1. Profit First
One common challenge for innovation departments is proving the value of the work they produce. Good ideas take time to germinate and validate, then as soon as the idea takes hold it is possible that other departments will bring the project into the main business and take all the glory! Profit First sets out a simple approach that shows exactly how much profit a team or company has made and will give you the right ammunition to justify an increased budget for your innovation team. This book has made a huge difference at MakerClub helping us transform from a cash-hungry business to making a profit in only 6 months.
Core concepts of Profit First
The key message from Profit First is psychological. That we often think of profit as what’s left over from the sale once the costs have been taken out. The problem with this is that when starting a new revenue stream, things take longer than planned and what’s left over is often disappointingly paultry. By changing the equation of profit first to take the profit out of the revenue and only spending what’s left two interesting things happen.
The first is the concept of primacy, which is to say that humans naturally value the first thing in a list more than those below it. At MakerClub, by putting profit first, the whole team knows that that is an important and unconditional part of any business venture we embark on.
The second is Parkinson’s Law. “Work expands to fit the time available to completion”. By taking the profit out of the equation early, the rest of the work has to get done with the resources left.
2. Crossing the chasm
Understanding why mobile phones are ubiquitous but Virtual Reality is still only used in a few niche solutions after 30 years of hype is a nuanced question. Having insight into why some customers buy at different stages of the hype cycle can help make “go or no-go” decisions on products much earlier and save millions of dollars in investment. It can also help understand how best to market to the various different personality types in the product development lifecycle.
Core concepts of crossing the chasm
There is a bell curve of people who adopt a new technology. This ranges from those technophiles who will pay over the odds for a half-finished piece of technology just to be the first to own it, all the way to the laggards who are quite happy with a good old fashioned notepad and pen, thank you very much. This is true of any technology you’re selling from a new potato seed (the first study where this adoption curve was noticed) to iPhones.
The chasm referred to in the title is the transition from the early adopter to the early majority, where consumer attitudes change. They go from tech enthusiasts who can see the huge potential in VR or electric cars, to the pragmatist who wants a finished product with no rough edges and asks sensible questions like “What happens if I’m in an area with no car charging points?”
Understanding this chasm, why so many companies have perished there and how best to navigate it will help you become a better innovator.
3. The Lean Startup
The Lean Startup requires no introduction in entrepreneurial circles. Also described as the ‘Startup Bible’ the lean startup has spawned whole industries, approaches and frameworks in Silicon Valley. While some of the ideas in this book have been superseded with new thinking, the book is still considered essential reading to be able to talk the same language as others in the startup community.
Core Concepts of The Lean Startup
The Lean Startup aims to stop innovators from building an incredibly flashy product that no-one wants. It is all about identifying your most important assumptions at any given point and testing them in the quickest and cheapest way possible.
The Minimum Viable Product (MVP) encourages nothing but the smallest number of core features needed to give the customer value and Concierge Testing makes the case for highly tailored customer experiences in the early days, to understand their needs, as opposed to trying to build a system that will scale to millions of users.
These are just two approaches put forward by the book which makes a strong case for ‘going lean’. It is important to make lean for you. We’ve found that the approaches are not one-size-fits-all, and cherry picking the parts that fit with your organisation requires careful consideration.
4. Good to Great
The best way to build a consistently great company is to look at the great ones around us and identify what makes them tick. Built on over 20 years of research into hundreds of companies, the book defines ‘great’ companies as ones that enjoy growth and success over 15 year periods, long enough to prove that they’re not fluking it! They then analyse the biggest factors determining that success. If you’re thinking about building out your innovation team, this is the book for you.
Core concepts of Good to Great
Good to Great is all about getting the “right people on the bus”. By this they mean, make sure everyone on your team is an A-player and has the right skills and attitude to pull together. Much of the book focuses on the leader or innovator, defining a Level 5 Leader as shown below. Building the right team, lead by a level 5 leader is the precursor to success in all of the other books mentioned here.
4. Start with Why
We wanted to complement this collection of books on innovation, leadership and project management with one on marketing. While it is true that most big businesses will have entire marketing departments, it is important for innovation teams to market internally, show off what they have been working on and for the Head of Innovation to generate buy-in from the whole company before they can get company-wide acceptance for a new Digital Transformation Strategy.
Core Concepts of Start with Why
It is often tempting to tell the world what your products does that’s so amazing or how your product is going to improve their lives, but this book argues that the best companies make the most impact by explaining why they exist. If you can connect with someone on a core emotional and almost ideological level, then it puts meaning and purpose onto everything else that you do.
It’s not always easy to find the “why” in your company, but it is certainly a worthwhile endeavour. Here’s a great Ted Talk explaining the book by Simon Sinek himself.