How to Lead Your Team into the Unknown

Leading Your Team
Here is an excerpt from an article written by Nathan Furr and Jeffrey H. Dyer for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

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Ask notable innovation leaders what they think about traditional management practices—say, those taught in a typical MBA program—and you get some pretty strong reactions. Take Elon Musk, a cofounder of PayPal, Tesla, and SpaceX. “At my companies,” he says, “our position is that we hire someone in spite of an MBA, not because of one.” Or Intuit cofounder Scott Cook: “When MBAs come to us, we have to fundamentally retrain them—nothing they learned will help them succeed at innovation.”

Nothing? Why is that?

We’ve been investigating that question for more than five years now, in the course of our work identifying companies that have earned a significant share-price premium by consistently launching innovative products and entering new markets. These companies have been successful time and again, we’ve found, not because they’ve won big bets but because they’ve made the process of bringing new offerings to market more reliable and less risky.

They’ve done so by drawing on a wealth of ideas developed over the past 50 years. Among them are Ted Levitt’s insights into understanding the true scope of a business and the purpose of its offerings from the customer’s point of view; Clayton Christensen’s work on identifying the jobs people need to do, for which they buy particular products and services; Jeff Dyer, Hal Gregersen, and Clayton Christensen’s research on the skills innovators use to discover new ideas; IDEO’s approach to developing empathy with customers and synthesizing new ideas from disparate sources, known as design thinking; Steve Blank and Eric Ries’s method, called lean start-up, for testing possible offerings through a series of quick, focused experiments; and Ian MacMillan and Rita McGrath’s test-and-learn approach to validating the viability of promising offerings and business models in the market. We have brought these strands together to map out the end-to-end process successful innovators use to conceive, develop, test, and launch innovations more reliably.

A Comprehensive Approach to Innovation

Conceiving of, developing, and launching new offerings is an inherently risky undertaking. By combining the risk-reduction ideas that innovation thinkers and practitioners have developed over the years, we can map out an end-to-end process that can greatly increase the odds of successfully launching innovative offerings in uncertain markets. This process has four steps:

1. Generate Insights: Use questioning, observational, and networking skills to search far and wide for broad insights into problems that may be worth solving.

2. Identify an Important Problem: Through direct observation look for an unsolved problem or an unfilled emotional or social need that enough people have for the opportunity to be worth pursuing.

3. Develop the Solution: Instead of building a complete product, quickly construct a set of simple prototypes of many different solutions. For each, start with a theoretical prototype (that is, a verbal description). If that looks promising internally, move to a virtual prototype you can test with customers. This must be a visual representation but could be just a drawing. Move next to testing a minimum viable prototype with customers (the simplest, quickest physical version of the offering you can devise). Finally, pilot test the full-blown solution—the minimum “awesome” product (a refined version that seeks to be awesome on the few features that inspire customers).

4. Devise the Business Model: Once you have worked out the offering, apply the same experimental approach to developing and testing the components of the business model, including approaches to pricing and customer acquisition.

For most innovations you need to successfully complete all four steps before devoting resources to scaling. The exceptions are businesses that have network effects, such as PayPal, where the value of the innovation increases with each additional member. Even in those cases, you need to work through these steps judiciously as you scale, or you will most likely end up with a flameout worthy of the dot-com era.

Like any effective corporate operation, this process, which we call the innovator’s method, requires discipline, perseverance, and dedicated, effective leadership. But as innovators like Musk and Cook point out, it is a different kind of leadership, calling for skills and tactics that many of us have yet to master. In this article we lay out those skills and offer our insights into the unique challenges they pose.

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Here is a direct link to the complete article.

Nathan Furr is a professor of entrepreneurship at BYU’s Marriott School of Management. He is the lead author of the just published The Innovator’s Method (Harvard Business Review Press, 2014). and of Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation. Jeffrey H. Dyer is the Horace Beesley Professor of Strategy at the Marriott School of Management at Brigham Young University. He is the co-author of The Innovator’s Method (Harvard Business Review Press, 2014).

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