Innovation Incubators and Agile

In today’s complex and ever-changing world, we sometimes have to ask ourselves what kinds of opportunities is agile best suited to enable. Is it maintaining existing products? New and interesting features with older, established products? Or is it something else? The idea of innovation incubators inside companies has existed for a while, but let’s talk about why agile might be a better fit for those than traditional products. Sometimes, agile transformations go bad because it’s the wrong answer.

Investment Horizons

SAFe® uses the concept of Investment Horizons to identify the different solutions or services the company produces and determine what the next investments should be. SAFe divides into 4 different “horizons” for investment:

• Horizon 0 – these are those products in the final stages of their life or that are being sunset. There’s no further development on Horizon 0 products.
• Horizon 1 – these are the products currently being used by customers and are what make the company its money. Some active development is happening here, primarily to maintain the service or to continue ensuring parity with competitors. The company still invests pretty heavily in these products.
• Horizon 2 – these are the next generation of products. They might be used in small markets or to a specific subset of customers. Generally intended to be not-quite-ready-for-primetime but may generate some revenue. Development efforts here are pretty active as the company readies this for full deployment to the market. A lot of investment is made here to get these products completed.
• Horizon 3 – these are those projects that are expected to come to fruition in 3-5 years. They’re the “outside-the-box” ideas that could potentially revolutionize the industry or the company’s place in it. A lot of these concepts will never see the light of day, but the company likely invests a good portion of funding these ideas to see if they will pan out.

An Aside

I’ll be blunt and say that most companies I’ve worked with over the years tend to not invest in or even appear to have awareness of Horizon 3, where innovation incubators lie. Instead, they focus very heavily on Horizon 1 with a little funding tossed at Horizon 2. Too many companies are working very hard to achieve or maintain parity; far too few are working hard to leapfrog their competitors. Whether this is a failure of strategic thinking or simply the inability to do more than react, I’m not sure, but I’ll leave that evaluation as an exercise to the reader.

Where Innovation Incubators Live

Innovation incubators, those “startup companies” that exist inside large enterprises are typically funded via Horizon 3. In companies mature enough to actually invest in this horizon, there are a lot of different, interesting, weird ideas being developed. It’s like product brainstorming – there are no bad ideas. We’re not sure what will be the best option for the company or our clients, so let’s try a lot of different things and see what “sticks”.

Innovation incubators allow companies to act a bit like venture capitalists, investing more or less in ideas that seem to have strong potential. It also means those efforts need to be constantly experimenting, constantly finding what works – and what doesn’t – and pivoting to new, innovative ideas. The benefit is that it allows the teams the freedom to fail quickly, reduce learning cycles, and not bet the “family farm” on an idea that may or may not work. At any point, a Horizon 3 effort can be shelved and teams moved to a new idea. Experimentation is the word of the day and innovation is the goal.

Agile and Innovation Incubators

As many companies have tried to adopt agile for their organizations, problems have arisen. Primarily, that agile (despite what some may claim) isn’t a cure-all. I have been in IT for a very long time and I think agile is – by FAR – the best way to do software development. In my mind, it’s not even close. But it’s not the best for everything. There are some products, some companies, for whom agile introduces some friction and may hinder progress rather than streamline it. The ideas of lean and agile can help identify bottlenecks and resolve impediments, but perhaps having a Product Owner isn’t ideal. Perhaps there’s less need for daily stand-ups because of the work being done. Or maybe doing things in timeboxes/sprints introduces more problems for planning than it solves for delivery.

The place where agile can really shine, though, is with innovation incubators. To fail fast, teams have to experiment quickly. To experiment quickly, they need to focus on the needs today, not what someone might need tomorrow or in two weeks. Consequently, this is where the focus on “what’s most important right now” agile provides can really shine.

Using Agile Properly

In an innovation incubator, teams experiment with novel solutions. They should focus on a few items at a time. They should frequently reflect on how things went and what they’re going to do differently. In other words, they work in the way agile methodologies recommend. Because of that, active agile coaching can really benefit these teams.

When we look at the maturity model, the goal is “high-performing teams”. We know that long-lived teams, with good collaboration, and good practices are likely to achieve that. Coaches know how to help that happen. They’re adept at navigating the challenges of the “storming” phase. They understand agile methodologies and the “why” of things. Lastly, they know how to apply lean principles to improve flow. What company wouldn’t want a good flow of new ideas about future products? I hope the answer is “none”.

The Future of Innovation Incubators

It’s agile in Horizon 3 that the biggest gains can be seen for innovative companies. I hear, far too often, companies like Google or Apple thrown around as “good innovators”. They are and they’re far better than most companies. Nonetheless, if those other companies are interested in doing more than maintaining parity, they need to invest in Horizon 3 – and Agile.

Innovation incubators are critical to the success of innovative companies. Agile is designed to “experiment hard, fail fast, learn quickly”. It’s the perfect complement for innovation. Improving flow allows us to see things faster, to test ideas, and to select the winning ideas. Also, faster learning cycles allow us to adjust, experiment more, and find new ideas.

Closing Thoughts

Companies that invest in Horizon 3 are more likely to be winners in their market. They revolutionize their industry. They change their place in the market. Emphatically, innovation incubators are the way to go. Invest in new ideas. Change your world. And let agile be the way you do it.