internal executives for metered funding. They receive plenty of feedback –much of it very challenging—and coaching along the way from seasoned executives who lend their time and expertise.
The associates who take the initiative to bring ideas in get experiential learning in the areas of business modeling, the customer journey and user experience. They also learn key principles like minimum viable product (MVP) design, a lean startup technique defined by entrepreneur and author Eric Ries as the “...version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
This experiential learning is a key part of our cultural transformation as Bosch transitions to an IoT company. For example, in 2018 Bosch sold 52 million web-enabled products, up 37% from the year before. By the middle of the next decade, all Bosch products are expected to be equipped with AI, or AI is to have played a part in their development or manufacture. In order to maintain this momentum and meet these commitments, we need a culture steeped in innovation and a lean startup mindset.
As the Innovation Framework approaches its sixth year, we’ve learned a number of key lessons.
- Innovation is not prescriptive; you have to develop what works in your corporate world
Dr. DeGraff told us early in our engagement with him that he couldn’t just give us a turnkey plan. While he was an indispensable resource for us with guiding principles, he encouraged us to build our own approach that would match our culture.
- Process is important, but the moment you write it down, it’s outdated
The Innovation Framework at Bosch looks very different than when we first started. We’re open to how it needs to adapt over time. Similar to how a lean startup approach requires you to be more iterative, our approach is to formulate hypotheses, validate or invalidate and recur.
- It’s experiential, not experimental
The ability to quickly and inexpensively validate business ideas only comes from experience. For us, it’s as much about what our associates learn as it is about innovation or the next big idea. Be prepared to change the perception of “learning from failure,” because in many mature organizations, the mindset and culture penalize failure.
- Give it time and attention
This level of transformation requires buy-in from the top down. Enlist a few key management sponsors who are open to the explorative approach early in the process and let them champion the internal mindset shift required for success. Innovation is a journey. It’s not a process that’s established and can be left alone. You need to invest in resources that continuously sharpen methods and provide learning experience.
- Early identification of a future home for the new activity in the company is key to success
Securing the involvement of the future operational home business unit while securing continued management under lean start-up principles can be accomplished by co-funding the activities between corporate and business-unit funds.
Introducing a new and disruptive mindset into an established organization can look like a daunting task, but it’s certainly worth it. More than 90 ideas have been validated through Bosch’s Innovation Framework over the last six years, 35% of which have transferred into business units across the company. The program has also:
- Coached more than 350 associates across the U.S. and Mexico who have participated in Innovation Framework teams
- Led to collaborations between 15 business units
- Accounted for $95 million in contracted revenue by 2020
Companies that embrace lean startup principles and pair them with their existing strengths in incremental innovation will have a culture that is well-positioned to capitalize as IoT continues to grow. Introducing lean start innovation approaches means at the same time subscribing to accelerated change, and an obsession with continuous learning.
Oliver Steinig is vice president of business development and corporate strategy for Bosch in North America. He is also responsible for running Bosch’s internal accelerator programs and engaging with both internal and external startups.