Startup Innovation Strategies - Methodology

This is part one, in a four part series.

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In any collective activity or project, the project itself is sustained or hinged on background assumptions and methods of conducting that collective activity. In a very reductive analysis, one could say that the success of a project is already pre-determined by the methods of conducting that activity, and assumptions presumed by the group.

In the technology world, Steve Blank’s Customer Development methodology, Eric Ries’ ideas on the Lean Startup and Alex Osterwalder’s Business Model Generation are fueling the startup movement and creating “the startup model” a definite entity that is itself different from regular companies in form and function. Steve Blank crisply explains it thus -

"A startup is a temporary organization designed to search for a repeatable and scalable business model."

What this implies is that a startup, is based on the “scientific model” - continuous experimentation, testing, hypothesis generation and so on until a successful new business model is found to execute, at which point the startup grows in to a proper company. The company is different from a startup, in the sense that a company is all about the execution of that business model and scaling, whereas the startup is about finding that model. These are two very different methodologies.

Here Steve Blank differentiates between a small business, which is basically a copy of an existing business model repeated at a different place, at a different time, and a startup or a scalable startup, which tries to find and introduce a wholly new scalable business model. The Silicon Valley, technology driven, globalized mindset further re-inforces the belief that a startup must ‘take over the world’, so to speak, if it is to be considered successful.

I began writing this because I found that this small group of cultural capitalists (to use Bourdieu’s term) - Blank, Ries & Osterwalder - focussed on the startup business model itself and have not given attention to the idea generation component. That is to say, where do ideas come from and how do you go about generating new ideas that will eventually take over the universe. Steve Blank’s Customer Development process is mostly about validating a new idea, once it is formed. Eric Ries’ Lean Startup is about creating a structure that is built to handle failure, and a methodology to rapidly test business models. Alex Osterwalder’s Business Model Canvas is a novel way of describing a business model, that makes a business easy to understand, communicate and build upon. To Alex Osterwalder’s credit, he does give a third of his book for business patterns, idea generation and design techniques. I want to build upon this, to try and identify new patterns that are emerging in the technology world, which a startup could use to develop novel business models. Since, I’m not limiting myself to describing patterns using Osterwalder’s Business Model Canvas, I’m free to explore a much wider range of patterns.

As Steve Blank describes the act of creating and running a startup is an art. Idea generation itself is an artistic and creative process, yet there is no harm in describing trends or strategies of how they can be generated or have been generated. That is to say, this should not be taken as a limiting factor, rather as lubricant to get your creative juices flowing.

Before I move on to describing emerging trends, I think it might be worthwhile to note three innovation strategies that are still highly relevant in developing internet and technology products. They haven’t outlived their usefulness, and I still see many companies adopting these strategies in various scenarios. These are The Blue Ocean Strategy by Kim and Mauborgne, tapping value in the The Long Tail as described by Chris Anderson, and Disintermediation, which is the cutting out of middle men in a traditional business process and taking that online as a service.

If we look at these from a meta-perspective, it seems to me that these concepts have been developed after-the-fact, that is to say, they are descriptions of on-going strategies adopted by various companies which perhaps the companies did not or could not articulate fully, or perhaps a trend among a group of companies with similar interests, and these theorists have merely described what was going on in a concise manner - which again is very useful as it helps other companies to better understand the business they are in, and for startups to create new business models. This is the same methodology I would like to adopt, and to try and describe emerging patterns in innovation among startups. Further, these new patterns will help me to understand technology gaps and to create new services to fill them.

Photo credit - wili_hybrid on flickr