When it comes to incubating transformational, new-growth businesses, the innovation stage-gate process is fundamentally flawed.
Imagine that you’re in a dark greenhouse full of cacti, trying to find the exit. You’re going to be careful. You’re going to reach out and see what you find. You’re going to make “path forward assumptions” and, depending upon how they turn out, adjust your direction accordingly. You’re not going to start running because you could end up with a face full of needles.
The further from the core your initiative, the more winding the path to the exit. And those needles? They’re the opportunity cost — the valuable people, time and money you’ll waste developing bad ideas. They’re the professional fallout you may have to deal with if your well-resourced, high-visibility project suddenly hits a brick wall. They’re the damage to your company’s brand if you go “too public, too quickly.”
So thoughtfully testing assumptions to gain clarity on the path forward is crucial. But the important thing to remember is that not all assumptions are created equal. There will always be some assumptions that matter more to your path forward. If these assumptions prove true, you’ll be able to proceed with greater confidence. If they prove false, or reveal unsolvable problems, you’ll be able to call for a pause or pivot with greater confidence. You need to identify and test these critical assumptions as soon as possible.
But here’s the thing — the innovation stage-gate process always goes from left to right. A team starts by uncovering new opportunities and brainstorming new solutions. If everyone feels good about that emerging story, the team might then start working through the business case and go-to-market plan. When the team then invalidates the critical “There’s a business here” assumption, however, those “opportunity cost / professional fallout” needles are much sharper than if the team had identified the lack of a compelling business case earlier in the process.
I recently spoke with a Chief Digital Officer at a large healthcare company who used an anecdote to describe this challenge. Her team was well aware of the tremendous demand for mobile device-based chronic care management solutions and had always wanted to throw their hat into that ring. She knew, however, that the critical assumptions were: “We have a right to play and win” and “There’s a compelling business here for us.” If her team were to follow the traditional stage-gate process, she knew that they would spend a lot of time and money just to confirm known Jobs to Be Done and to brainstorm known solutions before (in)validating the assumptions on which success or failure would hinge.
My advice to her, and to anyone trying to more efficiently separate good growth business ideas from bad growth business ideas, is that you need to stop going from left to right. Start by sanity-checking where those truly unsolvable problems may lie and then test those assumptions early. If you have some initial confidence that there’s a compelling opportunity to target, don’t invest heavily in extensive market research and detailed prototype development. Proceed instead to build confidence that there really is (or is not) a compelling business case. Assuming the solution is compelling, is it conceivable that enough customers will pay enough? If you can initially validate that assumption, maybe you then build a prototype. Or, perhaps, you now need to build confidence that you will (or won’t) get the organizational support that you need.
Despite the common acceptance that innovation teams should proceed flexibly and iteratively, most organizations require that their teams do so within an inflexible, linear stage-gate process. It’s time to recognize that such a process frequently does more harm than good.