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Digital Product Innovation

Digital Product Innovation


Digital Product Innovation – The Lean Approach

Too many digital products brought to market by mobile operators and financial institutions fail to stir the public’s imagination. The plethora of telco-offered wallets that have been quietly abandoned over the years is testament to that, something we have touched upon in previous posts. These products are then substituted for new pet projects which are destined to the same fate. This process is set to be repeated ad infinitum unless those organisations fundamentally change their approach to product development and digital product innovation.

A Lesson from Lean Manufacturing

So how could companies be more successful at digital product innovation? To answer that we need to first take a step back in time, to post-war Japan, where Toyota was developing its now famous Toyota Production System incorporating kanban and just-in-time processes. Their aim was the complete elimination of waste in the manufacturing production line. The term ‘lean manufacturing’ was later coined in the 1990s as neat description of this philosophy whose over-arching ambition is to improve efficiency through continuous learning.

The Lean Startup Movement

This principle has been subsequently embraced by the lean startup movement. However the lean startup methodology differs from lean manufacturing in that the customer and the product are not known at the outset. Instead they are replaced by the startup (or innovation unit’s) assumptions, or hypothesis, of what the market is and what the product should look like. These hypotheses need to be continuously tested using a technique known as validated learning.

lean product development feedback loop

Validated Learning

Validated learning is the conceptualisation of the build-measure-learn feedback loop that is at the heart of the lean startup philosophy. Its intention is to enable companies to elicit customer feedback as quickly as possible – to learn fast and to fail fast. Central to validated learning is the use of minimal viable products (or MVPs) to elicit feedback from early adopter customers which allow companies to complete one cycle feedback loop as quickly as possible. From there companies can decide to persevere with their product or perform a strategy pivot.

It is through applying this methodology to digital product innovation that allows new entrants to disrupt the banking, payments and commerce industries and to bring the right products to market faster at the expense of their more established peers. Digital disruptors often say they are competing with the product rather than the bank or mobile operator that offers it, hence the need for these industries to really master their digital product development.

Lean is not small

These lean principles don’t just apply to startups. Being ‘lean’ is sometimes misinterpreted as being small or operating with no budget – and is sometimes used to justify the under-resourcing of product development units. Clearly it can appeal to companies in those positions but that’s not what its raison d’être. Lean is about improving efficiency through continuous learning – the equivalent of eliminating waste from the Toyota Production System. And when you uncover the right product that the market wants, being lean will allow you to rapidly redeploy resources from elsewhere to ensure that that product is brought to market as quickly as possible.

So these lean principles can be applied in larger organisations, and not just to specialist innovation units. Whole divisions or even companies can be reorganised cross-functionally around being lean as PayPal have recently done. By adopting other lean methods, such as lean UX and lean engineering, mobile operators and financial services providers can themselves bring the right digital products to market as quickly as those that threaten to disrupt them. Safaricom did just that when developing M-Pesa as we have touched on elsewhere.

However innovating the digital product that the market needs is one half of the solution. Creating a compelling proposition that the market wants is the other and it is this that we will examine in our next post.


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