Staying competitive and relevant requires more than just keeping up with the latest trends. It demands a structured and forward-thinking approach known as an innovation strategy. This comprehensive guide will walk you through what an innovation strategy is, why it’s crucial, and how it can revolutionize your business.

From the foundational concepts to real-world examples, we’ll explore how businesses, with or without the assistance of innovation strategy consulting, are harnessing the power of innovation to drive success.

What is Innovation Strategy?

An organization’s structured plan or approach to fostering and managing innovation within its operations is known as an innovation strategy. It defines a precise course for coming up with fresh concepts, putting them into practice, and eventually achieving long-term growth and competitiveness.

Setting objectives, allocating resources, and fostering an innovative culture are all essential components of a successful innovation plan. It can cover a wide range of topics, including customer engagement, process optimization, and market growth. Organizations can adapt to shifting market dynamics, keep one step ahead of competitors, and satisfy changing customer demands and expectations by implementing an innovation strategy.

Benefits of an Innovation Strategy

An innovation strategy offers many benefits for businesses, whether they embark on this journey independently or seek guidance from innovation strategy consulting. Below listed are some of the benefits of an innovation strategy:

Competitive Edge

With the tools and mindset to innovate proactively, this strategy helps organizations to stay ahead of the curve. Companies can recognize and seize growth opportunities, differentiate themselves from competitors, and improve their business innovation strategy by engaging in systematic innovation.

By utilizing external expertise and best practices, incorporating insights from innovation strategy consulting services helps strengthen this edge. As a result, the company becomes more inventive and adaptable, able to respond quickly to shifting market dynamics, satisfy growing client expectations, and keep a solid foothold in the industry.

Structured Approach

A planned and systematic approach to innovation is introduced by an innovation strategy, which is essential for putting creative initiatives into action. Businesses can use this well-structured framework as a road map for creating, putting into practice, and managing their innovation initiatives.

This organized method can be improved further by the assistance of innovation strategy consulting services, which can assist firms in customizing their plans to meet their unique demands and market dynamics. The end result is an efficient and well-structured innovation process that fosters imagination and idea development and guarantees that innovations are in line with the long-term aims and objectives of the business.

Enhanced Creativity

An innovation strategy helps firms become more creative. Embracing an innovative culture motivates staff to think creatively and generate original ideas. This focus on innovation techniques may result in a more dynamic workplace where employees feel free to experiment with new concepts.

Services for innovation strategy consulting can improve this creative environment even more. These outside specialists frequently bring a wealth of knowledge and best practices, sparking original thought and expanding the bounds of conventional problem-solving.

Risk Mitigation

An innovation strategy is essential for avoiding risks related to innovation operations. It is not just about coming up with original ideas. An innovation strategy assists firms in selecting the innovations to pursue, effectively allocating resources, and managing any risks by offering a defined framework and a clear plan.

Including information from innovation strategy consulting services can improve risk reduction even more. They frequently bring a thorough awareness of potential problems and can assist companies in navigating the complicated innovation landscape while reducing risks. As a result, risks are identified and methodically addressed, leading to a more considered and informed approach to innovation.

Improved Efficiency

Businesses may optimize resource allocation, streamline processes, and save operating costs by systematically developing and executing innovations. One of the key components of a well-designed company innovation strategy is this emphasis on efficiency. By identifying potential areas for efficiency improvements, innovation strategy consulting services can boost efficiency.

They provide the organization with a new point of view by highlighting inefficiencies that may have gone unnoticed internally. Costs are reduced, and resources can be redirected toward innovative projects, giving businesses a competitive advantage and increased market presence.

Customer-Centric Solutions

An innovation strategy places a heavy emphasis on creating customer-centric solutions that synchronize innovation efforts with those of the target market. By drawing on outside experience and industry knowledge, incorporating insights from innovation strategy consulting services can improve the creation of customer-centric products even more.

It results in the development of goods, services, and solutions that are precisely tuned to satisfy client needs and provide the most potential value. The success of the innovation strategy as a whole is attributed to the customer-centric approach’s increased satisfaction and loyalty.

Revenue Growth

Organizations can open up new revenue streams, broaden their market reach, and boost their market share by encouraging an innovation culture and systematically pursuing new product or service advancements. By utilizing their knowledge in identifying opportunities in the market and developing effective techniques for seizing them, innovation strategy consulting services can increase revenue growth.

As a result, the business is well-positioned to grow its revenue through new markets, creative offers, and increased competition. The firm is better positioned for long-term market success because of this revenue increase, which also improves financial performance.

Market Adaptation

Organizations can more easily adjust to shifting market conditions and changing customer preferences with the aid of an innovation strategy. Businesses may stay adaptable and sensitive to changes in the market by systematically pursuing innovative solutions, ensuring that their products or services remain relevant.

Using their knowledge of market dynamics and trends, innovation strategy consulting services help improve market adaption. These professionals often have a thorough awareness of the prospects in emerging markets and may help organizations modify their strategies accordingly.

Talent Attraction

An innovation strategy helps the company to be more creative and is essential in luring top talent. Businesses that foster an innovative culture attract creative and inventive people ready to share their ideas.

Businesses become more appealing to potential employees because of the reputation for innovation and access to networks of top talent brought by innovation strategy consulting services. As a result, a dynamic and creative environment is fostered in the workplace, attracting the best and brightest. This gives companies access to the knowledge and innovations of top individuals and establishes the company as a hub for industry innovation and thought leadership.

Long-Term Sustainability

A long-term sustainability strategy is built on an innovation strategy, which is more than just a short-term plan. By utilizing their knowledge in identifying new trends and possibilities that have the potential to propel the organization’s growth for years, innovation strategy consulting services can further improve long-term sustainability.

It puts the company in a position to remain flexible and relevant regardless of changes in markets, technologies, and customer preferences. This tactical approach assures the organization’s survival and puts it on the right track for long-term success in the industry.

Examples of Innovation Strategy in Action

To understand how innovation strategy can drive transformative change within organizations, let’s look at a real-world case.

Alex Morgan is a forward-thinking Chief Information Officer (CIO) of FutureBank. With a background rich in integrating tech solutions in the banking sector, Alex is no stranger to innovation. However, his latest challenge involves implementing a systematic approach to harness consistent and breakthrough innovations for FutureBank.

To navigate the complex landscape of innovation, Alex introduces the Transformation Navigation Team. He initiates a RACI matrix workshop, a simple yet effective means for defining project roles and responsibilities. In the matrix:

R (Responsible): Identifies the person performing the task.
A (Accountable): Ensures completion of the task.
C (Consulted): Provides input.
I (Informed): Receives updates on progress.

With clear responsibilities established, the Transformation Navigation Team is focused on auditing and strengthening internal capabilities. Alex initiates training and certification initiatives, engaging industry experts to ensure that teams are well-equipped and mature enough to take on challenges.

These internal capabilities fortify FutureBank’s innovation engine, ensuring that every idea is rooted in robust processes and expertise. The initiatives include maturity assessment, coaching, mentoring, design thinking training and certification, expert guidance, and collaboration with design and technology partners.

With the Transformation Navigation Team in place and internal groups armed with hands-on training and tools, the journey commences with a focus on Business Strategy. The team starts by refreshing the business model for the bank and reviewing its value proposition for key customer segments, using tools like the business model and value proposition canvas.

Furthermore, they delve into cross-product service maps, outlining key processes from client acquisition to the investment lifecycle. These comprehensive tools offer an end-to-end view of service delivery, highlighting customer-facing and internal processes. They promote a holistic approach, maximize operational efficiency, and foster a shared understanding of processes.

With a shared understanding of the business model and a clear view of gaps and bottlenecks in the service map, the team proceeds to define objectives and shortlist ideas. They use the Innovation Canvas to brainstorm solutions and prioritize experiments that align with the organization’s goals.

Using a prioritization matrix, the team selects three experiments with the best balance of feasibility and impact on the organization.

This case illustrates how an effective innovation strategy, guided by a visionary leader like Alex Morgan, can propel an organization towards consistent and breakthrough innovations while strengthening its internal capabilities.

Final Thoughts

The secret to realizing the full potential of your company and safeguarding its future is innovation strategy. The rewards are obvious, from increasing productivity to luring top personnel and staying ahead of the competition.

Be mindful of the fact that innovation is not constrained by industry or size as you examine examples of innovation strategy. It’s a way of thinking, a will to accept change, and a journey that can take your company to new heights. So go ahead, put these strategies to use, and let innovation be the catalyst for your success.

FAQs

1. What is an innovation strategy, and why is it important?
   An organized plan for encouraging innovation and putting new concepts into practice within a company is known as an innovation strategy. Continually creating and putting into use innovative solutions, goods, or processes, it’s essential for maintaining competitiveness, adjusting to change, and promoting growth.
2. How does an innovation strategy differ from a business strategy?
   An innovation strategy focuses on driving creativity and implementing new ideas, while a business strategy is a broader plan outlining how a company achieves its goals. Innovation strategy is a subset of business strategy, specifically addressing creativity and new product development, which can significantly impact a company’s success.
3. What are the key components of an innovation strategy?
   Setting specific goals, promoting a culture of creativity, distributing resources, establishing processes, and regularly monitoring and improving innovation efforts are key components of an innovation strategy.
4. What are the primary objectives of implementing an innovation strategy?
   The primary objectives of establishing an innovation strategy into effect are to promote growth, boost competitiveness, boost productivity, and develop customer-centric solutions.
5. What are the key benefits of having a well-defined innovation strategy?
   Gaining a competitive edge, encouraging creativity, reducing risks, improving efficiency, increasing revenue, adjusting to market changes, luring top talent, and guaranteeing long-term sustainability in a quickly changing business environment are some of the key benefits of a well-defined innovation strategy.
6. Is an Innovation Strategy only relevant for large corporations, or can small businesses benefit as well?
   All sizes of businesses can benefit from innovation strategies. Maintaining flexibility, adapting to market changes, and creating original solutions are all advantages for small businesses. They can become more competitive and promote growth by using customized innovation strategies.
7. What are some potential risks associated with an Innovation Strategy?
   Resource allocation issues, failure to bring innovations to the market, excessive development expenses, and internal reluctance to change are among possible risks associated with an innovation strategy.

Delivering a service to a customer involves multiple components, technologies and people working together across various channels. This can make it difficult for companies to monitor customer experiences and identify areas for improvement.

Failing to provide a positive user experience can destroy a business – fast! A company must create a seamless service process if it wants to grow and maximise value – this is where service blueprints come in.

What is a service blueprint?

First introduced in 1984 by G. Lynn Shostack, a service blueprint is a map or diagram that provides a visual representation of the steps within a service process.

This gives a company a complete overview of how its service and related user experience is delivered across all channels.

Service blueprint vs customer journey map

A customer service blueprint is similar to a customer journey map, but it goes much deeper. Service blueprinting provides valuable insights into the customer experience, along with all employee actions and additional processes involved in the service.

The main goal of a customer journey map is to understand the customers’ experience. Whereas, a service blueprint is a visual representation of how a company creates that customer experience.

What are the business benefits of service blueprinting?

Build the full picture

A service blueprint provides a company with a complete visible overview of a service structure. This allows businesses to build a full picture of their service processes, along with the employee’s experience and the customer’s experience.

Improve customer experience

A service blueprint helps businesses emphathise with customer needs and understand how a user experiences its product. A manager can track customer interactions related to delivering a service and identify areas for improvement.

Enhancing the customer experience has the potential to double business revenue – 86% of customers are willing to pay more for a great experience.

Improving your customer’s experience should be a top priority for every business owner and service blueprinting can help companies achieve this goal.

Support improvement efforts

A customer service blueprint is a powerful tool that makes it easy for businesses to identify weaknesses and support quality improvement efforts. Service blueprinting can also be used to design an entirely new service process with a human-centric approach.

Gain a competitive advantage

Service blueprints allow businesses to compare their services with their competitors and identify ways to stand out from the crowd.

Managers can also use blueprints to identify potential gaps in their services and determine what actions are needed to achieve the desired goal.

What are the key components of a service blueprint?

There are different types of service blueprints, with some being more visual and complex than others. However, every service blueprint must include five key components to be effective:

1. Customer actions:
   This should include all the steps, actions, choices, and interactions the customer experiences while going through the service to reach a particular goal. In most cases, this information is taken from a customer journey map.
2. Frontstage employee actions:
   All the employee actions that are visible to a customer when they are going through the service. For instance, when a waiter takes a food order from a customer at a table in a restaurant.
3. Backstage employee actions:
   Actions that occur behind the scenes so the customer does not see them taking place. For instance, when a chef prepares a customer’s meal in a kitchen restaurant.
4. Support processes:
   Any additional actions and interactions that support the employee delivering the service to a customer.
5. Lines:
   Service blueprints should also include three lines to categorise each element and identify how the steps in a service process interact with each other.
   • Line of interaction: This line includes the direct interactions between the customer and the company.
   • Line of visibility: This line separates the service activities that are visible to the customer from those that are not visible.
   • Line of internal interaction: This separates the employees who have direct contact with customers from those who do not directly support customers.

What is the physical evidence in a service blueprint?

Evidence is the final component of a customer service blueprint. This should include what customers come into contact with when going through the service process e.g. a store location or a company website.

What other elements should service blueprints include?

Companies can adapt service blueprints with additional elements to suit their business needs and goals. This may include:

1. Time:
   You can add a timeline to your service blueprint to display the estimated duration at each step of the process.
2. Arrows:
   These can be added to your customer service blueprint to represent relationships. A single arrow can show a one-way exchange while a double arrow can be used to show that agreement is required from both parties.
3. Emotions:
   You can display your employees’ emotions in your service blueprint, highlighting how they will feel at each step of the service process.

How do I create an effective service blueprint?

There are some simple steps you can follow if you’re looking for guidance on how to make a service blueprint.

Step 1: Identify your goal

The first step is to define what business goal you want to achieve with your customer service blueprint. You must identify which customer service scenario you want to investigate and have a clear understanding of the main purpose of building a blueprint.

Step 2: Conduct research

You must then gather research about the actions and experiences your customers and employees will have. This will include:

• Customer research:
  Collect information relating to the actions and interactions that customers have while moving through the service to reach a particular goal. This data can usually be taken from an existing customer journey map. Write down the customer experience in chronological order and make sure you identify which customer segment this particular service process caters to.
• Internal research:
  You will also need to gather information about your employee’s experience when going through the service delivery process. This can be obtained through various methods including direct observation and employee interviews/surveys.

Step 3: Build your service blueprint

You can now start mapping your customer service blueprint using the data collected. Make your blueprint map more engaging and interactive using visuals, colours, and more.

Running a service blueprinting workshop before mapping your blueprint will align your team and ensure that the process is collaborative and efficient. LinkedIn provides the following tips for running a successful service blueprinting workshop:

1. Set a clear objective for the workshop in advance so everyone knows what you are working towards.
2. Take the time to prepare for your workshop and make sure that all the necessary materials and information are ready beforehand.
3. Make your customer the focus of everything you do during your service blueprinting workshop.
4. Always hold a debrief session following your workshop to discuss what went well and what could be improved next time.

Step 4: Review and refine

You should review your service blueprint in detail before you share it with your team members. Additional elements like arrows and timelines can be added at this stage to improve the functionality of your blueprint.

Once it is finalised, you can distribute the blueprint to your team members. You may decide to organise another team meeting or workshop to share the blueprint and discuss the outcome.

This will give your employees the opportunity to ask questions about your service process and clarify any issues.

Should I use a service blueprint template?

A service blueprint template is a useful tool that will help you build an effective blueprint for your service process. Leveraging a service blueprint template will save you valuable time and effort when compared to building a service blueprint from scratch.

By downloading our service blueprint template, you can save time and effort in creating your own blueprints from scratch and take advantage of a pre-designed format that follows best practices in service design.

There are plenty of quality free service blueprint templates available on the internet. Take a look at the template by the Nielsen Norman Group if you’re looking for a user-friendly tool for online service blueprinting and want help getting started.

Final thoughts

Service blueprints are powerful tools that help companies gain a complete overview of their services, along with the employee’s experience and the customer’s experience.

Managers can use service blueprinting to identify weaknesses in the service delivery process and optimise complex interactions. This, ultimately, improves the customer experience and helps companies maximise sales and business value.

In our previous blog post, we offered you a guide to understanding your competition. Now, we want to build on that piece and explain how to understand your company’s position within its broader competitive environment. We will do that by explaining three frameworks.

SWOT analysis, PESTLE analysis, and Porter’s Five Forces Analysis are competitive analysis frameworks that allow a company to assess their competition, and understand their own position in the market, in different ways.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a useful way of analyzing these aspects of a business and helps companies formulate future strategies. PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis offers a bird’s eye view of the environment a business is operating in. Lastly, Porter’s Five Forces Analysis is a model that evaluates five competitive forces that form every industry and helps identify its strengths and weaknesses.

What is SWOT?

Albert Humphrey invented SWOT analysis in the 1960s. A SWOT report is often used internally to help a company set strategic goals, but it can also be used as part of a competitive analysis.

SWOT stands for strengths, weaknesses, opportunities, and threats. Below we will elaborate on these:

Strengths: Strengths are things that make a company stand out in the market it’s operating in. They are an integral aspect of an organization. Strengths are factors such as strong brand image, reduced debts, increased capital, loyal customer base, cash flows, geographic location, intellectual properties, etc.

Weaknesses: These can be categorized as factors that act as barriers to an organization when it comes to reaching its optimum level. Weaknesses are areas that a business needs to improve on to stand equally against its competitors. Examples include a weak brand image, increased debts, insufficient capital, etc.

Opportunities: These are linked to external factors that can offer a business a competitive edge. For instance, if there is a change in government policy that is directly linked to your product, it can determine the number of sales you’ll make.

Threats: Threats are external factors that can harm a company and adversely affect its revenue, brand image, and other such sources of value. Examples include increasing cost of production, limited supply of labor, rising competition, etc.

The value of SWOT analysis

A SWOT analysis can be used to home in on new business opportunities. It can also help identify which technologies are needed to keep up with competitors.

Building upon strengths and minimizing weaknesses is a key part of business. A SWOT analysis helps to do this. It also helps to minimize the weak aspects of a business before they worsen over time.

A sound understanding of internal factors such as a business’s strengths and weaknesses can influence the ability to seize opportunities and gauge threats. As tempting as it is to keep up with competitors, a business needs to have the capability to do that. A SWOT analysis is your savior in recognizing the company’s current potential.

SWOT Analysis Step-by-Step

Create a SWOT matrix

Create a grid first. Make a large square and divide it equally into four sections. Label each box accordingly: strengths, weaknesses, opportunities, and threats. All the information gathered will be filled in here.

Define objectives

When creating a SWOT analysis, decide which objectives are of primary importance as you need to include them in each section of the SWOT matrix. For instance, many people use a SWOT analysis when they’re looking to introduce a new product in the market. Make sure you which strengths, weaknesses, opportunities, and threats one will counteract by the end of the analysis.

Research

Conducting a SWOT analysis involves identifying a company’s strengths, weaknesses, opportunities, and threats. A good SWOT report will pull together information from sources of various types, including primary sources, such as company websites, financial statements, and annual reports; and secondary information, such as reporting and news items and product reviews as well as miscellaneous sites like Glassdoor.com.

Tip: Annual Reports are often produced by public companies and are often found in the “investor relations” section of a company’s website. US public companies are duty-bound to report financial statements to the Securities and Exchange Commission; search the SEC’s Edgar database for a company’s 10-K filing. European companies active in the US might submit a similar filing called a 20-F. UK companies can be researched on Companies House; while data quality will be richer for large companies, even modest-sized companies may provide useful data for SWOT purposes.

Strengths and Weaknesses

You can approach collecting and analyzing strengths and weaknesses in the same way, as they will often cover the same ground, for instance “revenue” could be a strength or a weakness. Here are some data points you can examine.

Financial performance

Revenue: the sum total of income generated from the sale of goods and services.
Net income/net profits: Revenue less operating expenses. An indicator of overall financial performance.
Investing cash flow: A company that can invest in its operations or share buybacks indicates a healthy financial position.
Financing cash flow: A company that can secure investment from banks and the capital markets indicates a healthy and attractive company.

For all the above, positive indicators are a strength, and the inverse are a weakness.

Marketing Performance

SEO: How well does the company rank for its top keywords?
Advertising: Does the company advertise? How well do they do it? Do they have a clearly defined brand? What makes them unique?

Word of Mouth Factors

Products: What are online reviews of products and services saying?
Employment: What do ex-employees say about the company?

Opportunities and Threats

Opportunities and threats are somewhat harder to discern as we move from quantitative data to qualitative. It is best to think of this pair in terms of external forces having a positive or negative impact on the business. Often, you will need to think about the company’s context within their industry. Luckily, financial journalists love discussing industry trends, so information should be reliably available.

Industry growth: Does the company exist in a growing industry that’s attracting external investment? Or is it in a low/negative growth industry?
Regulation: Are there any upcoming changes to a company’s regulatory environment that may be a threat or a benefit to the company’s operations?
Geographic: Is the company poised to enter a new geography?
Supply Chain: Is the company dependent on a fragile supply chain? Or
Trends: Is the company vulnerable to the fickle forces of fashion? Are demographic shifts likely to play into its hands?

PESTLE analysis

A PESTLE analysis is a tool that gives valuable insights into an industry’s overall macro environment. PESTLE stands for six factors—Political, Economic, Social, Technological, Legal, and Environmental—factors. These factors are helpful as they help to determine the external influences that can impact businesses. Furthermore, a PESTLE analysis can also be used to identify important risk factors for a SWOT analysis.

Below we examine these factors further:

Political: These are linked to the government’s control and influence over a country’s economy and market. Some examples of government factors are legislative or economic policies. Having a good knowledge of the political environment of a country is important because it can affect the industry in many ways. These include but are not limited to trade tariffs, increased taxation, fiscal policies, etc.

Economic: These factors directly affect a company’s long-term prospects. The economic environment a company operates in can impact its product prices and its supply and demand. Some examples of economic factors include rising inflation rates, unemployment, high foreign exchange rates, etc.

Social: Social factors include factors like cultural norms, health awareness, the rate of population growth, career attitudes, etc. These factors play a pivotal role in helping companies map out their marketing strategies, especially targeting specific customers.

Technological: These factors are linked to technological developments that affect a company’s operations. Take advanced technological advancements like artificial intelligence or deep learning, for example. If companies in this day and age fail to live up to these trends or aren’t fully aware of them, they might weaken their position in the market. PESTLE analysis deals with technological factors like infrastructure development, the pace of technological advancements, etc.

Legal: Legal factors are changes in legislative policies that affect employment, access to adequate resources, tax levels, etc. These factors are essential to consider as they influence the business environment companies operate in.

Environmental: These factors are linked to the ecological aspects of an environment. They include but are not limited to water disposal rules and regulations, energy consumption laws, etc. The environment aspect of PESTLE is especially applicable to industries like tourism, agriculture, etc.

Conducting a PESTLE analysis

The following steps will help simplify the process of conducting a PESTLE analysis:

Brainstorm: Reflect on the various facets of the business that are directly linked to PESTLE. Think about the positive or negative impacts of each and how to fit this data into the analysis. Consider seeking advice from experts outside the industry as well for a greater perspective.

Research: Conduct extensive research for each part of the PESTLE analysis. Look for supporting evidence for each insight. D&B Hoovers for example, is a data company that provides information necessary to analyze the risks involved in a business.

Evaluate: Rate the likelihood of every factor of the PESTLE analysis and how it can impact the business.

Refine: Repeat this process until you have reduced it down to a practical number of articulated and clear points in all the categories of PESTLE.

Porter’s Five Forces Model

Developed by Michael E. Porter in 1979, Porter’s Model of Five Forces model focuses on the five market forces that can determine the factors that affect profitability within a given industry. Using Porter’s model alongside a SWOT analysis can help a company make decisions on whether to increase its presence in its primary industry or invest in an adjacent industry.

Here are the five competitive forces highlighted by Porter:

Competitive rivalry

This force analyzes the intensity of competition in the market, which is dependent on the number of competitors and their growth potential. When there are a high number of competitors that are similar in size and market domination, rivalry is considered to be high. This is because consumers can switch to cheaper products. When rivalry is on the increase, competitors also have advertising and price wars.

Bargaining power of suppliers

This force aims to analyze the power of business suppliers. It determines how much control they have over increased prices of products. The force also assesses how many suppliers of raw materials are available. The fewer the suppliers, the more authority they have. Businesses with a wide range of suppliers are better off because they can control the prices of their products themselves, thus increasing profits. 

Bargaining power of customers

This force deals with the ability customers have to lower the prices of products. This is influenced by the number of customers a company has and how much it would financially cost to discover new customers. A niche customer base means that customers can ask for lower prices. A company with a broader customer base will have more power to set higher prices for products, increasing their profits.

Threat of new entrants

The force of new entrants in a market can affect a company’s power. A company’s position, for instance, could be adversely affected if it costs less time and money for competitors to enter the market the company is operating in. An industry with a robust set of barriers limiting new entrants gives companies the power to raise their prices and increase their ROI (return on investment). Some factors that can restrict new entrants include but are not limited to government policies and capital requirements.

Threat of substitute products

Simply put, a substitute product is a product that another can replace in the market. Both products fulfill the same purpose. Companies that offer products with no substitutes have an added advantage as they can charge customers higher prices. When substitutes are available in the market, customers are more likely to buy them instead, thus weakening a company’s power. An example of substitute products can be iPhone and Samsung Galaxy.

Final thoughts

Part of running a business is having your competitive game intact. This means being aware of competitors’ moves, what makes them unique, and their respective growth patterns. The analytical frameworks we mentioned in this article will offer a deeper understanding of the competition that surrounds a business and great insights into how one can cope and make their business stand out. Competition is a multifaceted phenomenon, and in order to excel at tackling it, it’s essential to understand its many facets and complexities.

Windmill Digital offers a unique range of digital product strategy and design service that will make your products stand out in the market. To keep up with the latest updates, follow our LinkedIn page.

A start-up may find initial success selling one or two products to a small customer base without being too detailed in their business planning. But to scale up successfully, precision is required. A founder or executive team needs a birds-eye view of their whole business: customers, revenue, costs, propositions, activities, resources, channels, and partners.

Attaining that high-level view is easy with the business model canvas. The business model canvas is a powerful strategic tool. It can be used for developing a new business; regrouping and rationalizing if performance sags; or setting a business in a new direction. There are a few ways it does this:

• It helps to crystalize connections between a business idea and how to turn it into a reality.
• It shows a team how it thinks about and interacts with its customers, which can help expose weaknesses in its business model.
• It allows a team to get a clear idea of what the business is or will likely be.

Below is the template Windmill uses to help clients set their strategic priorities.

Understanding the Business Model Canvas for Start-ups

The Business Model Canvas is divided into four sections: Customers, Value, Infrastructure, and Finances. Let’s have a look at what each area means for your start-up.

Customers 

The right-most areas of the canvas.

Customer segments. This area identifies which customers the business tries to serve. While you may want a large customer base, focus on who will buy your product first. Customer segmentation can be categorized by demography, geography, social class, financial class, personalities, etc.

Channels. How do you deliver your value proposition to customers? How are you going to meet them and tell them about your proposition? Where are your customers? The channel is a pathway of communication that links a community to the business (i.e  social media, email marketing, networking, etc.)

Customer Relationships are defined by how a business interacts with its customers.

What kind of relationship do you want to have with your customer? Is it transactional, personal, automated, self-service, or community-oriented?

How will the business get new customers, how will the business keep customers purchasing or using its services, and how will it grow its revenue from its current customers?

Value

The central area of the canvas.

Key proposition is what distinguishes a company from its competitors. The value proposition provides value through various elements such as newness, performance, customization, “getting the job done,” design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability.

Infrastructure

The left-most area of the canvas.

Key activities. What does your business do to achieve the value proposition for your customers? Some examples include consulting, designing, web development, baking, or driving.

Key resources. These are the things you need to perform your business activities. They include office space, computers, hosting, people, internet connection, and electricity, among other things.

Key partners. These are people in your network who can help you. Key partners are external companies you may need to carry out business activities.

Finances

The bottom-most area of the canvas.

Cost structure. What are your company’s costs? Which key resources/ activities are most expensive? What is the structure of your business? Is it cost-driven or value-driven? What is the structure of your costs? Are they fixed or variable costs? Are there additional costs to running a business? These can include legal costs, insurance costs, etc.

Revenue streams. How does your company make money? What value are your customers willing to pay?

There are many different revenue models:

• Pay per product
• Fee for service
• Fixed rate
• Subscription
• Dividends
• Referral feeds
• Freemium
• Equity gain

Conducting a Business Model Canvas Session

Filling out a business model canvas is ideally suited for small team in a workshop environment.

• Team of 3-5 participants
• Multiple colors of post-it notes 
• Sharpies
• A big sheet of paper or whiteboard
• 1½ to 2 hours of dedicated time

Step-by-step

1. Set the stage. Before you start, work with the group to explain the process and ensure everyone is aligned with the why’s and how’s of the session.
2. Fill each of the nine sections one-by-one by putting your notes on it. Start with the customer section on the right of the canvas, followed by value proposition, infrastructure, and finance. Try to map the most important aspects first and describe your criteria clearly so that the document is easy to interpret by someone seeing it for the first time.
3. Each value proposition needs a customer segment and a revenue stream. If you have multiple customer segments, use a different color of Post-It notes for each. Colored Post-Its will help you see the value proposition and revenue stream for each segment better.
4. Current state vs. new business. Are you mapping an existing business or its future state? Make sure you don’t mix the two—this is an easy trap to fall into. Mapping both current and future will allow you to identify any gaps. Put your best guess about customers, markets, infrastructure, etc. Assumptions are OK at this stage and can be replaced later as you gather data.
5. Compare business models to find the best via a customer segment or pricing model. You can have discussions within the team about the pros and cons of each.
6. Test it. Some elements of the canvas are easier to test than others, such as channel, revenue model, customer segment. For example, you can run A/B testing to test customer segments and the revenue model. Test what you can to generate early insights about the viability of your business model.

The business model canvas is one of the many tools Windmill uses as part of our  digital product strategy services. With our help, you can accelerate your start-up’s growth strategy with confidence. Together we can rationalize objectives and create exciting web and mobile app concepts. 

For further reading on Business Model Canvas framework, we recommend Business Model Generation by Alexander Osterwalder.

In this article, I will talk about four common methods of prioritizing features for an MVP. But first, let me get the basics out of the way. 

What is an MVP?

MVP stands for Minimum Viable Product, which to me always sounded like the crappiest possible version of something you can sell. But it’s not that. An MVP is a version of a product with just enough features to satisfy early customers and provide feedback for future product development.

Let me stress “satisfy” and “provide feedback”. Firstly, the user experience should still be good, even with this minimum set of features. Secondly, it’s the feedback that holds the critical value, providing the product team with validation about features and assumptions and thus guidance for the product’s future direction. We all need validation from time to time.

What is MVP Features Prioritization?

Before work on an MVP begins, the product team will have created a full list of all the features they want their product to eventually have. Such a list may be extremely long—long enough that deciding where to start is a puzzle in itself.

Thankfully, various methods have been developed by various people to solve that puzzle. I will be discussing methods called MoSCoW, FP Matrix, Story Mapping, and Kano. Features Prioritization helps to define boundaries between wants and needs. It helps designers think dispassionately about which features are core and which aren’t. It’s like an editing process for your features—kill your darlings and all that.

Each method of prioritization has its own set of use-cases and pros and cons. Some methods are intended to provide rapid orientation for the design team; others are more involved, bringing in decision-makers and taking into account effort, user flows, and even cold, hard cash considerations. There is a method for teams of every size and budget.

How does MVP Features Prioritization fit within development processes?

Most design teams work under a broad framework that starts with an idea and ends with a market-ready product. Examples include NPD (new product development) process and Design Thinking, which is the method I am most familiar with. The design thinking framework is structured thus: empathize, design, ideate, prototype, test. Alternatively, the NPD process follows the structure ideation, product definition, prototyping, detailed design, validation/testing, commercialization.

In both cases, MVP Features Prioritization occurs in the definition phase, after research but before Information Architecture (if you’re doing it) and before you start building specific user journeys.

Research is vital to successfully prioritizing MVP features. Research provides the data on which to base decisions. Without it, prioritization is just a matter of opinion, which is no good and will cause arguments. Indeed, even after research it is possible that members of a design team will have a clash of opinion over which features to prioritize. In the case of deadlock, the best approach is to conduct additional research, which could be further interviews or user flow testing. Windmill has done a three-part series on how to get the best data from your user research, which I recommend reading.

Common Feature Prioritization methods

Now that the scene has been set, it’s time to dig into the four most commonly used methods: MoSCoW, FP Matrix, Story Mapping, and Kano. I have ordered the five roughly in order of increasing complexity.

MoSCoW

MoSCoW is a straightforward method of prioritizing features. It allows for four classifications of features: Must-haves (Mo), Should-haves (S), Could-haves (Co), and Won’t-haves (W). But how do you tell a should-have from a must-have or a not-needed?

Must Have category is used for features that are critical to the current delivery timebox in order for it to be a success. These are features that form what is sometimes known as a “walking skeleton” – the barest bones that will form a product that’s functional and meets legal/regulatory requirements, but not one that would be competitive in the marketplace.

Should Have are the features that make your product worthwhile existing, that make it competitive. 

Could Have is a category for features with uncertain revenue potential and which aren’t so crucial for market visibility. These most likely won’t make it into the MVP unless the product is very well-funded.

Won’t Have are the features that are not critical and won’t be in the MVP. Features like alternative colors.

MoSCoW Method Pros and Cons

Pros: MoSCoW can be a quick process, orienting the design team in as little as thirty minutes or within a single workshop.

Cons: MoSCoW does not take into consideration non-design points of view, such as effort and cost/time, or involve technical representation.

Feature Priority Matrix

Feature Priority Matrix is similar to MoSCoW in that it has four priority categories. Where it differs is that it introduces effort as a second axis of decision-making.

The second axis allows for the categorization of features that are both useful and easy (or useless and difficult). As such, the four buckets differ somewhat from their MoSCoW equivalents.

Big Bets are features that add great value to the product but take considerable time and effort to develop. Quick Wins also add great value but are relatively easy to accomplish.

Maybes are roughly analogous to the “could-haves”: features that are easy to develop but of limited usefulness. And Time Sinks are low-impact features that are nevertheless high-effort.

The inclusion of effort increases applicability to real-world situations that a team might encounter. For instance, when discussing priorities with a client, it is easier to make the argument that a certain feature they want is considered a time sink, and thus should be excluded from the MVP. Or, with two weeks until launch, you can prioritize high-impact features with a short development time.

On the downside, without technical representation, effort estimates can be inaccurate.

Story Mapping

Story Mapping is my favorite method and the one I’ve used most frequently. The method introduces User Journey into prioritization. Features are added under their respective activities and ranked according to necessity. Story Mapping provides a broader perspective on the product while allowing for more granular features than in prior methods. 

The topmost features are designated as the Walking Skeleton. A line is then drawn between the columns that designates features for inclusion in the MVP.

One advantage of Story Mapping is that, thanks to clear representation of user activities, it’s easier to spot missing steps. A short list of features under one User Journey indicates that that journey might not have been mapped out fully. 

On the downside, an example story map is one thing, but a real-world story map can be a huge, evolving thing. Duplicates will be common and the map will require dedicated effort just to keep it up-to-date.

Kano

Named after the Japanese professor who invented it, Kano is the last method of Features Prioritization I’m going to discuss. It’s the most complex of the methods and the first to include money in the prioritization equation. And as you may well know, there are no short conversations when money is concerned.

Kano maps satisfaction against effort/money, and identifies four types of product features.

Basic features are similar to the Must-have MoSCoW features, but basic does not necessarily mean cheap. You will be spending a lot of money on things that are so expected that they do not contribute positively to satisfaction. That’s why the Basic curve does not even touch the neutral satisfaction line. A car, for instance, has a huge number of expensive, basic features that have to be included as given.

Neutral features don’t add much value. Perhaps they have limited use-cases, such as the extremely niche features that can be found in Excel that barely anyone uses. 

Performance is where we plot features whose quality can be a differentiator. Common examples include screen resolution and fuel consumption/battery life—high resolution and battery life would be great; low resolution and battery life would be unacceptable. 

Lastly, Delighters are features that provide a key competitive advantage and make up your Unique Value Proposition. They are novel features that people want to show their friends. Every phone needs a screen, but a really high-quality screen can be a major selling point. For instance, color, high-definition, touch, ultra-HD, and foldable screens have been delighter features at one point or another over the last 20 years. But screens also demonstrate how delighter features drift towards basic over time: the even ultra-HD is pretty much a given on modern mobile phones, leaving folding screens as the only one that people might want to show off to their friends. 

MVP Feature Prioritization takeaways

Each of the methods has its own use-cases and pros and cons.

• Features prioritization frameworks help design teams know what to include in the MVP.
• For smaller teams with lower budgets, MoSCoW might be the best option.
• Features Priority Matrix accounts for effort and can be used to manage stakeholder relationships.
• Story Mapping groups features according to User Journey, providing a big picture of your product.
• Kano accounts for cost plotted against satisfaction.

Features prioritization is a key part of Windmill’s product design, development and strategy services. Find out how Windmill can bring your ideas to life.

Bio: Yuliia Kharkhota is a Senior Designer at Windmill. Qualified in UX discovery and synthesizing research results, Yuliia earned her stripes working on product start-ups in e-commerce and healthcare. Since the start of 2020, she has been part of a Windmill design team working on developing new fintech products.

Great teams can self-organize, self-start, and work self-sufficiently. And the right project management approach can enable this proactivity — but first, we have to understand some of the fundamental challenges that might keep teams from working independently.

The science behind great teams is becoming a huge focus in the marketplace. Amid this search for optimal team management paradigms, a “self-sufficient team” has become one of the hottest buzzwords.

A self-sufficient team is an empowered work unit and can function optimally with minimal or no supervision.

To build self-sufficiency in a team requires the identification of key indicators that exercise broad operational goals, because building self-sufficiency in a team is not a one person job. And there are some key challenges in attaining self-sufficiency of a team. Let’s take a look:

What challenges inhibit a team’s self-sufficiency?

• Lack of product vision.
• Lack of explicit prioritization.
• Absence of a clear “definition of done.”
• Failure to take responsibility
• Lack of communication

Challenge #1: Lack of product vision

Teams can’t be truly self-sufficient if they’re only familiar with their own individual tasks. Team members should have a clear understanding of the overall “why” of their project, and that includes a perspective on its key strategic underpinnings. Product vision not only drives greater personal investment and wise decision making, but also a more self-sufficient capacity for confronting any challenges that flow down the strategic imperative, from priorities to requisite tech knowledge.

Challenge #2: Lack of explicit prioritization

In a truly self-sufficient team, team members pick up a task from the backlog and start working on it without having to go to their manager from time to time. Looking back to the previous challenge, strategic awareness is a great first step for enabling more fluid, self-directed task management. More specifically, managers require an explicit prioritization scheme to keep their team members working in unison towards the ultimate goal. Smart, explicit prioritization allows the full team to apply their skills to solve key issues explicitly without a manager’s intervention.

Challenge #3: Absence of a clear “definition of done”

Teams need a clear “definition of done” – a specific description that marks the completion of their work. Poorly defined endpoints lead to sprawling efforts and missing out of key tasks – a definite checklist needs to be formulated to ensure that every work has its proper definition of done.

For example, in the case of a software development team, the following definition of done can improve self-sufficiency:

• Automation & manual testing
• Peer review
• Customer documentation
• Product manager and business reviews

Challenge #4: Failing to take responsibility

A self-sufficient team needs to hold each member of the team accountable for their work. This practice, however, shouldn’t come at the expense of ignoring divergent responsibilities based on an individual’s skill set. Hence, everyone in the team, should take responsibility of their deliverables, regardless of one’s level of expertise.

Challenge #5: Lack of Communication

Lack of communication is anathema to self-sufficiency and proactivity. Feedback should be focused on addressing the issue and keeping communication open among the team. Mistakes happen, and they’re far more costly when they’re persisted or ignored until the last minute.

In conclusion

As prominent studies make the business value of team performance more tangible than ever before, the integration of best practices for building effective, self-sufficient teams is essential to delivering efficiency and productivity for businesses. Hence, firms can’t just wave their hands and create self-sufficient working groups. Developing self-sufficient teams requires solving key management challenges to institutionalize a proactive business culture.