Validated learning as an excellent innovation strategy
25 août 2022
Today, even innovation and transformation processes are highly subject to innovation and transformation. Uilke Duinstra, innovation strategist at the Utrecht campus of iO, is getting more and more questions from customers like: “We are a mobility company, but we also want to enter the energy market. How do we do that?” or “We are a B2B company, but how do we also become B2C?” More generally, it concerns questions such as “How can we develop relevant new services step by step, without immediately plunging into a multimillion-dollar project we’re not sure will work at all?” These kinds of issues, which show that domains and sectors are increasingly fading, require a new approach to innovation processes.
Uilke Duinstra: “Customers today want to be able to adjust their business model step by step in order to anticipate technological and social developments. But, of course, they have to be able to make sure that there’s a market fit for their ideas. After all, innovation challenges today are not so much about perfecting your current business model, as about responding smartly to a market where the rules of the game are constantly changing. When innovating, it’s a good idea to conduct a step-by-step support survey: you first test something on a limited audience, then make adjustments based on the feedback and take the project to the next level.
“We call this approach validated learning,” says Uilke Duinstra. “It’s a process where you first find out what the problem is, then you look at possible solutions for your target test group and finally consider how you can scale these smaller pilot projects to a wider audience – and thus to higher revenue streams. You should always ask yourself what problem you are actually solving. You start with an ambition and a number of critical assumptions and then test them: ‘Apparently this service works for parents aged 40 to 45 with younger children, but does it also work for other target groups?’ With validated learning, you get an increasingly fine-grained picture of the solution to your problem through iteration. You find out exactly where there is room to further scale a new service in a continuously changing market.”
Challenging the status quo
We live in a time in which domains and sectors are fading and increasingly overlapping. Mobility is also about energy. An e-commerce company today is actually also a logistics player… change is the only constant. Consequently, you need to think about the role and ambition of your organisation in this changing world. How will your organisation challenge the status quo? What is your position in the market? How will you shape a future-proof business model that ensures you are still relevant tomorrow? Processes where the status quo is challenged are fascinating identity puzzles: which organisation should we be tomorrow?
Set of assumptions
Uilke Duinstra: “Suppose you, as a company in the automotive industry, notice that the sector is evolving from a sales-oriented market to a user market. In that case, you no longer have to worry about how to sell more cars. The key question then becomes: through which relevant services do I provide customers with sufficient flexibility and experience, so they come to me to organise their mobility? You could then consider you’d be able to better fulfill their mobility wishes if they’d share their schedules with you. Then the next question arises: do they want that? Some probably do, others don’t. But who exactly does or doesn't? This way, you develop a set of assumptions around which you can build a new service, but not without first checking its technical and commercial viability.”
You can check this in different ways. Uilke Duinstra: “A small-scale pilot project would work, but you could also create a product video. After all, the feedback you receive on that video will give you an indication of the support for the product. Are there enough people waiting for this service? Which assumptions are most critical?”
The last step is to think about how you can scale up and grow the whole idea. Uilke Duinstra: “You could come to the conclusion that for your growth-model you need, for example, two customers to start with, find three mobility partners and have an API that can unlock travel advice. Co-creation is therefore much more important here than with a traditional market introduction! Your immediate growth is not the most important indicator here, rather it comes down to achieving results that help you grow in the future and that help you prepare for a new business model.”
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From A to C? Find B!
In many innovation projects you want to get from A to C, but you usually don’t know where point B is – even though you have to pass it first anyway. You always start from a changing world and a certain ambition. You will then detect problems, look for solutions, define markets, test assumptions and finally find out how you can scale up. Very occasionally, you will also have to make drastic adjustments in such a process, for example because it gradually turns out that you ultimately do not have to get to point C, but to point D.
Because you do not know in advance what results you will achieve and whether you can actually build a future-proof business model with your new service, some organisations are reticent or even reluctant to innovate. Is our organisation ready for such a major transformation? Do we have the right expertise in-house? And what if we have invested a lot of money and it turns out that the service is not viable? An iterative way of working based on challenging the status quo and validated learning helps you to continuously determine your ambition and then see what the most risky assumptions are – and how you can reduce these risks. It is therefore best to discuss at the start which fixed steps the process will go through and make it clear to the customer that you will evaluate each step together. You learn something at every stage. New assumptions keep popping up that prove worthy of critical scrutiny. And if at some point that’s not the case, you must also be honest enough to dare and press the stop button.”
“An iterative way of working based on challenging the status quo and validated learning helps you to continuously determine your ambition.”
Monkey First and other misunderstandings
Far-reaching innovation and transformation processes can only succeed if you also create sufficient support within the organisation itself. There are quite a few misunderstandings about innovation in the workplace. Uilke Duinstra: “To start with, you should not innovate with a small club on a secluded island. You have to make your perspective visible to the entire organisation and to all your stakeholders. But you do have to be able to look at things from a distance to see the big picture. Like Neil Armstrong, who was only able to see how thin and fragile the atmosphere around the earth really was from space. That is why we often visit startups and innovation studios with stakeholders and directors. That way, we turn the perspective outside-in.”
Uilke Duinstra: “A second, frequently occurring misunderstanding concerns creativity. Innovative creativity is not about some genius ideas that come out of the blue. Creativity is also a process, which often requires you to look at problems from different angles.”
A third shortcoming from which quite a few innovation projects suffer internally, is that the most critical minds within an organisation are all too often silenced. Uilke Duinstra: “While you’d be better off rewarding employees who point out the Achilles heel of a concept! This ties in with the Monkey First principle. Suppose you want to teach a monkey to recite Shakespeare while on a pedestal. Many organisations then start with the easiest part: building the pedestal. Because then they can already cross that element off their to-do list. Wrong, of course! You have to start with the hardest part, which is teaching the monkey to recite Shakespeare. After all, there's no point in building the pedestal if the monkey never learns to recite Shakespeare."
One last tip: in order to get change makers and ambassadors within your organisation fully involved with your innovation process, according to Uilke, you would do well to give them something tangible: “A souvenir, so to speak. After all, you remember someone else's story much better if you link it to, for example, a billboard in your entrance hall. Innovation has to be tangible and visible in order to activate new ways of working and stimulate new behaviour within the organisation.”
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ALD Move: the ability advice app
Leasing company ALD Automotive went in search of a new business proposition that embodied their mission: 'freedom in mobility'. In collaboration with Uilke Duinstra’s team, they developed ALD Move. This app helps professionals organise their commute and business trips in a smarter way. Thanks to an overview of travel days, travel distances and the chosen mode of transport, the app also serves as the basis for the travel allowance.
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Uilke DuinstraService Line Director Strategy - iO
For 8 years now, Uilke has been forging innovation and strategy into a single offering. His secret to a successful innovation process? Getting the whole organisation on board through an exciting story. One that presents you with all the angles to shape a future-proof business.