Some companies are really good at transformation and continuous innovation; disruption is built into their DNA. Others struggle with their legacies of success, becoming overly focused on self preservation, which leads to slow decision making and aversion to risk.
But it’s not impossible for large companies to reinvent their business; indeed, it’s essential for their survival. During the course of my career, I’ve been fortunate to work at three amazing companies — all very different — each of which has been integral in transforming their industry.
Through these experiences, I learned important lessons about innovation and business transformation that can be applied to almost any company. Here are three critical keys to success:
1. Start with the customer
To be successful in product innovation, start with the customer and work backwards to determine the products you need to design and build. Only by truly understanding your customers can you deliver products that they will love.
When I worked on Coca-ColaⓇ Freestyle, we knew we had to start with the consumer and figure out what they wanted, so we did a ton of research. We started with focus groups in five different cities, five groups per city, all different age groups and demographics. The insights we gathered in these sessions informed our quantitative research, in which we ultimately talked to more than 7,000 consumers.
By truly understanding consumer preferences, we were able to build the Coca-Cola Freestyle in a way that appealed to consumers, with striking results: Installing a Freestyle machine led to increased beverage sales for restaurants by 17- 20 percent, and increased Coca-Cola sales volume by 30-40 percent in those locations. What’s more, about 25 percent of consumers who knew about Freestyle told us that they chose which restaurant they went to based on whether it had a Freestyle machine!
To innovate at Smartsheet, we set out to understand what problems our customers are trying to solve and then build solutions that help them do that. Smartsheet is a cloud-based work-execution platform that makes it easy for anyone to get work done without having to wire together a bunch of other tools. Today, most of the companies chasing this market overestimate the technical bar that most business users can clear, which results in overly complex products that are not easy for most business users to adopt. At Smartsheet, we really focus on how we can meet the needs of the average business user.
Every time we build a new product, we start by writing a document called a “PR/FAQ” (Press Release/Frequently Asked Questions”), which outlines what we’re going to build — and why — before we actually go to code (an exercise I brought with me from Amazon.) This means we create the story that we want to tell customers on the day the product launches — before we actually build anything. Then, we iterate on the press release until we like what it says about the product and how it solves a problem for the customer. We validate it with existing customers. Only when we’re satisfied that what we have is the right product definition do we begin work on building the proposed product.
2. Small independent teams move faster
Once you determine what to build based on research and customer feedback, assign a small team to the project and empower them to make decisions and innovate. Keeping the team small and focused helps prevent scope creep and eliminates the management overhead required to coordinate work across a large group. It is important to establish mechanisms for the team to escalate when they need help, but try to limit the amount of energy the team has to expend reporting up. This will speed innovation.
To develop Coca-Cola Freestyle, I built a small dedicated team that was completely isolated from the rest of the organization. We reported to a board of advisors on a quarterly basis but were empowered to make decisions without having to ask for permission.This was pretty game-changing, as it allowed us to move fast, experiment and learn, and be singularly focused on capturing the opportunity we saw in the market.
Coke’s idea of isolating a small, scrappy team to work on product innovation is the Amazon model as well. In fact, Amazon has a name for it: a “two-pizza team.” Almost every new service that starts at Amazon starts with a two-pizza team — a team small enough to feed with two pizzas.
Small, scrappy teams can help you make better decisions by forcing you to make trade-offs based on the constraints faced by the team. They’re better able to innovate quickly and course correct as needed to keep the project on track.
3. Take a long view
Another key to supporting innovation is to take a long view of the business. Rather than expecting an immediate return on an innovative new idea, focus on how you’ll develop the product to best serve your target market.
At Amazon, they take a very long view of the business. When we launched a service at Amazon, no one was pushing us with the question: How fast can you get to profitability? Instead, the discussion was framed around:
● What’s the market you’re going after?
● How much of the market do you think you can serve with the MVP (Minimum Viable Product — the first, solid foray to market)?
● Where do you think you’d go after that?
Rather than worry about getting a very quick return on investment, the idea is that if we build meaningful, compelling products, we’ll figure out how to make money over the long term.
At Smartsheet, we not only take a long view of our business, but also encourage our customers to do the same. For example, when customers come to us for a solution, we try to understand the problem they are trying to solve or the pain point they want our help to address. This deep understanding enables us to build solutions that are both opinionated and flexible. We bring best practices to the table, along with a real point of view on ways that our customers can change how they work, and how we can help their businesses innovate faster as they navigate a constantly changing market — now, and into the future.