Our industry is in trouble. The most “innovative” thing we have done in the last few years is to simply slow down our ships. Whilst this has been great for absorbing excess capacity, reducing bunker cost and improving reliability, it’s not something that is likely to differentiate for very long because it’s easy for our competitors to copy (everyone is doing it now). It’s also not something our customers are likely to pay more for.
To really build competitive advantage, what we need is continuous innovation that enables us to build products and services that create value much faster. We need to skate to where the puck is going to be, not where it is today.
How might we establish a framework for driving continuous innovation then?
I’ve just finished reading “The Lean Startup” by Eric Ries, and there are five key points that I believe are relevant for us as we seek to innovate our way to creating winning businesses.
Take away #1: Every business case has a set of assumptions
We need to accept the fact that many strategic opportunities have higher risk and inherent uncertainty than tactical fixes – especially when we are looking to increase revenue. It is the risky ideas that unlock new markets, where there is often an asymmetric payoff and the potential benefits can be huge.
It can be difficult to establish a direct link between the idea and the vision, and we often have to make leap-of-faith assumptions in our business case:
- Which customers do we think want this?
- Are the customers willing to pay higher rates for this product?
- Can we open up to new markets if we offer this product?
- Is it feasible for Maersk Line to do this?
Take away #2: Think big start small
Most of us intuitively strive to be part of something big; a big project that will change the way we serve our customers, or a totally new way of shipping containers.
This is reflected in many of the projects we’ve seen at Maersk Line. They typically set out to achieve great visions, but end up falling somewhat short of expectations. For instance, we have learnt from our experience with the X-Leap that adding more people into a project, having multiple work streams in parallel does not make the project go faster. Instead it increases the complexity and coordination costs massively.
The solution is to find a way to break the vision down into smaller increments of value and iterations of quality, allowing us to experiment and validate those leap-of-faith assumptions we had to make.
The way to build the vision is to start small, build the capability to deliver and scale up before then testing whether we can scale up; but we can only do this by starting small.
Take away #3: Validate your assumptions as early and as cheaply as possible
Developing innovative products and services is a really complex process. The reason for this is the nature of the work involved: we do not develop the same idea twice, they all differ in size, and hence variation is inherent in the process. In fact, if there is no variation, there is no value-add taking place. But the result is that innovation involves high risk and uncertainty.
So how should we deal with risk and uncertainty?
- Experiment with new ideas as fast as possible, invest the minimum time and money.
- Experiment with as many ideas as possible at the lowest possible cost.
In Ries’ experience, the experiment needs to be with a real product or service. He is not referring to the prototypes that we show to customers to get feedback. What he means is to build a working version of a product that can be launched to a segment of customers who have the potential to be early adopters.
This early version will not contain some important features that would lead to 100% adoption by our customer base. However it will allow us to validate our leap-of-faith assumptions as early as possible.
Take away #4: Pivot or Persevere as you learn
Stopping a project can be just as hard as it is hard to start it. This is especially true when software is involved; you can always add a feature here and there, make it that little bit better.
The question is: How do we know when we are done?
Implementing actionable metrics will enable us to understand the cause and effect of the choices made. These metrics will guide us to make an informed decision about which direction to take. Of course the performance measures of the delivery teams need to be aligned.
The ability to stop or change direction quickly is critical when you are innovating. After all, who cares about the delivery being on time/on budget/on scope if the solution doesn’t deliver value in the eyes of the customer?
Take away #5: It’s a culture change
Innovation requires us to work and learn together. It requires a discovery mindset. We need to create a culture where people work together as one team. Instead of handovers between several departments, stage gates with approvals, we need to form cross-functional teams that can achieve validated learning.
And teams need to feel encouraged to experiment with new ideas. Validated learning should be celebrated as much as the results achieved. Failures should be acceptable as long as the teams learn something new about what the customer wants and how to build the solution.
Conclusion
To create winning businesses for Maersk Line we need to innovate.. This requires us to make brave assumptions, start small and validate as quickly as possible pivoting or persevering as required. It also needs us to work together with the right mindset. We can’t avoid the high risk and uncertainty associated with creating new products and services. But we can change how we work to increase the chance that we will succeed.
Read more:
http://www.startuplessonslearned.com/2008/09/lean-startup.html