Future Foundry LIVE: How to Eliminate Corporate Innovation Waste

Hello and welcome back to our last installment of Future Foundry Live before we head into the summer. The feedback from the last episode was really good. Thank you so much to those of you who took the time out to get in touch to tell us what you wanted to hear more about, what you enjoyed about the last episode. If you have been with us for the last few episodes of Future Foundry Live, you'll know that we've been focusing on how to help you to identify better opportunities for innovation, focused on helping you to de-risk the development of new ideas, and essentially showing you a more effective way to validate new propositions in market. And then in our last episode, we looked at how as corporate innovators you can use the VC mindset to make better investment decisions. And I heard from a lot of you after the last episode, and what you said was that you're all experiencing just a pretty tough time, right? Macroeconomic forces are essentially conspiring against you, and as a result, you're being asked to do the same as last year, or more in some cases, but with less, right? Less in terms of budget, less in terms of headcount, less in terms of room for error. And you told us that in this episode of Future Foundry Live that you wanted us to focus on how you can still be successful as a corporate innovator in what are going to be quite tough, challenging economic times. So today we're going to focus on this. We're going to look at how you can eliminate the amount of waste that's involved in your innovation process so that you can focus your limited resources in the right place. And the other thing that you told us you really enjoyed was our Office Hours segment. Last time we were joined by Chris Carmichael from TUI, and I'm super excited to say that today we're joined by someone who can really speak to how corporate innovation works inside what is probably one of the world's most beloved companies. We've got Søren Lethen from LEGO Group joining us today. Uh, for those of you that are new to the show, uh, hello, I'm Jacob, CEO and co-founder here at Future Foundry, and I've spent the last, what, 16 years in corporate innovation helping some of today's biggest companies like, um, Hilton, General Motors, uh, HSBC, Walgreens to overcome innovation inertia and invent new ventures, products, and services. And having this ability to be able to innovate in a really systematic, scalable, predictable way is incredibly important, right? Because every established company in every category in every country around the world is operating in this rapidly changing environment of customers, of competitors, and of technology ultimately. And I think in the face of this change, I think it's fair to say that most companies feel pretty paralyzed paralyzed, right? They've witnessed one industry after another become upended by the emergence of disruptive new business models, you know, new delivery methods, new customer experiences. And we've all seen once dominant corporations either sort of withering, leaving billions of dollars in value on the table, and sometimes going out of business for good. And the stark reality, I think, in and amongst all of this change is that the lifespan of Fortune 500 companies keeps decreasing at an exponential rate, whilst paradoxically there's an explosion in the number of unicorns that are being born year on year. Unicorns being companies with a valuation of over a billion dollars. And as of today, there are around 1,200 unicorns in the world with a combined valuation of $3.8 trillion, and they span industries like automotive, like financial services, like health, logistics, travel, and together they've captured the GDP of Germany essentially in market value. And what's so frustrating about that is that many of these new ventures, if not all of them, could easily have been launched by corporate rather than a VC-backed founder. I think especially when you consider, you know, all of the advantages that corporates have over startups in terms of, you know, established reputations access to thousands, if not millions of customers, and that availability of working capital. In other words, our belief is that unicorns really have succeeded for no other reason than because corporates, as the incumbents, have kind of let them. Right. But what if we could leverage all of those advantages of corporates that I just talked about and tap into this change that's happening around us to, you know, build new business models that accelerate growth, to develop new products and services that fundamentally redefine what our business is? And what if we could use this change and use these advantages to reimagine how people are served and to create more modern, relevant, delightful experiences for them? Well, I think the will amongst most corporates is there, but I'm not sure that the ability is right, because developing new things inside established legacy organizations is inherently difficult, right? It is very slow. There's a ton of bureaucratic decision-making going on. You know, it takes a huge amount of time to reallocate resources from existing operations into new initiatives. And ultimately, there's just an inherent resistance to change, right? It's also very risky. You know, new ideas can disrupt existing business models, and they require, you know, a level of financial investment. And that carries, you know, the inherent risk of damaging reputations maybe if they fail. And it's also just really, really complex, right? You need a huge amount of coordination amongst different business units, um, with sometimes quite opposing objectives if you're going to be successful in integrating new ideas into your existing operations. And this is the reason that, you know, Citibank didn't leverage digital payments and invent PayPal. It's the reason that BlackBerry, who restricted, you know, an already very popular and secure messaging platform to their own devices, you know, didn't provide it cross-platform and invent WhatsApp. It's the reason that FedEx, with their expertise in shipping and logistics, didn't invent Shopify. It's the reason that IBM, you know, world leader in enterprise software, didn't invent Slack. And it's the reason that Marriott, you know, not anticipating the potential of the sharing economy, didn't invent Airbnb. And it's because innovating in a big organization feels a lot like you're trying to turn an oil tanker. So in 2020, we built Future Foundry with a mission to solve this problem. So we're the corporate growth incubator, and we work with people that we call frustrated changemakers to help them to overcome this internal inertia by giving them a superpower: the ability to accelerate, to de-risk, and to simplify the development of their next breakthrough proposition. And we do that by combining the major advantages of a corporation with the proven methods of the world's leading startups. And it's this potent combination of our design thinking, Lean Startup, and Agile expertise along with our clients' established brands, their domain expertise, their access to customers, uh, that makes working with Future Foundry feel a lot more like being on the speedboat rather than an oil tanker. So that's me and Future Foundry, but let's get into what we're looking at today. And we're starting on a bit of a sour note, right? But essentially, we're not in a good place with very few exceptions, the global economic outlook for the rest of 2023 is underwhelming, to say the least. And while inflation is slowing in some regions, you know, growth is also very slow. And this is sparking fears of— I can't even bring myself to say it— sparking fears of an R-word, essentially. And, you know, we've all seen the headlines since the start of last year. Nearly 200,000 tech employees laid off, 50,000 of those coming from giants like Alphabet, Amazon, Meta, Microsoft as they look to right-size and weather the, uh, the impending storm. Obviously this cost cutting isn't limited to Silicon Valley. You know, we're seeing it across the corporate world where, you know, the slowdown is a very real concern. Um, this 2023 CFO Outlook survey has nearly all chief financial officers, well, 99% of them predicting budget cuts and 60% of them anticipating cuts to either hiring or to talent retention. Investments. And the problem that we have as innovators inside these companies is that we can't simply refuse to participate in a recession and avoid these cuts. But on the other hand, we also can't stop innovating, right? Because we know that companies who continue to invest in innovation during a crisis experience way better growth and performance post-crisis versus those who scale back investments. So it's kind of incumbent on us to rethink, well, how can we work better under these kind of constraints, and how can do more with less. And the starting point really for this should be your portfolio, right? If you're facing constraints around time, around budgets, around resources, then you need to be pretty brutal when you're assessing all the different opportunities, the different ideas, the different pilots that you're working on. Because I guarantee that in and amongst all of these different projects will be a ton of waste in the form of what we call zombies, right? Now, these are projects that deep down are, you know, a drain on resources. You know, they're not providing anything back to the core business in terms of value or in terms of progress. These projects essentially are the living dead of innovation, and they just won't die, right? So let's get off this slide quickly. But zombies are opportunities, they're ideas, maybe pilots that you're allocating capital, team members' time to that just don't have a very well-defined or compelling purpose. You know, Perhaps you started the project with the best of intentions, but you know those objectives have since been lost in a bit of a fog. They could be quite stagnant projects. You know, perhaps they're trapped in a cycle of endless iteration, maybe some delays, internal bureaucracy, or maybe they just don't have any ownership, right? You know, perhaps you don't want to kill them because of internal politics or fear of failure. And it's these kinds of projects that we see time and time again. That just result in a huge amount of waste, right? And in times of deep economic uncertainty, resources are tight, right? We can't keep allocating them to these projects when we need those resources to focus on the things that are going to legitimize what we're doing as innovators and provide wins back to the core business. So, you know, for your team, if you continue to invest in these projects, that's going to lead to a lot of confusion. quite a lot of disengagement and pretty low morale, right? Which is super damaging because in this climate especially, you know, we need teams to be buoyant, we need to be excited about the contribution that they're making. And, you know, when you think about it from your company's perspective, you know, if it's under considerable financial stress, you've also got to consider that they might just not have the cushion to absorb any more failures, right? So how do we get rid of these projects and make sure that we don't introduce any more waste into the innovation system? Well, the, the answer really lies in what we call fit. Now, before the '90s, the traditional approach to product development followed a pretty linear process where companies would create a product, then try and find a market for it. But this is, you know, something that led to massive failure rates. You know, companies started to realize that they were essentially ignoring market needs. And then, you know, in the '90s, we saw the beginnings of the startup movement, the introduction of Steve Blank's customer development methodology. And this methodology essentially prioritized learning about the customer's problem and finding a market for the product before investing in fully developing it, which sounds like obvious now but pretty revolutionary from a product development perspective in the '90s. And then in the 2000s, this term product-market fit was coined by Marc Andreessen on the left here of Andreessen Horowitz fame, and it's essentially shorthand for being in a good market with a product that can effectively satisfy that market. And then when Eric Ries released The Lean Startup book in the 2010s, this concept of fit got popularized even further. So it took Blank's customer development methodology on one hand, combined it with Andreessen's concept of product-market fit, And The Lean Startup really centered on the idea of developing an MVP or a minimum viable product, testing it out in the market, learning from customer feedback, and then iterating until you find that sort of product market fit. And since then, you know, this concept of product market fit especially has become very widely accepted. It's implemented a lot in the startup world. You know, it's represented a paradigm shift essentially in product development, not just product development, but probably entrepreneurship too, right? Because it emphasises the importance of understanding the market and the needs of the customers first before investing significant resources in product development. And we do that today as innovators in our pilots, right? You know, we make sure that there's sizable market demand for, you know, the new product, the new service that we're developing, because If it doesn't, then investing in rolling those out is going to be really, really costly, right? But product-market fit as corporate innovators isn't the only fit that we need to be aware of, because before we even get into pilots, we have to have ideas, right? And we also have to make sure that, you know, before our ideas even turn into pilots, that they have what we call problem-solution fit. So, um, you know, is this thing that we're working on actually solving a genuine and significant customer problem in a better or maybe a more efficient way than existing solutions do that? Or is it a solution looking for a problem? And before we even get to ideas, you know, we should also be making sure that the opportunity areas that we're working in, you know, align with our company's strategic objectives, with the resources that we have available, the skills, the culture of the business. Otherwise, there's very little point in developing ideas, much less pilots within this space. And These different kinds of fit kind of exist across the innovation lifecycle. At the very beginning, before we even invest in understanding customer problems and developing solution concepts, we have to make sure that we're playing in a territory which has opportunity-company fit. And then when we've invested in understanding customer problems and developing solutions, it's at that point we have to ensure that there's problem-solution fit. And it's only once we've done that that we can sort of run pilots, start to find product-market market fit and generate what is hopefully, um, sort of perpetual growth. But how do you know whether you've achieved fit at these different junctures? You know, if you're reviewing your portfolio, you're looking at the different projects that are in it right now, you're going to need some criteria to look at. So I'm going to break these down for you. So first of all, let's look at opportunity company fit, and I want to show you an example first of all of what great company opportunity fit looks like. So Launch of iPhone in 2007. I know this is a trope, but bear with me because I think it's super relevant to company opportunity fit. Apple was already widely known for its design-focused approach. It had incredible success both in terms of personal computing and in digital music, as we called it then. I guess we just call it music now. They had iTunes on both the Mac and the iPod. And I think now when you look at iPhone in hindsight, it's probably the most natural extension of Apple's existing product line because it leverages all of their expertise in design, leverages a huge existing customer base, and it also leverages, you know, the relationships that they had with, with content providers. And it was a device that Apple could pretty seamlessly integrate into what was already, you know, even before the App Store, quite a thriving ecosystem. So through that lens, mobile phones for Apple, a fantastic opportunity right now. We don't have to go and change the world here with our own versions of the iPhone. That's not what I'm asking you to do. But the point that I'm making is that when you're assessing the opportunity areas you're working within, you need to be able to establish whether it's a good fit for your company. So I want to give you some criteria so that you can assess the current projects that you've got in your portfolio, uh, and also make better decisions about kind of maybe new opportunity areas that you want to spin up. So here, you know, I'd essentially be asking 5 questions, right? The first question that I'd ask is, well, is this an opportunity that aligns with our mission, our vision, our strategic objectives, and also the core values of the business, right? And by that I mean, you know, is it going to support or enhance our mission in some way? You know, would looking at this as an opportunity area contribute towards our company's vision? You know, would it support the key objectives of the wider organization, and does it align with our core behaviors as a business? I'd also be asking, you know, whether you have or whether you could procure all the required sort of financial resources, human resources, other assets that you might need to pursue ideas within this opportunity space. And by that I mean, you know, is there any budget to go and test ideas within this space? You know, have you got the design thinking, the Lean Startup, the Agile expertise that you need to be able to explore it properly? And can you leverage the assets of the core, you know, be they tangible, maybe intangible assets that you need in order to be successful in this space? I'd also ask whether your culture is supportive of the opportunity and whether there's an appetite for it. You know, if your core business wants you as an innovator to focus on disruptive innovation and this feels more like, you know, like an incremental or an adjacent opportunity area, then it's going to be worth rethinking whether you pursue it, right? And if there's a lack of appetite, whether that's because, you know, as an opportunity space it's considered too risky, maybe it doesn't align with the personal goals of your sponsor, you know, it might not be a good use of resources, right? The next question that I'd ask is whether you possess the technical skills, you know, the managerial capabilities, the industry knowledge that you need in order to seize the opportunity. And by this I mean Do you have the necessary knowledge that you'd need to succeed in this space within the business today? Those could be technical skills like software engineering, could be managerial capabilities, financial management, industry knowledge of the regulatory environment, for example. And finally, I'd be asking, does your existing organizational structure support the execution of something within this space? So if you had to spin up a new entity to pursue it, for example, would that be a straightforward thing to do? Structurally. If you're going to need to work with teams in other markets, you know, maybe other team members in different business units, different functions, you know, do you work in a structure that facilitates that kind of collaboration? And if the answer to any of these questions is no, then you shouldn't even think about finding ideas within these opportunity spaces, right? Because they'll get killed later on down the line, and you'll be wasting just a ton of valuable, uh, resource. In the meantime. This is, um, a bit of a throwback, not as much as iPhone, but if you remember Google+, it's a pretty classic example, I think, of, um, bad company opportunity fit. This is essentially Google's adventure into social networking. It was designed to compete directly with Facebook, um, has some pretty unique features that, that I remember. There were, um, like circles, so you could group the people that you're connected with into different spaces like work Uh, hobbies, home. Um, it used Google Hangouts for video chat, but it didn't really resonate with users at significant scale, right? And whilst in that sense it didn't find like product-market fit or problem-solution fit, those weren't really the issue here, right? The issue here is that there is just no company opportunity fit between Google and social networking, right? It should never have been a product. Google is a company that is organized around search, around information retrieval, you know, their core strengths lie in things like algorithms, search optimization, advertising. You know, they don't really have any alignment with social as an opportunity area, which is driven by, you know, very different kinds of user behavior, very different kind of network effects. And in 2019, after a quite painful, I assume very expensive years, this got mothballed entirely. And if you don't make sure that the opportunities on your roadmap are a good fit, for your company, you know, it's going to lead to 3 really wasteful things, right? You'll be putting garbage in the top of your innovation funnel, which, you know, almost always leads to garbage out, or GIGO as IT folk call it. And then when you get to the problem-solution fit phase, you know, you're going to be directing your team to work on all kinds of the wrong things. And worst of all, you'll sort of be delegitimizing corporate innovation in the eyes of your senior sponsors your senior leadership team, right? Because it seems that you don't understand, you know, the ambitions of the organization at large. So you've got to make sure that the opportunity areas you're working in are aligned with your corporate strategy, aligned with your resources, your culture, your skill set, and ultimately that organizational structure that you're operating in. So let's assume that you've looked at your portfolio, you're happy, you know, at a strategic level with the opportunity areas that you're working in, and now you've got to develop ideas within that space. And here what you've got to demonstrate is problem-solution fit, right? And I want to show you, before we get into this, probably my favorite example of problem-solution fit ever. And if you're joining us from the US, or you've been to the US and you've watched TV for more than 2 minutes, you'll be very familiar with TurboTax. So before TurboTax, like, completing filing taxes was insanely complicated in the US, even more so I think than in the UK. Uh, hugely time-consuming, complicated process for a lot of people, right? They had to manually go through tax forms. They've got to read very dense tax code to understand what deductions they can qualify for. Then they've got to like try and calculate those themselves. Very, very daunting, very, very error-prone. You know, most people paid too much tax. Some people didn't pay enough tax and got fined. Some people didn't file their returns and also got fined. So Intuit who at the time were primarily known for B2B financial software— so they invented Quicken, for example— they recognized that there was a huge customer problem here and introduced what is absolutely a superior solution in TurboTax that completely automates tax filing for customers. So it asks them a series of pretty straightforward questions about income, expenses, other sort of tax-related matters, and then it uses that information to fill out the tax forms and it calculates the taxes, and then from there it helps them to find deductions. And rather than paying for the software, um, it's completely free, right? Customers just pay a proportion of that refund. And so not only do I think it's great problem-solution fit, I think it's very, very clever business model. Um, it saves people time, you know, it's reduced the risk of errors, save them a ton of money. And millions of people use TurboTax every year. And this to me is what finding problem-solution fit really looks like. And to establish whether the ideas that you're working on right now or that you have in your portfolio have it. Again, I want to give you some criteria that you can kind of measure against, right? So the first question that I'd be asking is, has the problem been clearly defined and understood, right? And by that I mean, have we spoken to customers and established whether the problem that you're working on actually exists? And if it does exist— and this is a trap that I see a lot of teams fall into. If it exists, do customers care enough about that problem to go and solve it? Does it cause deep enough pain? Without this foundation, you're going to run the risk, I think, of developing solutions to problems that, yeah, people might have, but they don't really care enough about it to pay for a solution. The next question that I'd ask is, does the solution effectively address the problem by meeting the needs and wants of customers? By that I mean, you know, when you've prototyped it, do customers say to us that yes, you know, it meets their functional requirements but, but also their emotional requirements? And does it solve the problem in a better or more effective way than existing solutions? If it doesn't do it in a better way than existing solutions, then when you get later on down the line into piloting and trying to find product-market fit, you're not going to get the adoption or the customer satisfaction that you're looking for.

at that point.

The next question that I'd ask is, do customers find the solution valuable, easy to use? By this I mean, if customers found that it addresses their problem, that's kind of only part of the equation, right? Like, would they pay to use it? If so, how much? Or how much does the problem cost them today? And if they would, then great, but it's also gotta be easy to use, right? If it's creating more problems than it's solving, then that's clearly not a good place for us to be in. The next question that I'd ask is, you know, have we iteratively refined this solution based on customer feedback and testing? You know, if the answer especially to the last question was no, then have we made successive versions or iterations of it? You know, are we improving it based on feedback and insight? And also, have we validated this at scale, right? Not just with a handful of customers in a focus group. And the final question that I'd ask here is a really important one, right? Is this solution technically feasible and commercially viable? You know, can it be achieved technically, you know, either with your existing technologies, existing skills, resources, or by borrowing them and bringing them in? If not, then, you know, that's a pretty insurmountable roadblock. And the next question, you know, the second half of that, is it commercially viable? You know, can you sell the solution at a price that customers are willing to pay, and is the market big enough? You know, desirability really is only a third of the equation in problem-solution fit. You've got to establish feasibility and viability too. And again, you know, you have to be able to tick yes to each of these questions, right? Because these are questions that anyone who ultimately invests in this idea, you know, whether that be for a pilot or for a rollout, you know, those are the questions they're going to ask you. And if you're working on an idea and not generating evidence for these questions, then you're wasting time essentially. These are the only thing that should matter at this stage. In 1993, in a baffling waste of huge amounts of time, money, resources, Pepsi launched this product called Crystal Pepsi— basically clear, sort of caffeine-free version of Pepsi that was marketed as like a healthier, more pure alternative to regular colas. And the company spent a huge amount of of money on this. But the problem that Pepsi assumed people had— so wanting a healthier cola alternative— in reality just didn't exist, right? It just wasn't a concern for most soda drinkers. And they also didn't really associate clear beverages with cola, didn't necessarily see the lack of color as an improvement or a reason to, to switch. And ultimately, like, they didn't find this as a solution to their problem that doesn't exist. Exist to be a compelling enough reason to buy it, right? And in 1994, the whole Crystal Pepsi, uh, misadventure was, was scrapped. So if you don't make sure that the ideas that you're working on solve an actual problem with a demonstrably better solution, that's going to lead to 3 things, right? You'll be spending time working on solutions that you have to then go and find a problem for, which is time-consuming and basically just completely the wrong way around. You'll be working on and prototyping ideas, you be that digitally or physically, that nobody cares about. And you'll be jumping from the relatively inexpensive endeavor of working on ideas into the relatively very expensive endeavor of product development, right, way, way too quickly. So make sure first that you deeply understand the problem, that you have a solution fit, that customers agree that it's a great solution, and that the solution is something that you can make and that will generate a return. Okay, finally, let's look at product-market fit. You know, concepts that we've all probably heard about. I think a lot of people misunderstand it. This is what great product-market fit looks like. When Toyota introduced Prius in '97, you know, it was a time when concerns around rising fuel prices, the environment, were becoming very widespread. You know, there was a massive market of consumers who were very interested in more fuel-efficient vehicles that could, you know, reduce cost at the pump, lower their environmental impact. And the Prius offered significantly better fuel efficiency than anything else on the market at a massively accessible price point. And it's these things combined that helped it to become, I'm pretty sure, the best-selling hybrid in the world. In other words, Toyota was in a very good market with a product that absolutely satisfied it. You know, this is the very definition— well, Marc Andreessen's definition at least— of product-market fit. But to know if you're really finding product-market fit, I'd be looking to establish these things, right? So are we seeing consistently high and improving customer retention rates? I.e., you know, are a significant proportion of users continuing to use our product over time? You know, that high retention rate is an incredibly important metric when you're looking to establish product-market fit because it indicates that people find value in the product or service, right? And they choose to stick with it over switching to alternatives. Now ideally, that's a metric that would be improving too because it demonstrates that we're reducing what we call churn, or customers abandoning the, the product. I'd also ask, you know, are we experiencing substantial organic growth through, uh, things like user recommendations and referrals? So, you know, a primary channel for customer acquisition? Is it things like social, word of mouth, maybe an official sort of referral program? If it is, then that's a really strong indicator that customers find value in what we're building. The next question that I'd ask is, you know, does the majority of our feedback indicate satisfaction with our ability to meet the needs of customers and to solve their problems? So, you know, from a sentiment perspective, is the common theme— you know, it doesn't have to be absolutely everybody can't please all of the people, but is the common theme that people find the product to be worthy of their time or the money that they're spending on it, right? This is a really good leading indicator because it's going to speak directly to that previous point around organic growth. Would the majority of our users be very disappointed if they could no longer use our product? Because that would indicate very high level of perceived value. There's one survey question that we love here at Future Foundry, which helps us to understand whether we're on the right track in terms of product-market fit. And we just simply ask that question, right? How disappointed would you be if you no longer use this product? And if more than 40% of people say they'd be very disappointed, that is incredibly strong evidence of product-market fit. Below that, and we often find that, you know, products tend to struggle to get the traction that they're looking for. And the final sort of question that I'd be asking here are we observing an acceleration in usage as shown by increasing user purchases, signups, activity? You know, you should really be seeing quite a noticeable and increasing trend line in customer activity over time rather than, you know, consistent or maybe sporadic usage, especially if there are more purchases, right? You know, that's a sign that the product is providing value, that people are willing to pay to access that value. And this is what product-market fit is all about, right? It's about these positive signals once you've got a pilot out in the world. And you can't really say that you found product-market fit without proving these things, right? Um, and if you can't find that product-market fit, that's fine, right? But you should kill the pilot and move on to, to what's next. Um, I think Microsoft's Zune media player from back in 2006 is a really interesting example because it's something that actually has quite a lot of company opportunity fit. It has problem-solution fit, but it does not have product-market fit. You know, the market for standalone portable music players in 2006 was already dominated by the iPod, so they're not in a great market. By the time Zune was launched, the market itself was beginning to decline even further because of the rise of smartphones. They can obviously play music, do much more, so that's leading to a decrease in the demand for this sort of standalone media player. And it's also a pretty bulky product, you know, way less intuitive in interface terms to, to the iPod. So this is kind of the opposite of being in a good market with a product that, that satisfies it. And if you don't make sure that the products that you're testing in the real world satisfy the needs of a big enough market, that's going to lead to 3 things, right? You're going to be hiring teams to sort of run businesses that shouldn't really be businesses. You know, you'll be turning things that to date have been relatively cheap to produce into you know, production-ready products. That is a very expensive endeavor, and you're going to be building a business ultimately which requires just a significant amount of investment. You've got to test and de-risk it first by making sure that you can acquire users, you can generate revenue at a significant scale before you start to fully, fully invest. Now, I think if you looked at your portfolio today through this lens, you know, I wonder how many of the projects that you're working on are wasting time, wasting budgets, wasting maybe even hard-earned political capital that you've been, that you've been developing, um, I'd urge you to zoom out and ask 3 things, right? Like, I'd ask, are the MVPs that we have out in the world, are they truly satisfying the needs of a large enough market? Are the prototypes that we're working on solving an actual problem with a better solution than what already exists today? And are they proven to be both feasible and desirable? And I'd also ask, you know, the territories that we're working in, do they align really well with our core business strategy, our resources, our culture, our skill set, our organizational structure? You know, this economic climate that we're in, I think, will be very unforgiving for innovators who are spending their time, their money on innovation theater and are not laser-focused on generating evidence for fit. So kill your metaverse projects, essentially.

I'm joking.

I'm sure somebody somewhere one day will find product-market fit for this. Look, I think the best way to make sure that your portfolio has fit is to obviously be relentlessly focused on it from the beginning, right? And to stop doing anything that is peripheral to gathering evidence for it. At Future Foundry, there's 3 programs that we run with clients to help them to establish company opportunity fit, problem-solution fit, product-market fit. We do it in a very time-bound, outcome-driven way. So our opportunity Navigator program is kind of 3 2-week sprints where we're doing kind of horizon scanning, doing an assessment of everything that we could do, only prioritizing the things that we, that we should do because they have demonstrable sort of fit. Solution Incubator, that comprises 6 2-week sprints and 3 different work streams: one on desirability, you know, what is it that people need; one on feasibility, you know, what could we build; one on viability, how does it make money. And we only really finish this program with ideas that we've got kind of proven problem-solution fit for. And then Market Accelerator, slightly longer programs, 12 2-week sprints where we're focused on designing product-market fit experiments, building out minimum viable products, continuously testing with our experiment toolbox until, you know, we can build a case to say either yes, you know, this has product-market fit, spin it in or spin it out, or like there's no product-market fit here. So please don't spend any more time or any more money on it. Um, if you want to steal those approaches or you want to work with us on those programs, you can find some time to chat with us here, and I'd be really happy to talk you through them, or, you know, just, just, just sit with you and review where your existing portfolio is at, whatever is most, most helpful. Okay, time for a very exciting office hours segment, the bit that you're all really here for.

Very, very excited to have Søren, Concept Director from LEGO, with us today. Søren, I'm mega excited to talk to you and hear from someone who's been there and done that on everything that we've just discussed. So before we get into kind of a Q&A, Søren, can you talk to us a little bit more about kind of you, a bit more about your background, what innovation looks like at LEGO, and what your role is within Yeah, so my role is actually to help the different business units within LEGO to innovate more, you know, more efficiently, more practically, more high-end.

Because there are, you will see this a little while, I have a few examples of how we've segmented innovation into incremental and front-end innovation to actually reduce risk and reduce waste and time. And so we've actually worked on these methods. And I will eventually also come to my role, which is now almost an internal consultant trying to help the incremental business that are so tied down in innovating for the here and now to reduce risk or to reduce cost that they need to look a little bit into the future. So we've actually got 3 levels of innovation that I can unfold a little bit when we Awesome.

Great. I mean, one of the things that I'm really into, I mean, LEGO has like a pretty rich history in innovation, right? And one of the things that I was really keen to kind of learn more about, and when we announced that you were kind of joining us today, a few other people kind of made the same point as well, is how do you make sure that the, you know, like the areas that you're working in, like the territories that you're going after at LEGO, how do you make sure that they— I guess I'm speaking to company opportunity fit here, right? How do you make sure that they align with your core competencies? Like, is there a specific criteria or like a process that you've got in place? Like, how do you, how do you set your strategy at LEGO in terms of those opportunity areas, and how do you evaluate that, that fit?

Yeah, uh, thanks for that. I think what I can do is I can show a few slides because I would actually like to start with how this is not only about setting the processes, it's actually how we also work as a culture. So let me just share with you a few slides. It's always easier to have something to look at.

Let me look at it.

And here you can see little me back in the days when—

Oh, wow.

When I started my legal career.

Only a few years ago, Søren.

Only a few years ago, exactly. No, so basically just want to start somewhere with saying I mean, it's all about innovation culture. And our mission in LEGO is to inspire and develop the builders of tomorrow. And that has a huge impact in, you would say, the long-term investment goals that we're bringing. So you can say, to your question, we have these overarching innovation goals, innovate play, innovate the ecosystem around us, digital transformation, positive impact to the world. No surprises there. But the point being that we as a company, in having these agendas, they steer everything we do, and they actually also steer the operation method. And I think it's important to understand that with our culture, our talent is, is actually structured in what we call leadership playground. And the reason for me mentioning it is this, that innovation and bringing this out to the market is for everyone in the company to do. So we live under these 3 very simple, you know, rules or values within the company. Be brave on behalf of the business. Be, you know, be out there, be inquisitive, be focused on what you do. And last but not least, be curious about the world and everything happening within it. So these values altogether stuff actually forms the way we distribute innovation. So as I mentioned before, it's actually been explained quite simple. We've got, when we got existing play and existing business, it's the core innovation. That's where we drive demand. This is, you know, I always use it as a sausage factory analogy because you kind of, you know, it's reducing risk, it's incremental innovation, it's based on time, But on the other hand, what we see is as soon as we move into new business, new play, that's when we need the front-end innovation. And it's best depicted by just the hot dog stand. We're trying things out. You mentioned it, piloting, being constantly on the needs of people. So basically you can say, if you look at it this way, then the core processes, very much, you know, low waste, low effort, We're just innovating for where we are going. But when it comes to front innovation, that's really where we need the pioneering and creating the future of play via radical experience innovation. So to, you could say, the first question here is really about the organizational strength focusing on what are we good at using the methods that you also described in being agile, in being inquisitive, in jobs to be done. when we are uncovering new needs, but also be extremely firm when you are driving the core business, when you know what you're doing. And that's where that has worked until now. But let me, I think I'll come back later a little bit on where's the future then heading. So, yeah.

What's really interesting about that, Søren, is that like we, so are those, kind of values and focus areas, are those inherited from, from kind of LEGO at a corporate level? I.e., you know, in the team that you're working in, like, they're not your focus areas, they're not your values. Those are the values of LEGO at large, right?

Yes. Yes.

Okay.

And that's really the attempt to say that, that of course, maybe we have easier living than in, in funding innovation, But at large, the company are driving this behavior, which helps tremendously in driving innovation, understanding the need for new play. So it all roots back to understanding the future kids. What are their needs? What can we do for them and their parents?

Yeah, I think that's really, really interesting that, you know, there's very few corporate innovators I speak to that are clear on the sort of opportunity areas that they should be focusing on. And there are hardly any of them that I speak to that are inheriting those focus areas from the mothership as well, right? Like they're usually developing those on their own. So yeah, having that alignment, I mean, just makes things not frictionless, right? But like, yeah, removes a lot of friction around company opportunity fit because the core and the innovation team are heading in the same direction.

Yeah.

And in terms of, like, thinking about those different sort of opportunity spaces, then, Søren, that you've just shared, so how do you make sure that, you know, when you're developing new propositions within those spaces, how do you make sure that they're like meeting those unmet and underserved needs that we talked about earlier at like a big enough scale? I mean, LEGO is a huge, huge-scale business. Like, are there any specific strategies, like different feedback mechanisms that you're using to like collect insight and iterate your way to product-market fit? Like, what is— what is— what does product-market fit finding look like at LEGO?

And a very good question. I think, I think I, I, again, here I've— I came prepared a little bit on, on how we operate But I think what's essential, back to also my intro, is that we think and act audience-first across everything we do. This is, of course, happening also in the sausage factory, but more so, of course, when we are uncovering new needs. So this belief of audience-first has a huge impact on how we operate. And it's the good old Double Diamond model that we're really operating in that you can say, The way to, to solve what you're mentioning here is to identify and prioritize the riskiest assumption. So, so the point being, even though for some people it might seem a little bit overwhelming, that again, oh, let's get to the finish line as soon as possible. It is really a culture around designing for user experiments to prove or pivot, you know, minimum viable product. It has many good names, but the point being, That in order to operate this, you need to think in the double diamond. Sometimes you need to invest a lot in the beginning of the diamond, horizon scanning the jobs to be done. Sometimes you have them and you're able to do it, but then moving that before you've actually proven something here with minimum cost before going in and, you know, carving in steel basically when you want to go. So to the point here being, that alongside this process, what we have set in motion is, of course, a whole array of user experiments from quantification, quality, you name it. We've got all sorts of tools to bring that in before going into radical infield. So really, you know, little panels, little things where we just prove or pivot our hypothesis along the way. What is so interesting is that that's proven and known methods and everything, you know, in normal companies and so on. But what we've also seen in, you know, in our, you would say, intrapreneurship or whatever you call it, that how we can use the same ethnographic methods of questions, being curious, being brave, actually with the stakeholders. So internal and external stakeholder design, lack of better term, but really using business unit markets and specialties and agencies to co-build this message. So what we've actually done in front-end innovation is to align both consumer integration, but certainly also all our experts within and within the vicinity of the company to build these cases along the way. Because at the end of the day, everything about innovation here in this end is about de-risking. So actually, we make this simple model that kind of says, And yes, there is a lot of risk in the beginning, but it's okay. That's where you need to have the uncertainty and risk as long as your investment levels doesn't reflect it. So this simple model you can see is actually how our management steer our innovation portfolio. We have loads of things cooking in the beginning and maybe even just things coming in from the right and there's low investments level in them. But as soon as you start getting closer and closer, we also increase investment and thereby also de-risk. So in the end, it's very simple and then yes, very complex, but it's really that buildup that has really made our long-term investment valuable because we rarely go to market with something that doesn't fit at all. It has happened though.

100%.

Oh, you're muted, I think.

Wow, I've only been using Zoom for like a decade.

So thinking about, so at the end of that process, like if there is an end of that process, you kind of talk about market pilots.

And I guess we'd expect most people to find product-market fit in that pilot phase. But interestingly, like And kind of just out of interest, really, I guess, what's the kind of scale of concept testing and user research that's going on before market pilots in order to demonstrate product-market fit?

And I think actually it depends a lot on what we're doing. But, but you could say we, we do already, already in the first part of the double diamond, go out and do something. So we've processes in motion where you can do, you know, fake door, you know, online fake doors. Like, would you be interested in a new service that blah, blah, blah, just to get some steer? And I think what's really interesting, it's not only about finding evidence and de-risking, it's about listening to consumers also brings you some huge aha moments. In that phase of already, you know, asking commercial questions early on. Like, you know, don't be afraid of going out and MVPing and trying very early. The worst thing that can happen is that you learn something. So I think that would be my major cry out here for everyone listening. Like, experiment, apply an experimental culture in innovation. Try things out as soon as you can. And go out and learn from it, because it's both risk de-risking, but it's certainly also improving your innovation.

So earlier on, when we were talking about problem solution fits, or an I had a really bore, I had an example that I love, but I think a lot of people think is boring, which is TurboTax. Because yeah, we like we we all identify that problem of well, not just paying taxes, but also that problem of you know, like filling in tax returns, all that sort of stuff.

So I love it.

It's a little bit boring as an example. So like, can you talk to us about like some good examples of like products, services that you've been working on at Lego that really demonstrate like problem-solution fit and like speak to what the kind of problem and kind of better solution looks like?

Yeah, so thanks. You know, I think again, It's of course a little bit difficult with a lot of things being secret and so on, but I have a few examples of how we operate. One is the organization part of what this means. And then secondly, some examples of what we've actually built in thinking like this. Because as I mentioned before, so just starting there, in our field of operation, there is this, you know, division that we had up until now. But what we've seen lately is actually that the world, and I think you alluded to it as well, the world is changing so fast. Change is constant and the risk of losing ground is so quick. So we have learned that not only in the core innovation and the front innovation, you need to think ahead. So as an example of successes, and I'll show you concretely what did using this method. So please try it out and tell me what you want. But that's basically my job now is to enable everyone everywhere to innovate from within. That's how we've set it up. And the reason for me telling you this is actually how efficient and how little waste you can create if we go in as internal consultant, helping teams to find their jobs to be done, their, the process. Not everyone can do the same thing, and they only need it ever so often. So we actually go in as innovation consultants and build that bridge between them, because it's really all about future-proofing the brands. That's so essential for long-term success. So what this means in all simplicity is actually that any good example that I'll come will need to be rooted in what we call the 3C innovation thinking. This simple model is how we help franchises within LEGO, being that LEGO City or whatever, to start on the right foot. So I think my point to your question here, the best example I can give is where you have started on the right grounds before you race. So this, you know, toolbox here, is about curating the knowledge and insights you have around what we call the 3 C's: consumer, commercial, and especially cultural insights. We are forgetting in innovation, we can know what consumers say, we can know what commercial goals we have, but the cultural changes around us, how, what that changes. So basically, example number 1, what we identified in preschool is that the consumer, so the parents, they really want these 4 jobs to be done for their kids. When we started looking at this and the portfolio we had, it was extremely clear that we were out of sync with where the parents want us to be. So that's very consumer-y, but it's also very here and now. So again, in order to make that fit, both in commercial and cultural perspective. We have another example here where using this methodology, understanding, I know I don't have time to go through all the details of it, but in principle, just this thinking, if you can apply that, what do we know about the consumer? What are the jobs to be done? What commercial impact are we trying to change? But certainly, and we've seen this again and again, what are the cultural shifts happening out there? There that we should take notice of. So a good example here is that Friends, LEGO Friends, our girls line, and we, you know, we were allowed to say that in the beginning, it's a girls line, not anymore. Again, cultural shifts. But what was so interesting is that it's only 10 years old and it still looks dated if you see here on the left side. So what we did here was to apply and go out and research both the consumer, the commercial, and the cultural impact of the world in change, where empowerment of girls, you know, D&I, all the things actually made us do a complete repositioning of the Friends brand towards a friendship, you know, portfolio and so on and so on. So I think that was just the the basis of it. I hope it gave you a little bit of picture on how you can see we are steered completely by audience first, but also how it's actually efficient because you de-risk, you invest in the right point in time. And more so here with the Innovation Everywhere example at the end, you risk not innovating for the right reasons, for the right society, not only for the right job to be done. That, I think, is the huge, one of the largest changes in our line of the business, and I'm sure in most of yours as well. So again, that was like, I hope, well, a very quick picture of how it operates, but I hope it gave you an open—

Amazing, Søren. Thank you so much.

Like, a fascinating insight into how innovation structured into your process, into some incredible examples.

Thank you so much. If you want to stay up to date on our next episode coming up later on in the year, or you want more corporate innovation thoughts in your feed, drop me a follow on LinkedIn. Let me know what you thought about today's episode, what you'd like to hear about next. Really enjoy hearing from you. And until next time, thanks so much for joining us.

Have a fantastic summer, and we'll see you in the autumn.