Episode 212: Avoiding Common Pitfalls in Corporate Innovation with Ben Hafele
In this episode of the Product Thinking Podcast, I’m joined by Ben Hafele, CEO of Lean Startup Company, to explore the complexities of corporate innovation.
Ben shares insights on how large companies can effectively integrate lean startup methodologies into their existing frameworks. They discuss the importance of aligning innovation efforts with business strategies and how to avoid falling into the trap of unnecessary complexity. This episode is a must-listen for anyone interested in fostering meaningful innovation within large organizations while maintaining strategic alignment.
Are you looking to navigate the challenges of corporate innovation and strategic alignment? Tune in to this episode for valuable insights from Ben Hafele's experience with lean startup methodologies.
You’ll hear us talk about:
10:45 - Establishing Connective Tissue for Innovation
Ben introduces the concept of creating a "connective tissue" that links build-measure-learn cycles with overall business strategy. He explains how fostering this connection ensures that every experiment conducted is aligned with the company's broader objectives.
22:17 - Balancing Experimentation with Strategic Goals
The discussion delves into the challenge of balancing experimentation with strategic goals. Ben shares approaches for ensuring that innovation initiatives do not deviate from the company's strategic priorities, maintaining relevance and purpose.
45:30 - Overcoming Complexity in Corporate Innovation
Ben and Melissa discuss ways to overcome the inherent complexity in corporate innovation. They highlight practical strategies for simplifying processes and ensuring that innovation efforts remain effective and focused on delivering value.
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Episode Transcript:
[00:00:00] Ben Hafele: I've been finding that with terms like, innovation, or design thinking, brings up, Mental images of, I don't know, hackathons or brainstorming sessions or sticky notes on canvases that kind of seem like arts and crafts to a quote, unquote, serious corporate executive. If we're defining. Innovation as how to make the best decisions possible under conditions of uncertainty then that's a capability that's directly relevant to creating value for customers, increasing shareholder value.
[00:00:28] Lean startup to us, at the center of it is build, measure, learn. Build is frequently misunderstood. It's what's the most minimal and yet still viable experiment we could build to achieve that learning. Notice I didn't say the product necessarily and the viability applies to its ability to test the assumption, not the viability of the product itself.
Intro
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[00:00:47] PreRoll: Creating great products isn't just about product managers and their day to day interactions with developers. It's about how an organization supports products as a whole. The systems, the processes, and cultures in place that help companies deliver value to their customers. With the help of some boundary pushing guests and inspiration from your most pressing product questions, we'll dive into this system from every angle and help you find your way.
[00:01:14] Think like a great product leader. This is the product thinking podcast. Here's your host, Melissa Perri.
[00:01:24] Melissa Perri: Hello, and welcome to another episode of the product thinking podcast. Joining us today is Ben Hafele, the CEO of the lean startup company. His focus is on bringing the latest lean startup practices to organizations, looking for a sustainable way to manage the pressure to grow. Prior to joining lean startup company, Ben built the lean innovation program at Caterpillar.
[00:01:43] He has worked with over 400 startup innovation and product development teams, spanning five continents. Today, we're going to talk about innovating in large companies, what to do and what not to do. But before we talk to Ben, it's time for dear Melissa. So this is a segment of the show where you can ask me any of your burning product management questions.
[00:02:03] Go to dear Melissa. com and let me know what's on your mind.
[00:02:06] Melissa: Today's episode is brought to you by Liveblocks, the platform that turns your product into a place that users want to be. With ready made collaborative features, you can supercharge your product with experiences that only top tier companies have been able to perfect. Until now. Think AI co pilots like Notion, multiplayer like Figma, comments and notifications like Linear, and even collaborative editing like Google Docs. And all of that with minimal configuration or maintenance required. Companies from all kinds of industries and stages count on Liveblocks to drive engagement and growth in their products. Join them today and give your users an experience that turns them into daily active users.
[00:02:43] Sign up for a free account today at liveblocks. io.
[00:02:47] Melissa Perri: Here's this week's question. ~ Okay. This is a caller about the pharmaceutical company one. ~
[00:02:49] Caller: Dear Melissa, as the director of product and operations for the E-Commerce division of the pharmacy chain, I oversee a 1P E-Commerce platform integrated with a health tech component. Within our structure, there's also a director managing the commercial strategy, deciding what products we sell and which to prioritize online.
[00:03:08] Our long term vision is to evolve into a marketplace where a digital presence offers a broader selection than our physical stores. In this context, how would you define the role and focus of the product management and operations area? Specifically, how can we ensure alignment and maximize value within a broader ecosystem that includes both commercial, strategy, product, and operations?
[00:03:31] Melissa Perri: So it sounds like in your case, you do have many people involved in trying to figure out what the desired customer experience is. So a commercial strategy person who's actually figuring out what should you sell through the marketplace.
[00:03:44] You've got yourself, who's a digital strategy person. And then you've got somebody who's working on operations. So in a company like this, which is very common, by the way, this happens with banking. This happens with e commerce, with all different types of companies, you're going to want to work with those three people together as a team to figure out what the desired customer experience is.
[00:04:05] So your customer journey is going to take place outside of the digital area of your product is probably going to be talking to people or through operations and services. They're going to be buying something from the marketplace and they're going to be interacting with that digital marketplace. So what you want to do is work together with those people and try to figure out what is that customer journey end to end, and what can we do to use technology and digital tools to make it more seamless.
[00:04:32] You want to try to figure out what they need to know about what they're buying. Why are they buying it? How does it integrate into the rest of that journey? What they should be able to provision from it. If they have to do anything with what they buy from the marketplace digitally, all of that stuff is within your scope as a digital product manager.
[00:04:48] But you're going to want to really work with that commercial person and with the operations person to figure out where there are handoffs, how you can incorporate what they're doing and how you can best present that back to the customer. So typically in organizations like this, for example, if you were working in banking, you'd have somebody who's figuring out what the banking loan is that you're going to offer someone based on their credit score, X, Y, and Z, all of that.
[00:05:12] So that's like a banking product. But the digital experience person is figuring out how they apply for the loan, what what information they'll need to actually figure out what kind of loan they could do, how they provision the loan, how they take care of it afterwards, how you notify people, how you give them the information they need to figure out how to sign up for the loan, to sign up for the loan, all of that different stuff in the journey can usually be solved through the digital tools.
[00:05:34] So that's very similar to the capacity that you are going to be in as well. So the biggest issue you want to avoid here is Having the commercial person who's figuring out what you're actually selling, just dictating down what the digital strategy is. That's your job, right? So as a product manager, you want to step up, deeply understand what you're selling, how your customers will be using it, why they would buy it, how it fits into their journey, what that journey actually looks like, and then what could you use your technology for to make that journey more seamless, more valuable for them so that they get their problems solved.
[00:06:10] So that's your experience, right? You were trying to figure out all the digital touch points that come in there. So a good kickoff is sit with those two other people on operations and the commercial aspect of it. Map out that entire customer journey end to end, not just touching digital, but everything from the moment they have that problem to the moment that their problem gets solved.
[00:06:29] And then go and figure out where the digital touch points should be and how you can use technology to better solve their problems. Now that's going to be your strategy for how you build this out in the future. So I hope that helps. And again, if you have any questions for me on dear Melissa, go dearMelissa.Com and let me know what they are. Now let's talk to Ben.
[00:06:48] Hey, Ben, welcome to the podcast.
[00:06:51] Ben Hafele: Hey, Melissa. Thanks for having me.
[00:06:53] Melissa Perri: So I'm very excited to have you on because I've been a longtime follower of lean startup. I actually started getting into a lot of the experimental product management stuff that I do, because I went to a lean startup machine workshop back in the day, read Eric's book. So can you tell us a little bit about the lean startup company and about yourself, what you guys do?
[00:07:12] Ben Hafele: Sure. And just for the record, I'm a huge fan of your work as well. And really really appreciate everything you've contributed to this space and use it all the time. My name is Ben Hafele. I am the CEO of the lean startup company. My background is in a mixture of startups and corporate innovation.
[00:07:29] I in addition to, coaching startups and being a lead mentor as an accelerator also was the lean innovation person at Caterpillar. So that was our kind of corporate innovation arm at Caterpillar, still in existence today, which is really cool.
[00:07:43] And before that spent a lot of time in.
[00:07:44] Market research and new product introduction. Which is one of the reasons I'm a big fan of your work. And joined the company back in, in 2020. And we just get to work with big companies all over the world in a super eclectic array of industries and really interesting, use cases.
[00:08:00] So it's been a, it's been a great ride. And I would say our superpower, and we're lucky to have this as just to be able to see across All these companies that are trying to do similar things and, finding out what works, what doesn't work and how to better advise people on what to do.
[00:08:15] So that's me.
[00:08:16] Melissa Perri: Very cool. And lean startup, as a concept, can you explain to our listeners if I feel like most of them have heard about it, but if anybody hasn't heard about lean startup, can you explain the concept there?
[00:08:27] Ben Hafele: So that's a great question and we could do an hour on that. I would say that, in so lean startup was codified by Eric Ries, who's our founder at the lean startup company in 2011, in his book, the lean startup. And in that book he, he was very deliberate to say, Hey, this is this incorporates things like design thinking and user research and UX and, agile principles and all that kind of stuff.
[00:08:49] And but there's a lot of I don't know if it's clickbait or people are really trying to help where it's this is design thinking that's lean startup. And it's useful, to consume that content. But really from our perspective, it's it's the scientific method, right? It's, we have an objective.
[00:09:02] And there's some variation on how we can achieve that objective. So how do we state what we think will work and then test it and find out if we're right enough times to vet shape and de risk the path forward. And so a lot of what we do is I guess, technically design thinking. And a lot of what we do is instilling agile principles.
[00:09:20] That's all lean startup to us. And at the center of it is build, measure, learn which is actually operated. Learn build measure. So learn is what do we need to learn next about this thing could be an entire new business. It could be a new product within an existing business. It could be a new feature within an existing product.
[00:09:39] So it kind of the level of granularity needs to be specified. But
[00:09:43] once you've got what we're trying to achieve,
[00:09:46] you can say, what do we not know about it? What's the most critical thing to test next?
[00:09:50] So that's learn what do we need to learn next?
[00:09:52] And then build is frequently misunderstood. It's.
[00:09:55] What's the most minimal and yet still viable experiment we could build to achieve that learning.
[00:10:00] Notice I didn't say the product
[00:10:01] necessarily and the viability applies to
[00:10:05] its ability to test the assumption, not the viability
[00:10:07] of the product itself, but we could again, spend two hours on that.
[00:10:11] And then after after build is actually running the experiment, this is the measure part, getting the data and then coming back.
[00:10:17] To learn and saying, do we need to learn anything else? Or have we sufficiently de risked?
[00:10:21] So learn, build, measure that kind of build, measure, learn loop is at the heart of Lean Startup. And it's the scientific method applied to business.
[00:10:30] Melissa Perri: I like that you went back and started with learn there. I feel like that was a huge misconception when lean startup 1st came out was I saw everybody just building whatever came to the top of their mind and throwing it out. I actually worked in 1 company, when I came in, I was trying to introduce these principles talk about MVPs.
[00:10:46] We said that product part of it. It's not great, but I was like, well, we should do an MVP. We should do an experiment and they freaked out. And they were like, no, we can't do experiments. We're a real company. We're a B2B company, Melissa. We can't run experiments like that. What do you mean?
[00:10:59] And it turns out somebody had read the Lean Startup.
[00:11:03] tried to do an experiment in this company. It was like a marketing data company. And they just put like a button to nowhere on a screen. That didn't work to just see if people clicked
[00:11:13] it, but there was no follow up. There was
[00:11:14] nothing going on. So they just build all this janky stuff, didn't really learn anything and pissed off a lot of customers.
[00:11:21] So they were like, Oh, we're never going to
[00:11:22] do lean startup. That stuff doesn't work.
What Defines a Startup?
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[00:11:25] Ben Hafele: Yeah. It's a, it's, we encounter that kind of stuff all the time. And I think, startups by the way a startup is our definition of a startup is straight outta the book because it still works. And the second it doesn't work, it will no longer be. Our definition is that it's a team that's designed to deliver a new product or service under conditions of extreme uncertainty.
[00:11:43] So it's the uncertainty that makes a startup. A startup that's out in Silicon Valley, at Y Combinator is basically saying, we don't know if we should build this thing. Let's find out if there's a, they're there. So that's a startup maybe obviously but also if you have a big company, like a fortune 100 company where they're trying to spin up a new business or a new product or some new features on an existing product, that's also a startup team to us because,
[00:12:07] They're faced with uncertainty about what, which of these different options should we pick, right?
[00:12:12] And that's really the core of what we're trying to do.
[00:12:14] And startups have a little bit more leeway to your point, right? Coming back to your point
[00:12:18] of
[00:12:19] when you're a startup, sometimes you'll try to make fake sales or your trick,
[00:12:22] you'll trick people into, Entering credit card information and then say, sike, we were just testing demand.
[00:12:28] That's obviously something you don't do with a well known brand and established organization.
[00:12:32] The good news is there's plenty of other calls to action that you can have that aren't tricking people that are meaningful, that signal and exchange of value that signal, that there's actual attraction.
[00:12:42] And so finding those designing those experiments appropriately for a large business is a kind of an art and a science.
[00:12:49] Melissa Perri: So we just talked a little bit about one thing that I see is a big difference between smaller startups and these larger corporations when they're actually innovating or trying to launch something new. And that's that reputational brand risk, right? We can't just, Throw a bunch of stuff out there and not have it end up well because people will get mad and there's a lot of paying customers here.
[00:13:07] What are other differences between innovating if you were just a first time startup, right? Just no brand, no, nothing, no awareness versus trying to launch these new products or services inside a corporation.
[00:13:19] Ben Hafele: Yeah, that's an important question and just maybe a moment on the word innovation.
[00:13:24] Melissa Perri: Yeah.
[00:13:25] Ben Hafele: I found recently and I just like to get out and, talk and, interact with people and try to do it in person as much as possible. And I've been finding that with terms like, innovation, or maybe design thinking, or some of these things it brings up, Mental images of, I don't know, hackathons or brainstorming sessions or sticky notes on canvases that kind of seem like arts and crafts to a quote, unquote, serious corporate executive.
[00:13:49] And and I guess so I think neither 1 of us wants innovation to mean anything frivolous like that. And but if we're defining. Innovation as how to make the best decisions possible under conditions of uncertainty then that's a capability that's directly relevant to creating value for customers and, to tarnish with business terms, but like increasing shareholder value, right?
[00:14:12] Creating value for shareholders. So if that's what we mean by innovation, then it's if companies are trying to innovate how do you use lean startup? And I'd say there's different use cases. There's corporate innovation where you're incubating things in a separate group that are off to the side.
[00:14:25] Don't even get me started on coordination, transformational, horizon one, two, three, I think well meaning concepts that have just wreaked havoc upon many a company, right? And so they're just used in the wrong way. So innovation, corporate innovation
[00:14:38] is a use product innovation is a use, which is a particular interest the listeners here also technology, I'll call it commercialization, right? Where it's Hey, blockchain is exciting. Or right now I don't want to say the word AI more than once. So I'll just say at that one time, that's really exciting. So what do we do with it? Technology is not a product. It doesn't have a value proposition until we weave it into a business model.
[00:14:59] What is it? So all those are different use cases of lean startup at a big company. But build measure, learn is the same. That's the essence of it. But I would call it the connective tissue between build, measure, learn and the rest of the enterprise. Because things work in a certain way already. You're not starting from a blank sheet of paper.
[00:15:17] So what's the connective tissue back to the enterprise? And a couple of key things would be milestones, right? So for this collection of features that we're going to evaluate for the product or for this collection of products that we're going to evaluate to achieve the vision or this collection of new business opportunities, whatever it is what are the milestones?
[00:15:36] For products, a great, like base set of milestones is, do we understand the customer problem? Do we really know who the T the customer is? Do we do we have evidence of traction, with with customers? Do we have the right go to market strategy? Just stuff like that, where it's, where you can say of all these things that we're doing, what are the milestones?
[00:15:54] We don't want to just go out and run, build, measure, learn willy nilly, right? So that's one. Another one is strategy. So alignment with strategy. Putting the wrong things
[00:16:04] into the funnel or the framework
[00:16:07] is bad for two reasons. Number one,
[00:16:10] you're testing and validating something that's never going to go anywhere anyway, because it's not strategically aligned.
[00:16:15] And you're soaking up the limited bandwidth that whatever team you have
[00:16:20] has to actually work on the right
[00:16:22] things. And so
[00:16:23] the number of
[00:16:24] exasperated Product teams or innovation teams or technology teams that I've encountered or that we've encountered at lean startup co is unfortunately very high.
[00:16:32] And it's
[00:16:32] because they don't have a good strategic filter for what they should be working on in the first place. They're just doing stuff.
[00:16:38] Melissa Perri: ~I've seen that ~
[00:16:38] Ben Hafele: ~yeah.~
[00:16:38] Melissa Perri: ~a lot. ~
[00:16:38] Ben Hafele: ~I don't know. I've got a couple other examples. I don't know, like of things. I don't know if you want to go into that or if you want to move on.~
[00:16:38] ~Yeah.~
[00:16:38] Melissa Perri: ~go in the strategically aligned when I want to dig in there a little bit and then maybe we'll go back to some other misconceptions or things that people are doing wrong with it. ~I have come into a lot of organizations and especially when I first started freelancing and first started consulting, lean startup was the rage, right?
[00:16:47] Like MVPs were out there. Actually, it was way bigger than product management. At first I tried to like, come in and tell people, oh, you need a product management. Like you need a product strategy. And they're like, no, we don't need that. So all these large companies were. Either going agile and they didn't really understand the concept quite yet about product ownership or product management.
[00:17:06] Any of that stuff wasn't quite on the docket yet. Agile was just very new. But lean startup had been all the rage and one company brought me in to help train these lean teams they were setting up. And I thought it was like, The most noble of intentions. I thought it was amazing, like company that's been around for over a hundred years this big financial institution and they said, we want to help our people innovate.
[00:17:29] So they took people from inside the organization, set them up separately in these lean teams. We were in, separate rooms. They said, we're going to, we're going to help these people think like a startup so that they can learn to experiment within this company. And I would come in and I was teaching him about build, measure, learn.
[00:17:44] I was trying to slip some good product management practices in there as well, under the guise of lean teams. And what happened with it is when I came in, I asked what are the goals that they're experimenting towards? Are you trying to create a new business line? Are you trying to increase revenue?
[00:18:00] Are you trying to do this? And they're like, oh, we didn't really. Set up goals for them. We just want to teach them to experiment. So I said, okay let's try to find some goals. What could they do this around? And we searched and they ended up the things that they could control because they didn't have buy in for this, from like a business line perspective, let's say from a top, right? We're very small. They were very minute and they have the teams looking around for what they could affect rather than saying, Hey, this is what I want you to affect. And it was so tiny that these teams Who did great work under this, these conditions, they went out, they experimented they try to run experiments, they found out what they could improve, but then everybody dismissed it because it was so small. It was like, oh, well, we don't really care about, X, Y, and Z with 20%. That's just not really important for our business. And to their credit, they, that was the feedback we gave them and they iterated on it. And they said, okay, I said, you need to do this attached to a product line now, right?
[00:18:51] Like something within a business that you care about. And that was the next iteration. And then they iterated and now. Now we're on to setting up product management as a whole in there. But it's been really interesting to see how people have approached this in different, different segments to try to figure out how to weave this into their organization.
The Importance of Strategic Filters
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[00:19:08] Ben Hafele: yeah, and I think you're exactly right. It's about. Here's the strategic filter, and it needs to be as narrow as possible, quite frankly, needs to be aligned with corporate strategy. It needs to be aligned with business unit strategy, because if you do a good job of incubating something that no line of business in your company will ever scale, then why are you doing it?
[00:19:26] And so that amount of, and for some reason, defining that strategic filter, it doesn't take an incredible amount of work, but for some reason, companies are just incredibly reluctant to do that. And they say, let's just get on with the lean startup stuff. And you're like, no, you're, we want to make sure you're getting value for your money.
[00:19:43] Let's spend a little bit of time upfront thinking about the strategic filter. And I'll also mention, if we think about, like a funnel, where we've got a vision and then we've got optionality about how to achieve the vision. And the funnel is the narrowing in of exactly how we're going to achieve the vision.
[00:19:58] You know what? What we expect to come out of the funnel is really important. So I was just talking with a customer earlier. He's yeah, we have a 2 billion target by 2028.
[00:20:10] Okay, that's really helpful. Because now,
[00:20:13] how much do we have to load into the top of
[00:20:15] the funnel in order to get 2 billion out of the bottom?
[00:20:19] So alignment with different strategies across the organization, of course, which should all be integrated. And
[00:20:24] you obviously have
[00:20:25] done a lot of evangelizing
[00:20:27] on that. But then also, what do we expect to get out? So let's make sure we put enough in.
[00:20:32] Cause it is a funnel.
[00:20:33] The whole idea the whole shape of a funnel is a funnel because of pivot, persevere, kill.
[00:20:38] If we're not killing any of the things that we put in the funnel or we're not pivoting, then it's a tunnel. It's not a funnel. You whatever you start, you're going to finish no matter what. And that's not innovation because by definition, we can't pick the winners.
[00:20:50] Melissa Perri: Yeah, The top of the funnel piece that you're talking about, like I see a lot of organizations that go, Hey, I just want to start a new business line that makes 2 billion a year. And then they tell people to go, that's the strategy.
[00:21:03] Obviously. I've seen that not work out. What, do you need, what's the right conditions to set up a team to say, hey, okay, now you're ready to go out and actually explore what's going to work.
[00:21:16] Ben Hafele: Yeah, so it's double clicking on the strategic filters, right? Which it's an easy thing to say, but it is involved, to design those. I always like to have some sense of there's different words for this, that different customers of ours use, but sometimes I'll call it an exit strategy partner, which business line would take this.
[00:21:33] Were we to successfully incubate it? That's also been called the execution partner. Got one client that calls it a homeroom. Doesn't really matter what we call it. It's where do we think this is going to land? And it actually gets back to one of the things that's different about lean startup at a big company.
[00:21:48] Is thinking about resourcing, right? When you're a startup Y Combinator, whatever you've, you're like, we need people to do this work and it's really clear who you need. And you don't have to do change management as much because you're not handing it off to a business unit.
[00:22:01] And the word handoff is really important. I'll come back to that hopefully. Starting with. The end in mind about in some cases, we know where it would go. In other cases, we don't and constructing the team appropriately. So another big one is who does the build measure learn work.
[00:22:15] And of course I would say it needs to be a small cross functional team, small, as small as possible to be still cross functional enough to run build measure learn on those early milestones. But there's also a change management piece to it. So if you're in a corporate incubator, or even within a business unit.
[00:22:32] You want to start small. You don't want to get too many people involved. Because there might not be a there there if you've got five milestones, you might not make it through the first one or two. It's a funnel, right? It's a not everything's going to make it by definition. So you want people to be aware of things, but you don't want to get them whipped up and excited about everything that is the top of the funnel and get buy in and you can only start when everybody agrees this is a great thing because that's too much buy in for the top of the funnel, but they need to be aware. And then the art is. As you move through the funnel or you move through the process, it's who do you bring over?
[00:23:06] Who do you add? Which team members need to join your small team? So the team becomes bigger in a very deliberate way. And I always love to monitor the usage of possessive pronouns. And There should never be a discreet handoff moment. It should be a continuous handoff.
[00:23:21] And the exit strategy partner, whatever we're calling that group that's taking it
[00:23:26] should be using.
[00:23:27] We in
[00:23:27] our project, we are doing this.
[00:23:30] the
[00:23:30] 2nd, they start saying, you people over in product or you people
[00:23:35] over in innovation, or you people over in technology or R and D you're like, all right, time out pronoun violation let's go back and
[00:23:42] like, where did we go wrong? Because this is all about us, right?
[00:23:44] If you don't feel ownership over
[00:23:46] it. Yeah. There's no reason for us to do this because this is your project. This is your initiative and if you don't feel ownership over it, there's a very small chance that you're actually going to scale it. So we shouldn't be working on it in the first place. Yeah.
[00:23:59] Melissa Perri: I've seen that a lot. This like us versus them mentality when you have these innovation teams. And I think that's something that a lot of organizations are trying to grapple with. People are in the part of the business that is, making all your money, which is important, right? Are looking at all these people in the innovation going, Hey, like they get to work on the cool stuff.
[00:24:18] I have to fix this legacy platform and your legacy platform could be making tens of billions of dollars, but they're still not going to be happy about fixing it. Versus those people got to do fun, cool things and experiment and do all the new stuff and they don't have to worry about it. How do you deal with that?
[00:24:34] What's the right way to set that up? So you don't have that kind of friction.
The Innovation vs. Legacy Divide
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[00:24:38] Ben Hafele: And I think, I I mentioned the arts and crafts feeling. It was just like what you're talking about there, which is, Hey, that's all great. But like the rest of us have real jobs to do. And making sure that it's not arts and crafts and that it's directly tied. to something in the strategy that's really important.
[00:24:51] I've never met one P& L owner who didn't have a couple things that they thought, oh, gosh, I think there might be something there, but I'm not I would love to explore that. I'm just not, I'm not sure, right? And that's the stuff we want to work on. Not hey, wouldn't it be great if we had a AI powered drone that does 3d printing, whatever, just like technology for technology sake. I would say that like innovation itself is a good use case. And I mean like corporate innovation, like somebody who's called the innovation manager or whatever, is it is a great use case for for lean startup. A lot of the work that we do and that, and as that lean startup has worked for is just good old fashioned meat and potatoes.
[00:25:30] Product strategy, product management, right? So it's, Hey we have this vision of what we want to achieve in the world, is this product should we even invest in this product in the first place? What, where should we be going with the product? We have assumptions. Let's go use build, measure, learn to test those.
[00:25:43] And then at more of the product management level, it's, Hey, we've got a roadmap at what's the best way of implementing this feature. It's a narrower scope of uncertainty, but still uncertainty nonetheless. So what's the right experiment to run when we're making a little bit more micro decisions on a, maybe a weekly basis.
[00:25:59] And I actually prefer the product application of lean startup, where
[00:26:04] there is no handoff because it's the product team
[00:26:06] from start to finish.
[00:26:07] And
[00:26:08] handoffs are the death knell of whatever it is we're talking about. I've yet to see a way for one group of humans to explain to another group of humans what happened and, what the market requirements document is to use an old fashioned term or, whatever it is.
[00:26:22] So that continuous handoff. Is best practice when handoff is necessary, but best practice is
[00:26:28] no handoff at all because product teams are the ones who are running experiments. They're looking at the data. They're coming back and saying, what do we need to learn next? And that's the best case scenario in my view.
[00:26:39] Melissa Perri: To me, that's what I've seen too. That works really well is you're not just taking this team and throwing them out into this other area to innovate. And then bring back, from the mountain. This is what, we decided to build.
[00:26:50] Ben Hafele: I like you're on the mountain because what I often say Hey, we've knock. We're an innovation team. We've come up with this amazing thing. And we're going to bestow it upon you, which is very down from the mountain top.
[00:27:00] Melissa Perri: Exactly. So what you were talking about with the, the innovation team, not being separate from product strategy. I totally agree. I've seen that not work out well, too, because. What happens there is, your innovation team comes and they're like, Oh we figured it out.
[00:27:15] This is a product strategy. Here's what we're going to say from down the mountain, go work on it. And the team just picks it up and goes, but what's happening there though, especially in the product management aspect of it, I see so many people not think that innovating or creating new things as part of their job, then as product managers, they're like, Oh, we work on this. Incremental improvement type stuff, but they're never think
[00:27:36] of what could we be doing
[00:27:38] differently? Should we work this all up and do something
[00:27:40] else? Because they think all of innovation comes from that team and it's not something that's baked in.
[00:27:46] Ben Hafele: Yeah.
[00:27:46] I totally agree. And it's back to the problem with the word innovation, right? Innovation is solving a problem in the best way possible. Full stop. And if we have the most technologically marvelous thing that we've invented and then it, and it solves the problem equally as well.
[00:28:05] As if we just hired a new person and. They worked 40 hours a week on it. Which one's the best solution? It's whatever one solves the problem the best way. So it's not technology for technology's sake.
[00:28:17] I really, I think I said earlier I don't like the whole core adjacent transformational framework because.
[00:28:23] That works in retrospect, like we're looking back and, Oh, look at the way these things turned out,
[00:28:28] but it's a bad way to plan forward because
[00:28:31] then it makes you think, well, we can't work on that because that's core innovation. And, we're focused on transformational. It's no, we're all focused on solving problems the best way we can for customers.
[00:28:40] That's it.
[00:28:41] And I agree. I think I'm trying to find a better word for innovation. And sometimes I'll say research. Sometimes I'll say problem solving. Sometimes I'll say. Create value for customers. I just, it's a tough word to try to wiggle out of.
[00:28:55] Melissa Perri: I like when you say the research pieces on that too, because I feel like with lean startup, there's a common misconception that you don't do any work or research before you actually start experimenting. And I think we've been talking about how you need that strategy to come in and do that. But everybody just jumps into that build a lot of the times, or they're like whack a mole of what can we actually solve instead of going out and doing the customer research components of it.
[00:29:21] So when you think about, obviously it's the minimum viable experiment we've been talking about in Lean Startup. But when you think about What type of work needs to proceed that minimum viable experiment? Like, how much do you think about jumping into building right? And getting something out versus like, how much research should we be doing to make sure that this is the right strategically aligned thing?
[00:29:43] Or this is the right strategy to go after.
[00:29:46] Ben Hafele: Yeah. So just like anything else, if you're uncertain about your strategy, you can say, what are we uncertain about and how might we test that? What are the underpinnings of our strategy? That we have the least amount of confidence about. And then how do you design an experiment?
[00:29:59] Just to, and just to reiterate one of my earlier comments, build is not necessarily a product it's an experiment, and that's a very common misconception that we run up against all the time. So it's the most, most minimal and yet still viable experiment. That you can build in order to get the learning that you need.
[00:30:18] And would say most of the time when a team starting from scratch and they say, Hey, we're, we think there's a problem here, but we're not really sure. We're not really sure who the target customer is.
[00:30:30] The experiment that will help them build
[00:30:32] is user interviews.
[00:30:34] That's a, that's not a minimum viable product, but that is the minimum viable experiment.
[00:30:39] That's the best way of getting us the information that we need at that particular time. Plus, as like interviews have the added,
[00:30:45] Benefit of, asking follow up questions and root causes and collecting artifacts. And Yeah. We help clients run experiments all the time that don't involve building products.
[00:30:54] We're building experiments, including interviews, including observation, and including come home with me or just, checking out people at home Depot and what they're doing or how they're making decisions. And yeah, all of that is, all that is fair game and part of the lean startup toolkit.
[00:31:07] Melissa Perri: A lot of pushback that I get from large enterprises when we talk about customer interviewing or experimentation, especially the highly regulated ones is the legal aspect or the compliance aspect of it. How have you helped companies navigate those highly regulated industries like banking or insurance, where you've got all of this stuff that you have to really worry about from a legal perspective before you can just jump in and test with users or introduce something to users or talk to users even.
B2B vs. B2C Experimentation Challenges
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[00:31:35] Ben Hafele: Yeah, great question. And surprisingly, I would say like right now, most of the work we're doing is in B2B as opposed to B2C. And so we've got a lot of kind of good tips and tricks on that. I think part of it is just not having that team, that small cross functional team, being so small that the first time you encounter legal is when you're trying to go and interview their big, the company's biggest customers for no apparent reason.
[00:32:00] Or you're trying to show them a landing page for no apparent reason. And the legal team just looks at you like you're from outer space. And so really what lean startup is about is the scientific method, which is de risking things to say, Hey, we've done our, we've done our research. Here's what we need to do now.
[00:32:16] And that's exactly what legal is trying to do. They're trying to reduce risk for the company. So it was brand, right? They're trying to reduce risk for the company. So if you can I would say appropriately involve some of those guardrail partners up front and say, Hey, you know what? We're going to do this thing called lean startup, by the way, we don't have to call it lean startup.
[00:32:34] We call it lean innovation. We can call it. Rapid works and call it whatever a company wants to call it. Our job is to help this company take less risk. Here are five examples of the last five times. We have made a bunch of assumptions about a new product and it totally flopped.
[00:32:49] Remember those? Yeah, I remember this. Okay. Our job is to reduce that risk. And so we're actually in the same business. You're trying to reduce risk. We're trying to like, we are all trying to reduce risk
[00:32:59] in order to do that. Here's some things we need to do. We need to go talk to customers. By the way, this isn't our first rodeo, we're going to make sure that
[00:33:08] The discussion guide, if you need to see it, that's cool.
[00:33:10] Sometimes,
[00:33:11] What, what's legal going to say, but they just need to see it. So they feel good.
[00:33:15] Same thing with brand. And if you explain it that way, they're like, yeah, okay. Like we're all trying to do the same thing, but if you like, leave it until the last minute. And you're driving over to a customer and then you call legal and announce that you're about to walk in, they're going to have a panic attack as they should, right?
[00:33:30] Like having empathy for those types of groups at a big company.
[00:33:35] Melissa Perri: Yeah, that makes a lot of sense with that. When you are working with in the B2B space too, there's a lot of different concepts in lean startup and through experimentation about how we build MVPs and what that looks like. What are some techniques that B2B companies have to use or should be aware of when it comes to experimenting versus B2C.
[00:33:55] Ben Hafele: gosh, that's an interesting question. I think I've never been asked that. B2C versus B2B. I always like to disaggregate an experiment into the instrument. So that's like what we're showing or what we're presenting to the humans, the channel, which is like what we're, how we're presenting it to the humans, like through which medium in person or over teams or, social media, like how are we delivering the thing we want people to react to.
[00:34:19] And then the call to action, which is, what do we want somebody to say or do in response to the call to action, and so b2b versus b2c i'm thinking like the kinds of instruments that we do might be a little bit more high fidelity just because instead of Being really, you know being able to talk to a thousand customers tomorrow There's only five customers globally And so we just want to take a little bit more time to make sure the instrument Maybe do some more comprehension tests ahead of time to make sure that you know When people tell us if they like it or not, they're not really telling us if they understand it or not, right?
[00:34:54] So do a little bit more work like that. In terms of the channels. I don't think there's a big influence on that. And then the calls to action. That's really where legal gets nervous right as they should. And so we just always want to make sure that we're not promising anything to a customer. For example, one of my favorite calls to action is a variant of we're looking for candidates for the pilot program.
[00:35:16] And if it's like Groupon, right? To use an old, but probably an old term of it's and so if we get enough interest in this, the deal's on, if it's not, then we're not going to do a pilot program.
[00:35:25] We're looking for people that want to be a candidate in the pilot
[00:35:27] program. I'm not promising that we're going to do a pilot.
[00:35:30] I'm not, and but I'm saying, give us your information. And by the way, the pilot's going to be a little bit of a pain in the ass. Like you're going to have to do X, Y, and Z. It's not easy, but if you really like this thing.
[00:35:42] That we're proposing,
[00:35:43] then you can sign up to be a candidate. And so
[00:35:46] That's like an appropriate way of doing B2B
[00:35:48] call to action because you're not promising anything.
[00:35:51] It's onerous enough that if you're just slightly interested, you're not going to go through the rigmarole to actually sign up. So just, maybe more carefully thinking about those types of calls to action, because you only have so many at bats when there's only X number of customers globally.
[00:36:05] Melissa Perri: I like that the call to action. It sounds really nice. It's oh, Yeah the candidate piece, especially it's oh, this is this getting around that for that. Some of the stuff that I've seen to has to deal with, releasing, alphas or betas in ways where it's small pilot groups of people actually using it.
[00:36:22] So we know we might be building this, but we're still tweaking it. How do you think about either, should we think about stage gating for experimentation around that? What kind of tools should people have to be able to experiment in that type of B2B context? Yeah.
[00:36:36] Ben Hafele: I think it comes back to some of the milestones that we were talking about earlier. So it's,
[00:36:40] They're a little different for every company. So they're different for a B2C versus a B2B, different for different industries, highly regulated, not highly regulated.
[00:36:48] And so it's just. Here are the things we need you to prove in order to unlock another round of funding for you, right?
[00:36:53] We haven't talked about metered funding, but that still is the best way of kind of funding things in the space. And and here's the types of experiments that we want to see, and here's a toolkit for you. And like you said, that'll be a little different for every company, but you're not just saying, Hey, you've now been to a eight hour bootcamp on lean startup.
[00:37:10] Go get them tiger. That can be helpful to produce some initial proof points, but it's not going to produce the kind of systematic change that most companies are looking for.
[00:37:17] Melissa Perri: That's cool. And um, product operations in our book, Denise and I wrote, we write about how product ops is supposed to be giving you an experimentation toolkit, like putting the boundaries around it, all that different stuff. So I like that.
[00:37:29] Ben Hafele: Yeah. And there's an 80, 20 rule, right? It's I keep looking for this quote. I think it was like Bruce Lee. It was a martial arts expert that said, if you know these seven moves, 80%, you're 80 percent expert. And it's there's a lot of exotic types of experiments and everything, but there's also just the basics where, if those you're really effective as a lean startup or, product experimenter.
[00:37:47] Melissa Perri: What are the types of basic experiments you would suggest that people learn?
[00:37:51] Ben Hafele: no, I love it. I would say number one would be problem interviews. So just going out and trying to learn and I would say like observation would either be included in that bucket or separate, right. Where it's like. learning how to professionally observe someone in addition to interviewing them.
[00:38:06] So that would be my two insight kind of earlier milestones. I would say comprehension tests and making sure that people actually understand what it is you're trying to communicate. And if they don't understand, it's not their fault, it's your fault as the experimenter. And then solution interviews, which is fundamentally different. And then I would say front door tests, also called smoke tests, also called a number of other things where you've got some sort of a marketing MVP where you're representing. And by the way, this is also now that I'm thinking about it, a great technique for B to B, which is.
[00:38:40] And let's just take Caterpillar, for example, right? I spent 13 years at Caterpillar. You got like a 2 million dump truck. What's the MVP? Well, let's not build a 2 million dump truck and then find out if anybody wants it. How do they make a decision now? Well, they look at the marketing material and does that have the horsepower I need and the haulage and whatever.
[00:38:58] So it's for a lot of B2B,
[00:38:59] especially companies make really big stuff. It's.
[00:39:03] Make a marketing MVP and find out if anyone's interested, right? So that's a, that's typically the kind of an instrument that we would use in a front door test. Pricing experiments also obviously, very important.
[00:39:13] And if I had to pick, you can apply those things to different parts of the business model as well, not just, customers in the product. And then I would just say just a collection of growth hacking techniques as well. So a lot of people stop at, Hey, the product is great, but they don't go far enough to say how are we actually going to get the word out?
[00:39:30] And they don't experiment with, the right marketing and distribution channels and everything like that. So those would be my. My main picks for achieving the 80 20, the Pareto principle.
[00:39:39] Melissa Perri: Nice. So if you're in a corporation and you're deciding, Hey, I want to start teaching people, these principles. Bacon innovation, like, where would you suggest people start?
The Right Way to Build Capability in Organizations
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[00:39:50] Ben Hafele: we've moved away a long time ago from just doing like training. Training's good, to get people interested and kind of on the same page, but really the rubber hits the road when you actually do it. And all of the training and coaching and stuff that we do these days, or we help companies do is in the space of let's do let's identify real initiatives, right?
[00:40:10] Teams working on new features, new products, new entire businesses, whatever it is, and actually run that through A pilot, right? Or it's so it's a collection of training and coaching where you're actually working on a real initiative. And so the reason we like that is there's two benefits.
[00:40:24] Number one, you're building the capability by the way. I don't know if anyone is interested, but the lean startup company isn't a dime, isn't a pyramid shaped organization where a bunch of junior people are trying to get billable hours to do lean startup. We're capability builders, right? We don't have anyone like that does that work.
[00:40:42] And so our job is to. Help companies to be able to do this without us. And I think that's in line with maybe the way you were framing. The question is, if you're trying to do this at a company, what's the best way? It's by doing because one, you're building the capability. There's a difference between reading a book about swimming and jumping in the pool, right?
[00:41:00] So you're actually doing it, which is a great way to build capability. And second of all, you're producing proof points. And oftentimes, this type of. Activity is linked to some sort of change management goal where it's like, Hey, we want to be more customer centric. We want to be more iterative.
[00:41:17] We want to be more connected to the market. And when you can demonstrate, Hey we went faster. We killed it. We killed this feature and we didn't even know we could do that, right? We didn't know that was allowed
[00:41:27] or we pivoted and we didn't know we could do that before. You're collecting proof points.
[00:41:32] So that think of an internal adoption curve for any new way of working. And in this case, lean startup
[00:41:37] Then the innovators are the ones who are in the pilot.
[00:41:40] And then the early adopters say, Oh, okay, I get it now.
[00:41:42] I'm going to, I'm going to,
[00:41:44] do that. And then the early majority has some examples cause the early adopters did it.
[00:41:47] And you can. Earn your way across the internal adoption curve as opposed to forcing it on the entire adoption curve, which has never worked. Maybe it has, but not to my knowledge, right? Cause you're trying to go after even the late majority in the laggards and by definition they haven't seen it work.
[00:42:04] So they're out and I don't blame them.
[00:42:07] Melissa Perri: So you're starting with this team trying to prove that you're out there. Once organizations have done this successfully, let's say that they run a graded experiment. They found out they should build something. They build it. It works. Where have you seen it? I wouldn't assess, but what happens where organizations Stop doing that, right?
[00:42:27] A lot of them slide back into old behaviors. How do you prevent that?
[00:42:31] Ben Hafele: Yeah. Well, there's a couple of different ways. Number one is what we find is there's I don't know, believers or champions or something like that who are the ones that are the ones that make sure that continues, right? Because they see the benefit, they see the value, they see how much better the products are when you're actually, using lean startup techniques another way is explicitly by training a cadre of coaches, and coaches and trainers who are the ones who are the the protector of and the advancement. And so one of the cool things is for us is, We'll lose touch with a customer for 2 years, and then we'll bump back into them. And, they've moved the ball, right?
[00:43:08] They've advanced the craft. And that's just that warms our hearts. So that's a great thing to see. I think the other thing is
[00:43:14] Some of that connective tissue that I mentioned before
[00:43:17] it's actually making that explicit and saying, this is our framework. And so we have a lot of customers who are like,
[00:43:23] we did some pilots up front.
[00:43:24] We learned and everything. And we thought, Hey, this is great. There's enough proof. Now we're going to call it, Okay. Fast works or rapid works or lean innovation or whatever they want to call it, right? Like art the company X incubation something, product management, whatever.
[00:43:39] And and then they name it themselves and then, it's back to the possessive pronouns. It's we're doing this is our process. And that feels really good. So it's designing that framework for them so that they can, so it propagates itself long after we're. Involved.
[00:43:55] Melissa Perri: So now it's continuing even when you're gone over time. So if you were a leader and you're saying hey, I want to invest in this. What's your biggest piece of advice?
[00:44:07] Ben Hafele: My biggest piece of advice would be to prove it to yourself. Don't go all in, in the beginning. And it sounds weird, but we'll have customers, they'll come in and say, Hey, we want you to design, we from the beginning. We've never done this before. We want you to design this new framework and then we're gonna go implement it.
[00:44:24] And in a lot of cases, we'll say, no, we shouldn't do that. I know where you want to go, but let's just get, let's get some proof points because there's a key concept. It's probably the world's like most unimpressive concept. I call it the convinced do loop. And what I find is you want to do just enough convincing for this way of working to be able to do it.
[00:44:48] And then you want the doing to do most of the convincing. The approach you don't want to take is I have to convince everyone, all the stakeholders, the entire, all the VPs, the C suite, R& D,
[00:44:59] everybody that this is the best thing since sliced bread. And I have to get all the buy in.
[00:45:04] You're trying to convince the entire adoption curve
[00:45:07] in order to just get the right to do the first little thing.
[00:45:10] That just doesn't work. I'll often and sometimes people are, people will look at me and say, aren't you gonna charge of sales for the company? I'm like, yeah, I am. But I wouldn't recommend you spend that much money with us. . So it's it's, we're an impact driven company and I just know that if we, if there's just, it'll implode under its own weight.
[00:45:24] If it's just so big in the beginning that we'll never actually get the right to do anything because. There's too much convincing. So balancing convinced do is probably my unimpressive framework for judging how to balance that.
[00:45:38] Melissa Perri: It's the same advice I give product managers who ask me like, Hey, I want to work this way. I want to do this stuff. and I'm like, what can you like, don't go try to convince your whole organization that you should work this way. Just take ownership of what you have convinced, like your direct people to, that you should go do it and just act right.
[00:45:55] Like act and then demonstrate, act and demonstrate. And that's how I see people make a lot of good progress.
[00:46:00] Ben Hafele: Yeah. I've never seen anything, we've all heard strategy it's culture for breakfast. And that's correct, but it's also incorrect in the way that people use it in a lot of cases, but we've never seen culture change without proof points. So it's that's the convinced do loop, right?
[00:46:13] It's I've now seen this work. I get it. I'm the next person on the little internal adoption curve. And so now I'm going to give it a shot. And it seems like it quote unquote takes longer, but it doesn't take longer because the other way just doesn't work at all. And so it's the only way we'd recommend people get into it.
[00:46:33] Melissa Perri: Then when you look at how innovation is changing and what's in store for lean startup and corporations out there, what are you excited about?
Evolving Corporate Innovation
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[00:46:42] Ben Hafele: Oh, so much. I'm excited about just continuing to just tell, like I said just good kind of product work, right? Not necessarily quote unquote, innovation work. That's always exciting and we know how to set that up correctly at companies, but I just, I really liked the product work because it's no nonsense.
[00:46:59] It's directly connected to the strategy of the company. And it's the work that the company does, right? Like you don't cut product because that's what companies do is they make products and manage products and manufacturing. So it's I really like that. I would also say in the innovation, what used to be called the innovation space There's a few companies out there that are really nailing the innovation space.
[00:47:19] So it's not certainly not dead, but I would say what we're finding is there's like more specific funnels now. So instead of the innovation funnel, it's the wearables group, and they have a little wearables funnel, or it's the electrification group, and they've got a little electrification. So I actually like that because the strategy is much more explicit and more narrow as opposed to let's just go out and innovate on everything.
[00:47:40] And so I actually view that very positively. Call that corporate innovation 2. 0. I really like that. Those teams are getting specific. And then I said, I wouldn't say AI again, but I will there's just such an opportunity out there to help people make sense out of the excitement and the buzz and whatever.
[00:47:58] So our client is the chief AI officer to, at a, fortune 100 company and The CFO called and said, Hey, we need to spend more money on AI.
[00:48:06] And thankfully our clients in a lean executive and said, Hey I'm more than willing to take the check, but we need to make sure that we're spending it wisely and that, it's in line with strategy.
[00:48:14] We don't want to just spend it to say we're spending it. So there's just a lot of waste out there when it comes to AI. And having a disciplined approach, like we talked about milestones and strategy, who does the work we didn't talk about governance, which is a big one, can tell a lot of stories about that.
[00:48:28] All those kinds of design parameters on how to, the connective tissue for lean startup, super important, not hard. Pretty simple as a matter of fact, but most companies for some reason like to skip that part.
[00:48:40] Melissa Perri: Well, I'm excited about this coming up too. Thank you so much, Ben, for being on the podcast. If people want to reach out to you and learn more about yourself and lean startup company, what can they do?
[00:48:51] Ben Hafele: Well, great. My last name is Hafele. So hopefully that'll be in the show notes. H A F E L E. So you can find me on LinkedIn Ben Hafele. You can also go to leanstartup. co to learn more about the Lean Startup Company. And then my email address is ben.hafele@leanstartup.Co.
[00:49:09] Melissa Perri: Cool. And we will definitely put all those links in the show notes at product thinking podcast. com. Thank you so much for listening to the product thinking podcast. We'll be back next Wednesday with another amazing guest. And in the meantime, you can send me all of your product management questions to dearMelissa.Com. We'll see you next time.