The lean startup process, with its iterative learning cycles, is particularly suited to transformation and disruptive innovations and involves four parts. These are the business model, customer development, agile development; the fourth element, the minimum viable prototype (MVP). The process involves continuous iterations of customer development, MVP, and business model changes, repeating until a scalable, repeatable business model emerges.

The Front End of Innovation (FEI) Canvas was developed specifically to focus on discovery in large corporations and is divided into four sections and twelve boxes. The four sections – which were patterned after Mark Johnson’s four box business model are the customer value proposition, operating model, profit formula and risk and assumptions.

Large companies, based on implementation experiences from over 30 large companies, typically make the following mistakes: 1) incorrect problem definition; 2) confuse solution attributes and the solution; 3) use the Osterwalder canvas rather than the FEI canvas; 4) focus on the wrong customers; 5) fail to embrace early prototyping and 6) make incorrect assumptions in the areas of channels, cost structures and adoption rates.

Large companies are innovative along the sustaining trajectory, but fail in the development of transformational and disruptive innovation. Two of the reasons for this failure are that transformational and disruptive innovations require a new business model and lack a unifying development process comparable to stage gate. The lean start-up process represents a new paradigm which allows companies to dramatically shorten the time needed to 1) create transformational and disruptive innovation: 2) pivot to a new business model or 3) stop the project. This forth coming article, which will be published as a chapter in soon to be released PDMA toolbook, reviews the principles and methodology of the lean startup approach through the lens of lens of human-centered design principles and lessons learned from implementing the lean startup approach in enterprises.

Leaders at incumbent firms increasingly recognize that in order to sustain growth and protect their companies from disruption, they must innovate “outside the core”—beyond the familiar markets and competencies on which the company has built its existing business. Outside-the- core innovation projects, which target new customers or non-consumers in new markets, can lead to disproportional growth. However, they are also very risky: the odds of success for outside-the- core projects rapidly drop with each step outside the core. Looking at outside-the core innovation projects from a business model perspective can help identify the sources of risk. In a study of six outside-the-core projects, we find that, contradictory to common wisdom, the likelihood of failure is not related to how many steps the project is outside the core. Instead, the risk of failure is influenced by false assumptions about the distribution channels, cost structure, unit margins, and velocity elements of the innovation, which are often carried over from the incumbent business model.

Business model innovation represents a significant opportunity for incumbent firms, as demonstrated by the considerable success of Apple’s iPod/iTunes franchise. However, it also represents a challenge, as evidenced by Kodak’s failed attempt to dominate the digital photography market and Microsoft’s difficulty gaining share in the gaming market despite both companies’ huge financial investments. We developed a business model innovation typology to better understand the complex set of factors that distinguishes the different types of business model innovations and helps define their associated challenges.

Large companies are innovative along the sustaining trajectory, but fail in the development of transformational and disruptive innovation. Two of the reasons for this failure are that transformational and disruptive innovations require a new business model and lack a unifying development process comparable to stage gate. The lean start-up process represents a new paradigm which allows companies to dramatically shorten the time needed to 1) create transformational and disruptive innovation: 2) pivot to a new business model or 3) stop the project. However, most of the published examples are from small start-ups. Large companies, based on implementation experiences from over 30 large companies, typically make the following mistakes: 1) incorrect problem definition; 2) confuse solution attributes and the solution; 3) use the Osterwalder canvas rather than the FEI canvas; 4) focus on the wrong customers; and 5) fail to embrace early prototyping. Best practices to avoid these implementation mistakes will be presented.