Innovation Expert Frederik Mohrmann on Prioritizing Innovation Projects in B2B

Frederik Mohrmann on Applying the Lean Startup in B2B in the Aerospace Industry

Frederik Mohrmann is Business Developer and Lean Innovation Coach at the Netherlands Aerospace Centre (NLR).

NLR is an applied research institute. Their work covers different fields ranging from systems design and electronics to avionics. They’re a nonprofit organization – currently 80% contract-based for the private sector and 20% strategic financing from the Dutch government. They do operational consultancy, human factors, design composites and innovation and projects.

At NLR, Frederik is a researcher in aviation human factors and a business developer connecting knowledge development within NLR to the market through Lean Innovation.

We had a really interesting discussion. In it, you’ll learn:

  • Why it’s important to be intentional in selecting the knowledge an organization wants to develop.
  • The importance of deeply understanding the uncertainties of innovation projects.
  • How to use implementation and value-effect preconditions to prioritize innovation projects.
  • The challenges of innovating in the aerospace industry.
  • Why it’s important to understand change management in B2B.
  • The single thing that kills Lean Startup adoption in organizations.

You can read the full interview below:

Etienne Garbugli (EG): Could you tell us about your work at NLR? What kind of projects are you taking on?

Frederik Mohrmann (FM): We sell innovation. For example, an airline will say: “Okay, I’d like to develop a new type of training”. They can contract us to develop that training. We often help develop products – that could be a complete aircraft wing to an engine to a new cooperative avionic – or test product design.

The question I’m concerned with at NLR is how can NLR become better at that? We do knowledge development in specific programs and we participate in research initiatives from the European Union, but how do you choose which program or which knowledge development you want to do? What’s the need of the market? You need to understand what’s the value that that specific knowledge can generate within the sector.

If you’re fully government subsidized, the pressure to choose is low. As you become more dependent on the market (as NLR is), it’s important to become more critical about what knowledge you want to develop, which innovation fields you want to participate in to set up that selection process internally. That’s what I’m doing.

EG: What are some of the methodologies that you use to determine whether an investment is better than another?

FM: I think it resonates with a Lean Startup approach. It’s not just looking at validated learning metrics. You know the expected turnout or return on investment point, but you also want to know how many uncertainties are in your value proposition and whether you validated them. How many do you need to validate? If you have several value propositions next to each other, you could have one that has a lot of uncertainties and the other that has less uncertainties. The one with less uncertainties might also have less budget but it might be preferable simply because the risk of it stalling is lower. You have to break it down, not just look at the technical proposition and what employees have promised, but the certainties and uncertainties in this product development investment.

Another aspect is which preconditions must be true for your innovation to be valuable to your customer? Sometimes, innovation at businesses you’d like to sell to isn’t just a clear plug and play, it’s not an isolated product. In many cases, you have to interact with existing systems, existing operational processes in your customer’s organization which means that if a lot of other preconditions have to be true for this innovation to be valuable, the risk of failure increases proportionately. It’s a sense of understanding, what needs to be true for this to be implemented successfully?

The second thing is, if your innovation is implemented, it has some net value for your customer – making an operation more efficient, more economic, lower costs. Those values are dependent on specific conditions within that organization. It’s not just about the implementation preconditions, it’s also about the value-effect preconditions. Does it actually have value? If I’m going to sell you this product and it’ll save you €100,000 a year, that’s cool. With one company, it might save €100,000, in the other company, it might only save €20,000 because they can’t (or don’t want to) leverage parts of their operation which increases the value of what you’re implementing.

EG: In that case, you need to make predictions about future outcomes based on validated learning that you put together for these innovations?

FM: Before their first validated learning, I always ask the people with the ideas: “what’s the value of this innovation to the customer?” I ask this because even though there’s an emotional aspect to purchase decisions, businesses will generally ask you: what are my savings, when will I attain ROI and what are the risks? Businesses are fairly pragmatic about their purchase decisions, and rightfully so – numbers talk when you’re working in B2B. I think it’s one of the mantras in your book.

When I ask teams what the value of their innovation is, they may answer, for example: “Decreased CO2 emissions in airline maintenance processes.” Great. Although I can imagine that that’s nice from a technical standpoint, what does this mean for the customer? At the end of the day, the customer is going to pay you, and how does he earn it back?

An airline is in the market to transport people from A to B with a profit margin. CO2 reduction isn’t its core business; how does it serve the core business model of the customer? When I ask them to do this analysis, they explain: “If we do this, then that happens, then we have this effect and then, at the end, it saves them that much money.” Great, are all of these effect-assumptions true? If they say “I don’t know”, I explain that by writing these assumptions down, they have in essence a shopping list to validate the preconditions. If they find that some preconditions are not ready, how can they expand their innovation concept to include these preconditions in their offering? This ensures that they’re green, and thereby safeguards the value of the innovation, reducing the risk of product development.

EG: In a way, this is limiting the cost to evaluate the opportunities that come to your team – in a way, that’s completely the Lean Startup?

FM: Yeah, I think it is. You’re attuning people to what’s certain or uncertain and what the risks are in the value-estimate of their innovation. You can use this to select which seed-ideas you want to actually validate. If you have 20 new ideas, you can invest $10K per idea and validate them all, or you can sort them based on how many uncertainties are related to the initiative, as opposed to only looking at benefit-promises.

You really need to be rigorous about this in a B2B market. My own focus lies in the civil aviation market (airlines, airports, air traffic control). These are often very operational organisations that look for investments with a good story and clear, quantified contribution to their core business, preferably with short-term ROI. This is quite different from a consumer market, and it’s also one of the challenges that NLR faces with innovation in these markets.

EG: Do you feel that these types of constraints reduce the risk-taking ability of these organizations?

FM: An airline takes people from A to B. They want to bring as many people for the lowest cost to have the biggest market share. Airlines are very heavily regulated; they have to comply with a lot of rules and there’s not a lot of wiggle room to change things. Safety is a high priority. You can essentially kill your business if you don’t comply. For this reason, the business models change sometimes, but they don’t change radically. The level of disruption in the aviation industry is more damped than if you look at other industries. There’s more movement in ancillary parts of the operations such as, for example, support software for crew rostering.

If you’re talking about rigorous changes like, for example, changes to the way we track aircrafts, it’s a lot of technology that you put in there. You have to go through all the regulations. The regulator needs to like it, the rules and the laws might have to be changed, operation procedures need to be modified, everybody has to relate to what you’re doing. It’s very difficult to get a change and that’s the reason why you don’t see the aviation industry making radical steps in the way they operate.

If you look at the process of innovation in the aerospace industry, you’ll see that a lot of the technology is developed on the defense side because there’s more risk-taking there. The decision to innovate and try new technologies is often made based on the need to be successful on a fast-changing battlefield where there’s a lot of inherent uncertainty. That’s a whole different value proposition to develop technology than if you’re looking at a business that wants to fly people from A to B, and beat their competition.

Frederik Mohrmann on Prioritizing Innovation Projects in B2B
Frederik Mohrmann presenting at the Delft University of Technology

EG: Working in a fairly regulated B2B environment, what do you feel are the challenges of innovating in that sector?

FM: You need to be aware of the constraints that the industry puts on you. Those can be regulatory or business model constraints. You have to consider the lead time – these are large organizations you’re working with, you have a lot of internal customers, different types of buyers, convoluted strategies, a lot of different departments which are not aligned. You need to go up the ladder and see where silos meet and then sell at that level, but then you’re speaking to the CEO of an airport with 40,000 employees. He doesn’t have the time to look at your value proposition everyday. There’s a lot of convolution in that sense. You’ve got the constraints, accomplished organizations, multi-stakeholder environments, etc.

Looking at the development side, the things you develop are going to be held to a high standard. You’re pitching to organizations that operate 24/7. They don’t accept failure. They don’t accept downtime. Hence, your internal investment to make something of that quality is high as well. The whole industry isn’t moving very fast.

EG: Looking at your industry, it doesn’t seem like a natural fit for the Lean Startup – how did you decide to adopt Lean Startup at this level?

FM: I’m leading the introduction at NLR right now. Sometimes you gain clear traction with internal problems, and sometimes you have to be Don Quixote. The new strategy of NLR is to look into product and service development, proactively engaging new and existing markets in new ways. That’s a shift from our historical tendered business model to a proactive, entrepreneurial business model, but the question is how do you do that with low risk? Risk-taking is fairly unfamiliar to our non-profit organization. Lean Startup provides NLR with a risk-reduction method that makes it easier for our organization to dip its toes in entrepreneurship. We’re trying to be more mindful and value-added in what direction we choose with our strategy and product investments, which is a major reason for people to open up to it.

And what’s the alternative? You can approach this classically like: “write a business plan, tell me how much money you promise me with an ROI in three years.” But all too often, you end up investing too much in solution development based on loose assumptions, leading to one single (fairly expensive!) learning moment two years down the road when the market isn’t what you thought it was, or some competitor swooped in and produced it at twice the speed. You can’t afford to hold on to technology-push philosophy today, you need to be much more attuned to the value you deliver and sensitive to the assumptions underpinning it.

EG: How did you hear about Lean B2B initially?

FM: I started asking myself at the end of 2015: “Why are we doing these projects?”. I wanted to be more value-added in the work I was doing. I picked up Start with Why by Simon Sinek which I loved and picked up The Lean Startup. When I read The Lean Startup, they talked about B2B and corporations, but both of those were under-appreciated topics within the book. My questions were how do I apply this risk-reduction strategy within an organization and how do I apply this for businesses because when you’re talking to businesses, you really need to change the way you’re thinking.

I found your book and felt that it was one of the better books. The reason that I chose to read it was that it started out with The Lean Startup and then said, how do we apply this to B2B? That’s exactly the question I was asking myself. It resonated with my situation.

I also read Lean Enterprise because I wanted to figure out how Lean Startup works within organizations to change processes. How do you influence higher management? I read a lot about change management because I realized, it’s all good and well to know where you want to go but how do you get there?

EG: Well, quite frankly, they’re tied at the hip. It’s not really possible to do everything from the outside-in without dealing with change management. It’s definitely a big part of it.

FM: Yeah, it’s huge. Within the Netherlands, we have a Lean Startup Leadership Platform. It’s a working group with a lot of different organizations from all trades to see how we can apply Lean Startup within organizations – B2B, B2C, internal change programs, etc. There’s been a lot of discussions on how to apply it for a specific product, but now more and more, the question is how are you going to implement it, how do you change your top management?

You need to be pretty progressive as top management to make that decision and then to test if it works. You need to have a big enough organization that can take that risk in case it fails. A lot of smaller organizations are faced with: “Okay, I’d like to see if it works but I’m not going to set up a different department”. How do you demonstrate Lean Startup within an organization without having that separate safe haven? That’s where we can set the seed for change but it’s very difficult.

EG: Tristan Kromer says that innovation needs to be managed outside of the regular P&L and not be evaluated by the same rules. Is that how you see it?

FM: That’s the challenge I was hinting at because if you don’t get the freedom to put it outside an organization, then you’re stuck within the classic P&L, the classic organization. It’s difficult to demonstrate a different way of thinking within that framework. An organization must create the right preconditions for Lean Startup to work, even for just a pilot if it wants to assess its value for the organization. By doing stage-gated piloting, the organization limits its risk exploring Lean Startup.

That’s where it fails a lot of times because you need to have enough team endurance as well as protection over you if it doesn’t start high enough in the organization. Once you can pilot it and show that it works, the experience speaks for itself. You can scale it up, and the company will adopt it, but it’s that initial demonstration within the current framework which is quite deadly for the introduction of the Lean Startup.

EG: In a way, it’s too easy to kill it fast because it doesn’t comply to the current rules in place?

FM: Yeah. If you have a CEO who’s entrepreneurial, understands these concepts and is looking to increase the entrepreneurial power of his/her organization, then that’s a guy that will probably say “Read this, it’s what we should be doing.”, move forward and find talented young people that are interested in setting it up. But in organizations that are learning to be more entrepreneurial, like NLR, that’s not something that they’ll just do 1-2-3. It’s not easy to set up when the initiative starts at the bottom of the organization instead of the top, but that’s the trick – introducing Lean Startup using Lean Startup.

EG: Thank you for your time.

FM: You’re welcome.

How Loopio Grew from 0 to 300 Customers by Focusing on Relationships

Loopio Co-Founder & CEO Zakir Hemraj on Scaling a Lean B2B Business

Zakir Hemraj is Co-Founder and CEO of Loopio, a platform to help sales teams and businesses manage their RFP responses.

Their software handles all sales information requests. Whether it’s requests for proposal, requests for information or security questionnaires for compliance or due diligence exercises, their platform gives salespeople the information and tools they need to let them do these exercises more quickly.

They have customers ranging from software companies like New Relic to large enterprises like KPMG and IBM.

I got a lot out of our discussion. In it, you’ll learn:

  • How Zakir turned a problem he experienced in his work into a business opportunity.
  • How they validated the opportunity and why a lightweight version of the product help speed up validation.
  • How Loopio managed to sell to large organizations as a small bootstrapped startup.
  • How Loopio got their first paying customer.
  • How customer advocacy can help evaluate product-market fit.
  • How they put the customer at the centre of everything and the impact it has on their business.

You can listen to the full interview below:

Etienne Garbugli (EG): How did your team go about selecting a product/market opportunity initially?

Zakir Hemraj (ZH): I think a lot of great entrepreneurial stories start with one of the founders experiencing the problem. That’s what happened with me.

I was working at an emerging software company called Achievers. I was there for 8 years working through various roles. I was the first sales engineer in the company. The entire sales team was leaning on me as the product expert. A lot of these exercises around responding to these types of sales requests (RFPs) would just come to me. I found it very cumbersome. There was no easy way to do it. It was a lot of Excel spreadsheets and Word documents. A lot of emails were being sent back and forth across the company, and there was no consistent way to do it well or even do it intelligently. How do you get more efficient and smarter over time, especially since you should be able to streamline these workflows? It just seemed like an opportunity.

Slowly, we decided to tackle the market. We bootstrapped the company to where we are today. But looking back to what got us to this day; we knew that if we were going to do this, we needed to solve a real problem. Especially since we’re going to grow the company based on revenue, we have to be solving a legitimate problem.

In the early days, just to test the market, there were a lot of customer interviews. A lot of talking with people in our own networks. The three of us had the luxury of being in our careers for about 10 years. We were leveraging our own networks and going out there, going to conferences and just talking to people to validate the problem and understand it more deeply.

EG: How did you go about validating the opportunity?

ZH: I think that really trying to get inside the head of the customer and asking questions about their pains and trying to map out what their current workflow is so that we can solve very specific problems. We took techniques from the Lean B2B book. We took techniques from the Mom Test book. We added our own flavour to it. But one thing that worked well was having a very lightweight version of the product to use as an anchor to the conversation. Without this, conversations can get abstract very quickly. Having something tangible to wrap those conversations around was actually pretty useful for us. It allowed us to iterate very quickly.

We sold ourselves as individuals, the value, the partnership, and the long-term vision. In the early days, the product was very minimal, so we got people to buy into the future. The biggest leap was getting someone to pay for it.

I remember the day that happened. We were running this beta for summer throughout 2014. We were trying to get whoever to come on board. Then eventually one day, I remember us sitting around the desks and we just said, “The next person who calls, just ask them to pay for it and see what happens.” Lo and behold, it happened.

EG: What were the core challenges faced by Loopio in the early days of the business?

ZH: In the early days as a bootstrapped company, not having a ton of funding behind us, prioritization of feature development was very difficult because there are all these things you want to do. There are customers that are starting to ramp up and giving you all this feedback. Learning how to say no was definitely a challenge. Pushing back and challenging our customers and prospects. I think in the early days we didn’t have that level of vocabulary. We had to develop that over time.

We’re selling to big organizations, and they have all of these demands, legal concerns, terms and contracts. We did not have a lot of that figured out when we started the company. We just had to figure it out on the fly, which is a great challenge to have. You’re forced to do things a bit more maturely because you’re trying to gain customers.

As much as we gained traction, we also got rejected a lot. At the end of the day, we’re a startup convincing a 1,000 or a 10,000 person organization: We might hear something like, “Hey, you’re an unfunded 3 person company. What guarantee can you give that you will be around next year if I invest in you?” There was just no way to guarantee that we would be around. So we built an executive portfolio to talk about all of our backgrounds. It was a deck that talked about our expertise in business and technology. That helped sell the future. Sometimes the only thing that can truly solve that problem is time. You have to be around for two or three years. It’s really a matter of waiting it out. Now, having 300 customers, it’s a lot easier. We don’t have that conversation as much.

EG: How did you know that Loopio had found product-market fit?

ZH: I think it was in your book you talked about 5 passionate customers. I don’t think there was ever a point in time where we said, “Yes, we achieved product-market fit,” but I do think it was around that mark.

One thing was very important to us – we knew we were building a product company, not a service company. If we had a bunch of passionate customers, and they were passionate about the services we were providing, then that would not have been an accurate representation of a product-market fit. The services were important but, the product was the main thing.

I also want to say that when we hit the 20-30 customer mark, we started seeing patterns in the customers. “Hey, these growth-stage software companies just get it.” Then we started to get our first set of online advocacy. Having people write reviews about you online and go to bat for you as a reference customer, that’s when you really start entering a territory where it’s not only you selling the product, it’s the community selling the product. Once you start making that transition, that’s a good product-market fit.

EG: What value did you get from reading Lean B2B?

ZH: We have built a whole company on this idea of customer centricity. We involve our customers in everything. We have a customer advisory council. We write very thorough and thoughtful release notes. We over-invested in our support team to make sure every user gets a phenomenal experience. Customer Success is something we invested in very, very early. The underlying philosophy of being close to your customers is important in B2B. Even if your product fails, great relationships will carry you through that. That philosophy really resonated with us in those early days. We built our company around that.

EG: Had you guys been exposed to this level of customer-centricity before starting Loopio?

ZH: I think so, but we’ve taken it to another level. Achievers was an employee engagement software. The engagement in the employee experience and customer experience we provided was ingrained in the culture of the organization. That led to engaging with your customers and prospects in a way that was above and beyond. I grew up in that philosophy in my first job out of school. I didn’t really know any other way.

We decided very early on, again as a bootstrapped company, that we might have the best product out of the gate but, what can we do right away that can differentiate usthe answer to that early on was Customer Success. I decided a year into the journey that I need to stop working on the product side and start spending the majority of my time on working with customers. This helped me make way better decisions for the business.

Loopio’s Customer Success Video

EG: After having been through it yourself, what validation process would you recommend to entrepreneurs starting in B2B?

ZH: The idea of doing thorough customer interviews is great. I also think it’s important when doing that process to time box it. Limit the number of interviews you’re doing to get your feedback. Have a methodology of how to conduct interviews and a framework. Have a strategy, and have a lightweight, minimal product to anchor conversations around.

Focusing on relationships very early is also important. Putting your early interviewees and early customers in a position of power. They’re the experts, and you’re just learning from them. I think that’s very important. The reality is a lot of people out there want to be helpful and give you feedback. They will help you in your business in the early days. More people than not will want to help you out.

Make it really easy for them. If you’re asking someone for their time, give them 3 suggestions of 15-minute slots. Don’t make them do the thinking. You should go out of your way to make it easy for them because you really want their time and their input. Little things like that will go a long way. Once you get someone on the phone, you can start a relationship, then prove value very quickly. If you get input from somebody, you can turn something around in 4 weeks to make it more tangible. Then they will be more excited to talk to you the next time and the next time. When the time is right, you can start asking for money. That was the way we approached it.

EG: What advice would you give to new entrepreneurs starting in B2B today?

ZH: Customers are everything. Know your customers. Know your market. Build relationships and iterate, iterate fast. It’s a combination of everything we talked about but, those are the things that come to mind.

EG: Thank you for your time.

ZH: Thank you very much.

How Flutura Built a Painkiller Product By Fully Immersing in The Energy Industry

Derick Jose on Growing Lean B2B Startup Flutura

Derick Jose is Co-Founder of Flutura, a verticalized AI company focused on impacting operational outcomes in Energy and Engineering industries. Flutura is among the top 3 vendors globally in the Energy AI app space. Their customers include Henkel – the largest manufacturer of industrial chemicals – and Stewart & Stevenson. You can read Derick Jose’s blog here.

In this exclusive interview, we talk about the importance of fully immersing yourself in your target market:

Etienne Garbugli (EG): Could you tell us about Flutura? What are you guys building? Who are your customers?

Derick Jose (DJ): We have built an industrial AI platform called Cerebra which ingests high-velocity electro-mechanical sensor streams and helps industrial engineers see patterns the human eye missed. Our customers are upstream drillers, downstream petrochemical companies, and heavy equipment manufacturers. For example, Henkel uses Cerebra to ingest sensor streams and predict quality outcomes in 18 countries.

EG: How did your team go about selecting a product-market opportunity initially?

DJ: We immersed ourselves in Houston (which is the Silicon Valley for Energy/Industrial companies) and cast a wide net within Energy and Engineering industries to target a number of problems. We also did a lot of 1/2-day Lunch ‘n Learn workshops, 60-day ‘Show and tell’ pilots and we surrounded ourselves with retired Industrial/Oil and gas SME who shared their “tribal” knowledge with us.

EG: How did you go about validating the opportunity for Flutura?

DJ: Once we found a list of problems worth solving, we filtered and ranked them based on certain weighted criteria including the amount of value unlocked, the intensity of pain, whether the problem is a ‘Vitamin’ or a ‘Painkiller’, whether someone gets a promotion if the problem is solved, whether there was enough sensor data to solve the problem and whether status quo (living with the pain and not solving it) is an option. We immersed in a lot of early quick show and tell pilots delivered in 30-60 days and surrounded ourselves with retired Industrial & Energy subject matter experts.

EG: How did you motivate early adopters to work with Flutura initially?

DJ: The engineering and energy industries value 2 very important attributes in a product offering: Reliability and Tangible $ realized. Towards this, we created business value calculators as a feature of the Cerebra product, stress-tested the product for ruggedized industrial workloads and got their data and made it come alive in our product in just a few days.

EG: What were the main challenges faced by Flutura in the early days of the business?

DJ: During the initial days, we faced 3 challenges: 1. ACCESS: Access to business users/Operational heads who would benefit from Applied AI instead of meeting IT teams 2. TANGIBILITY: The industrial world is used to tangibility; Digital AI solutions are typically very intangible in the electromechanical world 3. $ IMPACT: Creating value calculators which linked AI outputs to Operational Outcomes and resulting $.

EG: How did you know that Flutura had found product/market fit?

DJ: Once we got our first 3 signed orders for Cerebra we knew we were onto something. Our initial definition of product-market fit was getting a paid proof of concept but over a period of time we refined it so that we get recurrent revenue streams in an operating income (Opex) model.

EG: What value did you get from reading Lean B2B?

DJ: The biggest value of the book was its nuts and bolts approach to executing product strategy. The insights were very granular and ultra-specific which helped us execute the same. I had been through multiple books which were all high level. The feel I got from reading Lean B2B was that it was written by a practitioner who had been through the pains from the trenches. So, I loved 2 things: Specificity and Actionability of insights.

EG: How have you been using what you’ve learned from reading the book?

DJ: I remember the following nuggets which we actioned: Meeting people where they meet for pleasure (We did a lot of Thursday evening drink and learn sessions. This was a big hit. We gleaned insights which probably would not have been expressed in a formal controlled setting), being problem-backward, not technology forward (Initially we were seduced by IIoT (The Industrial Internet of Things) and Deep learning nets. But we quickly course-corrected) and not looking at frequency of problems but willingness to pay.

EG: After having been through it yourself, what validation process would you recommend to entrepreneurs starting in B2B?

DJ: Look for a minimum of 3 signed orders/cheques for your product before realizing that your nose is above water.

EG: What advice would you give to new entrepreneurs starting in B2B today?

DJ: Build vertical process specific AI modules into your product. It can be a game-changer in the marketplace.

EG: Thank you for your time.

DJ: Thank you.

Innovation Consultant Joyce Oomen on The Right Time to Think About Innovation

Innovation Consultant Joyce Oomen on Innovation Management for Lean B2B Startups

Joyce Oomen is the founder of product and innovation management consultancy Pimcy. Her company helps businesses structure their innovation product development by combining innovation management with innovation portfolio management.

Joyce worked her whole career in product development, spending 10 years as a Senior Product Manager for a large bank. Her experiences in a corporate environment help fuel her strategic innovation work. She is part of accelerator DOON in the Netherlands and organizes A Day of Life in Startup workshops to help companies familiarize themselves with the principles of The Lean Startup.

I really enjoyed our discussion. In it, you’ll learn:

  • The right time to start thinking about innovation and why it’s sooner than you think.
  • How to build the preconditions to allow your company to innovate.
  • The dangers of projecting the ROI of innovation projects and how innovation portfolio management can help reduce that risk.
  • The importance of building credibility in B2B.
  • How to use proof of concepts to get inside large organizations.

In this exclusive interview, Joyce will also talk about her new venture to help organizations manage their Innovation Portfolios.

You can listen to the full interview below:

Etienne Garbugli (EG): What are some of the methodologies you use in your work?

Joyce Oomen (JO): Our basic approach is Lean Innovation and the Lean Startup but tailored in a way where it’s more the key principles that we use because The Lean Startup is very software-based and startup-based. We work for more established companies where we have to adjust to a different context. I really like from the portfolio management suite the Three Horizons framework. That’s really a guiding framework that I use. Your Lean B2B framework is also a nice framework if you’re in B2B.

What we try to do is combine a lot of practices and see what fits. We have to have some common-sense approach and see what works. It really takes small steps. We don’t believe in big bangs.

EG: What are some of your best practices when it comes to innovation?

JO: In terms of best practices as an innovator, you have to eat your own dog food. I’m applying the principles myself for a new venture I’m starting up. I’m doing solution interviews and we’ve been doing Lean Canvas(es) and drawing out experiment boards. So, not only coaching people using it but also doing it yourself and you say oh well it’s quite complicated sometimes.

EG: You mentioned you were starting a new venture around portfolio management, maybe you could go a bit into details of what you’re putting together?

JO: We’re working with a partner who has developed a new innovation portfolio management software. I’ve already been working with him for 2 years on a different MVP but we learned that, it (his solution) was more tailored to SME companies and it was not doing the trick for the larger corporate enterprises. There were a lot of things that were lacking so, he decided to start from square one to make it perfect. I’ve been feeding a lot of product development ideas into it and I’ve been involved from the start with setting up that new product.

We’re now 80% there. It’s not perfect but we’ve already gone into market and we already have a proof of concept with one of the major banks in the Netherlands. We’re learning a lot from that.

We have a four-month proof of concept and it looks good. Hopefully, it will be a longer-term contract. In our solution interviews, if we mentioned the proof of concept with one of the major banks, it opened doors because our target audience is in the larger corporate and/or very large SMEs where it’s difficult to get the right entry point and you need good references. That proof of concept is really important. We do everything we can to satisfy them. They get the concierge treatment.

EG: How important is innovation and innovation management to organizations today?

JO: It’s vital for organizations. If you see the rate at which technology is evolving (and it’s accelerating), there’s a major impact on a lot of companies and sometimes they don’t realize that it has an impact. I believe if you don’t think about what the impact might be and how it might affect you then at some stage you will be too late. There’s a lot of startups. It’s easier than ever to start up, and because technology is also decreasing, the barriers to entry are lower. If established companies are not investing in innovation right now then they’re really not doing it right.

The difficulty for us as innovation consultants is that our point of entry should be when everything is going well and there’s sufficient money to innovate. But companies typically say well, everything is going well, I don’t need you. That’s quite a challenge because what you want to do is to ensure that you can extend the lifecycle and have the next generation (of products) ready, but sometimes it’s more the short-term focus that companies have. When the shit hits the fan, then yes, we can do some innovation but they want to have quick wins. We need innovation and we need a return on investment but it’s better to be involved earlier in the cycle.

EG: How do you see the innovation space evolving over the next 5, 10, 15 years maybe?

JO: First of all, there will be more open innovations. The boundaries of the company will become less and companies will open up more to the world and to outside startups.

Which means they will be working more in cross-functional teams that probably get more autonomy themselves and their own budget. I think that the functional structures that we now have and the hierarchy, if you want to innovate it doesn’t work.

EG: What do you feel are the challenges of innovators working in a B2B environment?

JO: Lean Startup is really new for B2B markets. You always hear that it’s not possible in B2B; you can’t have a MVP because we’re in a very capital-intense market. I think a lot of things are possible by thinking more about your real customer and end user. You can test with mockups. It’s a totally different way of thinking and working and B2Bs are sometimes more technically-focused and not really consumer-focused or market-focused so that’s really a new sound. You need to convince a lot of people and that takes a lot of time. You also can’t prove (innovation) because you can’t say okay, if you do this with me then I promise that you will have this yield. It’s impossible as a consultant.

EG: So, it becomes dangerous to be projecting the results for things that are difficult to foresee in a lot of ways?

JO: There’s so many dependencies. What you do with innovation is you’re changing the culture, the process, you need management buy-in you and have all these stakeholders. So, how can you promise that we will have a 20% cost reduction or a 20% increase in revenue? I can’t. It all depends on how engaged people are and what change really comes across, and you can’t do that by yourself, you do this together.

EG: It feels like there’s a big change management piece especially in the innovation space interacting with these organizations so making sure that they understand the benefits at all these critical points and are able to implement the right approach to be able to get the results they seek.

JO: Yes, but that’s why I think our approach is different. We start from the angle of portfolio management. What you actually do is that you build a structure that allows innovation, that gives space for innovation. You’re building the preconditions so that the company can innovate. Often, it’s also easier to show where the results will be because the company will be killing more projects earlier, their New Product Development success rate will go up. There will be more ideas and so on but it’s difficult to put that into real dollars. I don’t have enough data yet to make those kinds of promises.

EG: What value did you get from reading Lean B2B?

JO: A lot of things are common sense, but there were a couple of models that really helped me and I’ve been using. I used the buyer persona canvas and also how you can position your message based on the various stakeholders within the decision unit (DMU). Crossing the Chasm, I bought that book again and oh yeah, that you always have to charge.

And also, that you have to build your credibility. I think that’s what I got from your book.

I really had to start working on that because I have experience but most of it was with one single employer. I have been starting to write blog posts and, now since last year almost exclusively about portfolio management and the Three Horizons. I keep writing about the topic and it helps because I now get in touch with people through LinkedIn and they find me via these posts.

EG: What innovation advice would you give to organizations operating in competitive industries today?

JO: To look at your existing innovation alternatives and start mapping them across the Three Horizons and see how much you’re doing in incremental innovation, in new technology or new products and what you’re doing in transformational innovations. If companies map it out, they’ll probably see okay there are mismatches.

If I can give a second one, what I’ve noticed is that a lot of companies don’t have a specific innovation strategy. You need to define an innovation strategy: where do you want to be? where do you want to go within the coming years? what sandbox will you be playing in?

EG: How early do you feel that that needs to come in a company’s existence? Should it be within the first few years or should it be when the company has reached a certain level of stability?

JO: If you’re a startup, you probably have other challenges and already a longer-term vision in your head. As you start to become established and have a lot of people working for you, it’s the business as usual feeling and that’s when the danger comes. What’s the next step? How long will this business model remain valid? What you see is that established companies focus on business as usual and start improving their operational excellence. When they run into difficult situations, they’re cutting costs when you’d rather invest in innovation and make sure that it grows.

EG: Thank you for your time.

JO: Thank you.

Innovation Expert Daniel Almodovar on Why Companies Can’t Just “Wait and Buy” Startups

Innovation Expert Daniel Almodovar on Why Companies Can't Just Wait and Buy B2B Startups

Daniel Almodovar leads the business validation practice at World Class Center Innovation and Design. There, his process includes documenting the initial business idea, extracting and prioritizing hypotheses, validating problem, solution, market demand, profitability, measuring, learning and adjusting the solution. Depending on the client’s interest, they can provide training, mentorship or externalization of the validation.

In this exclusive interview, we talk about why companies need to innovate (and can’t just buy startups):

Etienne Garbugli (EG): Could you tell us about your work at World Class Center Innovation and Design?

Daniel Almodovar (DA): We are part of Altran, a leading firm in engineering and R&D. Within the company, we represent the global team for innovation and design, addressing projects that cover the whole lifecycle of innovation: trends & technology radar, customer insights, creative problem-solving, invention, prototyping, business validation, UX/UI design, and product realization up to manufacturing of small series. We also have transformation programs for organizations to boost their innovation potential. Our clients are medium and large corporates from all industries, with national and multinational footprints.

I participate in projects of nearly all the practices. I particularly enjoy cases in which we run an invention project that generates new promising concepts and then we continue working in their business validation, moving them towards reality.

Altran - World Class Center Innovation and DesignAltran’s World Class Center Innovation and Design in Madrid

EG: How did you get into the innovation space initially?

DA: I had been part of the Vodafone Group R&D team for many years and, there I had not only executed many innovation projects but also tried different innovation methodologies, to the extent that I became an internal consultant. It was a natural transition for me to move to Altran’s innovation team.

What I like the most in this career change is the opportunity to live innovation in so many different sectors: finance, insurance, chemical, industrial, energy, automotive, aerospace, urban services, consumer goods… This helps you realize that innovation shares common issues everywhere.

EG: What are some of the methodologies you use in your work?

DA: I mainly use the Lean Startup framework, Business Model Canvas, some Design Thinking tools, and a methodology called Synectics, which provides a strong basis for successful human interaction in creativity and problem-solving.

Rather than being tied to a single methodology, I believe that what works is to have a varied toolkit from which you select the right tools for every project and client need. For instance, sometimes I have also used the Jobs-to-be-Done framework, Google Design Sprint, or the Innovation Games set.

EG: What are some of your best practices when it comes to innovation?

DA: Innovation is carried out by people. For me, the ideal innovation project is when the people that participate in the project live a personal transformation and acquire a new mindset that can apply from that moment on in their future projects – and even in their lives. This happens, for example, when they get to experience the benefits of understanding their customers, releasing their creative thinking or validating the critical assumptions behind what they want to build.

In the same way, it’s essential for people to understand purpose. Why are we doing this innovation project? Why are we using this tool or doing this activity? How will all this contribute to a goal? The innovation facilitator must always make sure it is clear for all participants.

The facilitator also has to explain the differences, in terms of mindsets and rules, between the operational world and the innovation world. This prevents the premature killing of promising concepts because they’re applying the operational mindset. The key is to manage the transfer from the innovation space to the operational space.

EG: How important is innovation and innovation management to organizations today?

DA: What comes to mind may sound very cliché: the “VUCA” environment, the increased frequency of disruption in every sector, the decrease in companies’ lifespans… You simply cannot afford to ignore innovation. And at the same time, you must operate your core business, what currently brings in the money. I agree with most innovation thinkers that carrying out innovation and operation in parallel is the biggest challenge that companies have to overcome nowadays.

EG: How do you see it evolve over the next 5, 10 or 15 years?

DA: I think that, during the next years, we will see a gradual process in which organizations will learn from success cases and will get better in being “ambidextrous”, executing their core business and exploring new businesses at the same time – with effective transfer from the second activity to the first.

In addition, I’m also very curious about the evolution of internal vs. external innovation, i.e. on the one hand, internal innovation projects or intrapreneurship; on the other hand, open innovation challenges or engagements with startups (which is so popular today and for some companies seem to replace internal innovation). I think that both have pros and cons and that the right approach is a mix. Actually, the binary division internal vs. external is quite simplistic, and changes when you start including other dimensions such as ideation and implementation (see model below).

In-Out Innovation Approaches for when to Build vs Buy Startups
In-Out Innovation Approaches

EG: What are the main challenges faced by innovation experts in the industry today?

DA: If I wanted to make a joke based on what I have experimented frequently, I would say that the fact that nearly every company applies a reorg every 6-9 months! This changes the points of contact for innovation and/or freezes innovation projects due to re-prioritization of activities.

More seriously, the answer would be related to the previous questions, i.e. companies applying only the operational mindset or taking care exclusively of short-term results and fast return on investment – indeed, the most common complaints I hear from participants in innovation projects are “I don’t have time for this as I’m very busy with the daily operations” or “This activity is not in my objectives”.

Another challenge would be companies thinking that they don’t need any innovation system or process and that they just have to “wait and buy” the innovation that happens externally.

EG: What do you feel are the challenges of innovators operating in a B2B environment?

DA: Many challenges are common to the overall innovation space. However, you must be very aware of the specifics of B2B, such as the fact that you have “fewer shots”, or that you have different client-people within the same client-company requiring different value propositions or that experimentation must coexist and not disturb the ongoing business. All this is very well explained in the Lean B2B book. :-)

EG: What value did you get from reading Lean B2B?

DA: It was really helpful for me. I had read most of the Lean Startup literature (Eric Ries, Steve Blank, Ash Maurya, Cindy Alvarez, etc.), but I was missing a comprehensive explanation of the specifics for the B2B space. In Lean B2B, I found confirmation of many of my previous thoughts or intuitions about applying Lean Startup in B2B, as well as many new clarifying and useful ideas. It is really well structured both in the overall chapter distribution/narrative and in the checklists, tables, sidebars, tips that every chapter includes. I bought the paperback edition and it is now full of pencil marks and underlines, pointing to pieces of knowledge that I have used in my projects.

If I had to choose one powerful idea I extracted from the book and soon internalized, it would be the fact that Lean Startup in B2B is strongly linked to strategic selling and must consist of building a trust relationship. Many other concepts or pieces of material in the book have become part of my personal toolkit, such as the “jury”, the “money map”, “Value = Benefits-Costs”, the interview templates, or the tips for first pilots, case studies and discounts.

EG: How have you been using the ideas from the book?

DA: When I got the book I was actually running a project consisting in mentoring a client’s team through a Lean Startup process in the B2B space, so it was a great help to reinforce the B2B specifics beyond the general Lean Startup framework. Afterwards, I have used the toolkit I obtained from the book when running any project or initiative that involves B2B. This refers not only to projects with external clients but also with internal clients (e.g. to help Altran R&D projects go to market) or within our own innovation team (e.g. to expose our new innovative offerings to our customers).

EG: What innovation advice would you give to organizations operating in competitive industries today?

DA: I would advise not to let innovation happen just as a spontaneous activity that depends on the personal initiative of a few employees; instead, start creating and nurturing an “innovation system” like the Innovation Model Canvas, something that continuously fuels the company with ideas for new businesses and validates them so that they can become a reality.

EG: Thank you for your time.

DA: Thank you.