The Ultimate Guide on Continuous Innovation: How to Build the Next Generation of Products That Matter

What is Continuous Innovation?

Building what customers want using continuous feedback loops.

We Are Living in a New World: The Rules Have Changed

As products have gone from being delivered in a box to being delivered over the Internet, there’s been a dramatic shift in how customers consume, demand, and interact with products.

This fundamentally changes how products need to be built.

It’s always been about customer pull.

While we have gone through many different product development methodologies over the years, the key thing to keep in mind is that what drove us to change in each of these previous shifts wasn’t simply changing for changes’ sake or simply because a group of people got together and decided to do things differently.

All these previous shifts happened in response to a change in how customers consume products, creating a spike in demand. To respond to this spike, we had to fundamentally change how we built products–from staged to iterative to continuous.

Today, it is no longer enough to build what customers say they want because, by the time you build that, you learn that what they want is something entirely different.

In this new world, the only way to ensure you build what customers want is to engage them continuously.

The stakes are much higher this time.

The old way of building products used to work when there were considerable barriers to entry and few competitors. Even if you got the product completely wrong, you had time to course correct and get back on track.

But fast forward to today, introducing new products has become cheaper and faster than ever, which means there is a lot more competition than before—both from incumbents and new companies starting up all over the world.

Did you know that there were 100M startups in 2018? That's a rate of 1 startup every 3 second!

In the old world, failing to deliver what customers wanted led to failed projects. But in the new world, continually failing to deliver what customers want leads to total business model failure.

This is because customers today have many more choices than before. If they don’t get what they want from your product, they switch to something else.

Conversely, today's most successful companies realize that good ideas are rare and hard to find. And that the best way to find the next big idea is to test lots of ideas quickly.

While the early adopters of this new way of working were high-tech startups like Airbnb and Dropbox, continuous innovation has been increasingly applied in many different domains over the years, and it works even at a massive scale.

Some of the most valuable companies in the United States, like Google, Netflix, Amazon, Facebook, etc., all practice a culture of rapid experimentation.

The best way to find the next big idea is to continuously test lots of ideas.

Speed of Learning is the New Unfair Advantage

In this new world, speed of learning has become the new unfair advantage.

Companies that learn fast outlearn their competition and get to build what customers want.

It's important to emphasize that speed is relative. You don't need to go as fast as Facebook or Amazon to win unless you compete directly with them. In other words, you only need to go faster than your immediate competition to gain a learning advantage.

Tesla is a good illustration of this point.

Building a car is undoubtedly more complex than launching a digital product, and we'd naturally expect it to take longer.

Tesla took 2.5 years from concept to its first car delivery to a customer. It takes an average car company ten years to do this. Tesla was moving at light speed, an essential aspect of its success compared to an average car company.

We'll cover how they pulled this off as a case study. But for now, remember that you only have to outlearn your immediate competitors to win.

When you outlearn your competitors once, you stand to launch a new innovative product and capture market share. But whatever is worth copying will eventually be copied. By continuously outlearning your competition, you stay relevant to your customers and see your business model continuously thrive and grow.

This is the essence of Continuous Innovation:

As opposed to stop-and-go innovation, continuous innovation is a mindset of constantly challenging the status quo — even if you currently are the status quo.

Every company needs to simultaneously optimize its existing business model (sustain) and search for the next evolution of the business model (disrupt).

It's about simultaneously playing offense and defense with the competition.

Why Isn't Everyone Practicing Continuous Innovation

Existing product development processes no longer work when you're moving fast and trying to build products under extreme uncertainty.

Problem 1: When you're moving fast, static plans no longer work

You need light-weight dynamic models that can quickly adapt to your learning.

Problem 2: Execution of the plan is NOT the right measure of progress

Building a product no one wants on time and on budget isn't progress. You need to swtich from output based metrics to outcome based metrics.

Problem 3: You make a few big bets versus making many small bets

Because planning and tracking projects this way consumes a lot of time and resources, you can only afford to make a few big bets at a time.

All Continuous Innovation Articles

This is a complete list of articles I have written on Continuous Innovation.



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