Mastering a Continuous Innovation Process - Part 2: Value Proposition Design & Business Model Generation

In organizations of all sizes, across all industries, leadership teams are focused on driving innovation within their company. The key? Developing and maintaining a customer-driven approach to innovation, and sticking with a proven process that has built-in accountability frameworks to drive results. In a recent post, we examined innovation and the key drivers of its success.

But why are many otherwise successful organizations still struggling to innovate? According to a recent survey by Accenture, U.S. companies have vision when it comes to innovation and they’re committed to driving it. But where most companies fall short is on its execution, because many organizations do not distinguish how they innovate from how they approach performance gains in other area of business. In fact, 82% of survey respondents note their company takes a single approach to managing small product improvements and large-scale innovation initiatives.

An organization’s continuous innovation process should be comprised of three main components: the Idea Stream, Value Proposition Design and Business Model Generation. In my last post I focused on the Idea Stream, the first step where ideas are harnessed from across an organization and from valued external groups, like strategic partners and customers. These ideas can also be generated by market opportunities such as mergers, acquisitions and dissolutions. The Idea Stream phase is a way to categorize, research, and prepare ideas for the next two steps, and the focus of this post, Value Proposition Design and Business Model Generation.

Value Proposition Design

There are two components of the Value Proposition Design phase of the process: determining the customer segment for the idea (Who is this product for? What are the characteristics of this group of users?) and the value map (What customer problems are we going to solve? How will we solve them?). The main goal of this phase is to further refine the ideas generated from the work done during the Idea Stream. However, just because an idea has made it to the second part of the process doesn’t mean it will make it through to the end. You can and should remove ideas from the list at any point once it’s determined, through a series of validation steps, the value proposition is no longer strong enough.

Something to consider during this part of the continual innovation process; solving customer pains can be arguably more valuable than helping customers attain organizational gains. While both are important, helping an organization fix the pain of wasted money and resources may provide a more tangible benefit in the long run. Enabling customers to knock troubles off their priority list will also leave them feeling positive about your products and services.

To set your initiative on the right path, make sure you are talking to your customers early and often about their pains and what they want from new products. Relying only on surveys, internal research and informal conversations with non-clients will provide you with lackluster insights. Make sure you’re also targeting the right customer. While it sounds like a simple recommendation, we see this problem regularly. You have a new product idea and explain the new set of features to a customer, only to find out they’re not trying to solve this problem. Are they the right customer for this idea? Know your customers and what makes them tick, listen to their ideas, and foster a culture where this becomes something you are known for. This will allow you to become experts on the adoption curve of your products.

Lastly, a good litmus test for ideas is that a product owner or champion must be able to present an idea to his or her peers and succinctly explain why the organization should see this idea through. Ask yourself: what market are we serving with this idea? What customer pains are we solving? And does this idea map to what’s important to our business? If you can make a compelling argument to support the idea, then move it along in the process; if not, move on to the next batch of ideas.

Business Model Generation

Once you have fully validated your idea’s value proposition, it should move on to the Business Model Generation phase. Once the market and customer segment has been defined, you should continue developing thorough answers to key questions like: how much will this product cost? How will we reach our customer’s customers? And how will we get this idea or product developed? You may also ask whether or not you have the internal resources to see it through, what the features are of a minimally viable product (MVP), and if you should look to partners to fill internal gaps. This is where private equity and venture capital organizations have a distinct advantage. They have ongoing opportunities to reach into their ecosystem to pinpoint a partner company that can help see an idea through to development and then to market. The biggest roadblock we generally see with our technology clients is that they do not have the people or skills in house to do all of the work. Don’t be afraid to look to external partners to make your innovation initiatives a reality. In some cases, your local university may be a good partner (especially if they’re running a lean startup or evidence-based entrepreneurship class) to help prove business models.

Organizations across the globe continue to struggle with the execution of their innovation initiatives. Be an outlier in your industry by staying hyper-focused on your customers, gathering insights from them and developing products that solve their pains by applying a proven, rigorous process to your innovation priorities.