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Pathways to Scale

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Why planning your innovation expedition helps avoid a lot of trouble on the journey…

Image: Dall-E via Bing

GUEST POST from John Bessant

When I was a child a big feature of the social landscape was the annual visit to my uncle’s house on Christmas Eve. My dad came from a big family and they’d gather at his brother’s place to celebrate; my kid brother would already be asleep but I would sit in the small room next to the place they were all gathered, drinking, talking, occasionally singing. It was warm there; a small electric fire in the grate and a blanket to wrap myself in if I felt the cold.

Which was just as well since I invariably spent the evening with my nose in a book. Not just any book; as soon as we arrived I’d make a beeline for the bookshelf and haul out John Hunt’s account of the ascent of Everest. And I’d spend the evening while the ice crawled up the windows outside the room I’d imagine hearing the wind howling against the flimsy side of my tent as we shivered over a primus stove, trying to warm ourselves and get some rest before tomorrow’s big day. The last painful yards towards the summit…..

I was fascinated by the scale of the thing; a huge expedition, involving over 400 people (362 of them porters helping carry the 5000-plus kilograms of equipment) and relying on the intimate knowledge of the mother mountain held by the 20 Sherpas in the team. Those Nepalese guides had grown up in the shadow of the peak and knew to fear and respect it. The months of planning in smoky rooms in London clubs, the assembly and trek towards the base camp and the allocation of roles to help lay the foundations for what would certainly not be a simple walk in the park.

The extended discussions around which paths to take, the weighing up of different challenges along the prospective routes. Obstacles reckoned into the equation and balanced with the specialist skills and equipment needed to tackle them. A whole new language of cols and crevasses, of pitons and crampons to be learned, a crash-course in high altitude physiology and technology to be mastered.

And that was all before they even took their first tentative steps up the slopes.

It was engrossing, exciting and scary; for an 8-year-old kid whose experience of mountaineering extended to scrambling over the South Downs during our annual trip to see Grandma this was heady stuff. And as the evening wore on and we approached the summit, so it became a race against time. For the climbers, whittled down to Hilary and Tenzing, struggling up the last stage, their oxygen and energy running low and storms looming.

And for me hearing the chatter from next door rise to the climax which portended the taking of farewells, the wrapping of my kid brother in a blanket to continue his pre-Santa sleep in the car and me being bundled into a coat. Would I get to the summit in time — or have to wait until next year to continue the journey, abandoning mine at the eleventh hour?

I took a couple of lessons from that book, the first being that I’m not cut out for mountain climbing. There have to be easier and still thrilling ways to get your kicks and ‘because it is there’ isn’t a good enough reason for me to devote my energies to that particular kind of madness.

But the other is a healthy respect for people who scale mountains successfully. It takes a lot of planning, great team work and an approach to uncertainty which is all about agility and pivoting, adapting and improvising your way upwards.

Pretty much the key ingredients for successful innovation — and certainly relevant to another kind of scaling journey, enabling great innovations to have impact.

Because taking an innovation from a small-sized success story to something which delivers value at scale is not an easy one. The Holy Grail of impact has a lot in common with that elusive quest pursued by King Arthur’s knights, taking them along strange paths, meeting with dragons and disasters and lasting a long time. Similar odds of success too.

Having spent a long time focused on the challenges facing start-ups the innovation spotlight is now moving to the question of scaling — and there’s a helpfully growing body of knowledge and codified experience around this theme. Including the important decision about which route to take for the journey to scale.

One thing about mountain climbing which I remember thinking about when reading my Everest book was how they chose which route to take. Faced with 29,000 feet of sheer white walls with the occasional dangerous looking black rock poking its jagged edge through the snow like a knife through a curtain, how do you decide which path to take? It’s not as if there are well-worn tracks and clear signposts which you can follow — all you have is a lot of very unfriendly and treacherous ground on which to try to make your way.

It’s the same with scaling your innovation. Choosing your preferred pathway to scale is a key first stage on the journey; fortunately — like today’s Everest climbers — there’s a wealth of experience available from previous attempts and some important lessons on which we can build.

In particular we need to see the choices available as lying on a spectrum where we trade off additional external involvement with giving up a degree of control.

It’s a strategic decision, trying to balance the resource commitments you’ll need to make with the amount of control you want to retain. And with deciding what parts of your innovation knowledge are core, what parts are modular and can be adapted and customized with others in mind and what parts are you prepared to let others engage with, ‘hacking’ their own version of your ideas. Scale stories give us valuable clues about possible options, which include not doing it!

Some innovations aren’t really about a scaling journey. They work for a particular problem in a particular context; what’s needed for impact over the long-term is sustainability, being able to continue to deliver over an extended period of time and becoming something which is used and relied upon.

But if you are going to aim for scale then your choices include:

· Parachute — develop the venture, then try to get acquired, a classic start-up exit strategy. Let someone with the experience and the resources buy your solution, let it go. Easy on paper but you give up all your control and can only watch from the side-lines as your venture develops, and hope it’s in safe hands…

· Go it alone — keep on adding staff and spreading your solution across different geographies, gradually paint the world (or your chosen part of it) in your colors. There are plenty of advantages to doing this — mostly you keep control and you can directly manage quality, message, brand, etc. But the downside is you’ll need a lot of people and resources and you’ll pretty soon reach the point where you need to rethink your structure. The old tight-knit start-up team has to give way to a structured organization, complete with policies, procedures and a slowing down of the decision-making process. Plus you’ll need to adapt your solution to different local conditions — compatibility. And cost management will be important, finding ways to grow without bloating.

In reality this organic growth kind of approach can’t be a solo act — there will be things you need to outsource like legal services, manufacturing, distribution or maintenance. And it can also take time to build your own networks.

· Replicate — maybe your solution idea is one you think will work simply by replicating, placing the same offer in different geographies with only minor tweaks to help it fit. If your solution is something which can be ‘packaged’ and exported — a plug’n’play option — then this can work. It can either be a ‘grow your own’ approach, repeating the pattern by putting down your footprints on an increasingly broad geography. That’s the kind of route followed by IKEA and many other retailers, embodying their innovation solution in something which can be replicated.

Or you can franchise, allow others to take on the task and replicate on your behalf, sharing the revenues and building on your original innovative efforts. That’s the route which McDonalds has followed, exporting its original innovative fast-food format to over 39,000 locations around the world. But as Ray Croc, their scale architect realized, there’s a critical need to make sure the rules are clearly codified and then control via the franchise agreement so your proxies don’t damage the brand, compromise quality or change the core product. It’s a kind of remote control based on a clear constitution….

· ‘Relay replication’ — another version which involves another organization adopting and using your solution. Like franchising it requires protocols, training, standardization of core elements and processes but it also allows the adopting unit to continue to adapt and innovate within agreed parameters. A classic model here might be the diffusion of chemical plants like oil refineries; the core technology is transferred and the user learns to operate. It needs more than simple delivery, not plug n play — it involves a shared extended handover process until the user can make ‘product in a bottle’ with its own staff operating the equipment.

The advantages here are that you learn every time as you coach different organizations in the use of your innovation, plus there’s the chance that their downstream learning feeds back to you and allows you to improve your innovation. But it takes time and resources to ensure a successful handover, with key knowledge being shared through training, manuals and protocols and a long-term commitment to support.

· Licensing is another variation on the replication theme where other players can take on and (depending on the terms of the license) do things ranging from simply selling the core package through to adapting and extending it to suit local conditions. The big advantage is that other players are putting their shoulder to the wheel, helping spread the innovation, plus there’s a direct financial return to the original innovator. But once again it does involve letting go of control.

· Open source/open licensing — much commercial innovation is about finding ways to appropriate the benefits. So there’s pressure to keep a tight rein on what’s shared and how. But if you want to spread something, especially a novel approach, you might want to open up more to accelerate diffusion and seek your returns from being a first mover, growing with the market. There’s plenty of examples — Philips wanted to change the way we consumed recorded music in 1993 when they launched the Compact Cassette and so licensed it for free to others like Sony and Matsushita. It makes sense — if you are trying to establish a new ‘dominant design’ and move the world away from the current incumbent then recruiting others via open licensing is a good road to take.

And in the world of social innovation this has particular relevance; innovators who want to change the world for the better face the same challenge and recruiting others to the cause offers one way of doing so.

There are several advantages to such an open approach, not least it recruits many innovators who may help improve on your ideas. Communities of practice and using the crowd have become powerful innovation engines through this approach of free sharing; Linux is a good example.

Image: Dall-E via BIng

Lego’s approach to the hackers who started to modify the original ‘Mindstorms’ product is interesting here; they were presented with a different option to the traditional lawsuit which they might have been expecting. They were invited to Denmark to add their innovative ideas to those of the core design team!

But the downside, of course, in such open approaches is the loss of control and the risk that the innovation may be hijacked or developed in directions which do not match those of the original authors or reflect their social values.

· Strategic partnerships make sense where there is a clear need for ‘complementary assets’ of knowledge or other key resources and where win-win arrangements and contracts can be put in place. Christopher Sholes and colleagues had developed a great solution to the typewriter opportunity back in the 1850s but it took their strategic partnership with Remington and their accompanying mass-manufacturing and marketing to scale their innovation.

· Multi-player consortia may be needed when the range of complementary assets needed goes beyond a single partner. Sears and Roebuck pioneered the remote retailing model with their mail order catalogue approach but they needed to bring together many other players into the model to make it work — finance houses, logistics and distribution and a wide range of different suppliers. Boeing and Airbus do the same today, orchestrating extensive networks of players and partners to deliver their aerospace solutions at scale.

Such consortia bring real power to the scaling challenge but also require careful integration around a core mission. Managing such ‘strategic networks’ is well-known for its high transaction costs and co-ordination challenges.

· Value network and ecosystems — today’s innovation language extends this multi-player game, recognizing that there is a need for multiple players to work together to create value at scale. The challenge is that not all of these players have the same goals or aspirations so balancing their needs with the overall ‘mission’ becomes a tricky balancing act. It’s also important to recognize that such ecosystems don’t just have shared value creators in the mix like our strategic partnerships; they may also involve other players who affect the journey to scale by shaping the ways in which the value creation game is played. Examples of such shapers include government regulators, trade unions and standards organizations.

Once again this has particular relevance for scaling social innovation where system change which delivers real impact may depend on finding ways to bring many diverse players, like government agencies or regional authorities onside. As an influential IDB report puts it, such collaborations require ‘…different actors to coalesce around a shared set of priorities and best practices’.

· Platforms — we’re also now seeing the rise of platform businesses which enable scaling through linking innovators and markets more effectively. The Taobao market approach pioneered in China mimics in many ways the ecosystems around Apple’s developer platform or much of the Amazon operation. For small start-up innovators such platforms become a powerful alternative route to scale, but at the cost not only of accessing the platform but also in letting go some degree of control.

For any innovator climbing Mount Scale remains a key challenge. Meandering around the foothills may be a pleasant way to pass the time but if you want your innovation to have real impact then that peak has got to be climbed. Which means putting together and planning your expedition with the kind of care and attention John Hunt brought to his Everest team. And my guess is that his reflections probably have relevance in the world of innovation. Working out the most appropriate route up those slopes is something best done in the comfort of base camp rather than halfway up the mountain with the wind howling and the snow lashing at your face as you realise that the other path might have been a better one to take….

Image: Dall-E via Bing

This blog is based on our forthcoming book ‘The Scaling Value Playbook’ — click here for more details and to pre-order

You can find my podcast here and my videos here

And if you’d like to learn with me take a look at my online course here

Image credits: Dall-E via Bing, John Bessant

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Scale Your Innovation by Mapping Your Value Network

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How understanding the players in your game can help you scale successfully

Scale Your Innovation by Mapping Your Value Network

GUEST POST from John Bessant

There comes a time in innovation when you realize you might have taken on something a bit too big. No matter how hard you throw yourself into the challenge, creating value from your idea is going to need a little help. Changing the world, or even a small piece of it, takes a lot of push. That’s the moment when you realize you need ‘complementary assets’ – the ‘who else?’ and ‘what else?’ pieces of your innovation jigsaw puzzle.

It’s a challenge at the very beginning – how to put together a network of people and resources to bring your idea to life? But it’s an even bigger challenge when it comes to scaling innovation – how to get widespread adoption of your ‘best thing since sliced bread’ innovation.

Something which Otto Rohrwedder, the inventor of sliced bread (or more precisely the machine which enabled it) came to understand. He spent fifteen years working to develop and scale his invention and set up the Mac-Roh Company to launch his great idea. Only to see it arrive with more of a whimper than a bang. The bakers to whom he tried to sell it were underwhelmed. They thought the machine too complex for everyday production, it was bulky and took up precious space – and they weren’t convinced of the need anyway. Teetering close to the edge of bankruptcy he persuaded a local baker, Frank Bench, to invest and install the first machine.

On July 7, 1928, the first loaf of commercially sliced bread was produced by the Chillico the Baking Company of Missouri and sold under the brand name Kleen Maid. And while bakers had been skeptical of the benefits local families in the mid-West were much more enthusiastic. As a review in the local newspaper (the Constitution Tribune) put it:

“So neat and precise are the slices, and so definitely better than anyone could possibly slice by hand with a bread knife that one realizes instantly that here is a refinement that will receive a hearty and permanent welcome.

Within two weeks bread sales from the bakery had increased by 2000%! The idea began to take off across the country and two years later the New York-based Continental Baking Company began using Rohwedder’s machines to build an entire business around sliced bread. Their product – Wonder Bread – (and the accompanying marketing campaign) helped lift awareness to a high level. By 1933 almost every bakery in the USA had a slicing machine and 80% of the bread produced in America was sliced

Otto isn’t alone; many innovations which ultimately scaled successfully spent a long time in the doldrums, great ideas which drifted because of the lack of partners to give the required momentum. J. Murray Spangler’s invention of the electric vacuum suction sweeper nearly wheezed its last before it could make it into everyday home use. It was only when he connected with William Hoover that the venture took off. Mark Twain’s enthusiasm for the typewriter was that of an early adopter but the only way Christopher Sholes and his colleagues could get their machine to a widespread market was by teaming up with the experience of the Remington company who understood mass production, marketing, logistics and all the other ‘complementary assets’ they needed to scale their innovation.

And Earl Tupper’s brilliant bit of alchemy in turning black sludge waste from oil wells into brightly colored polypropylene storage vessels signally failed to impress American families until the link-up with Brownie Wise who brought her social marketing skills literally to the party. Home demonstrations via a social get-together not only accelerated sales but also laid the foundation for a powerful new addition to the marketing repertoire.

So scaling innovation is a multi-player game. We’ve learned that to create value at scale needs a network – but importantly one which goes beyond the sum of its parts. Systems have ‘emergent properties but these only emerge if there is an organizing energy to enable the process. And they need to share a common purpose, reflected in the current discussion of innovation ‘ecosystems’ , a concept which comes originally from biological science and refers to “the complex of a community of organisms and its environment functioning as an ecological unit”

It’s been applied in many branches of natural science with the same focus on an interdependent collection of elements with a shared goal or purpose, for example in geography:

An ecosystem is a geographic area where plants, animals, and other organisms, as well as weather and landscape, work together to form a bubble of life… Every factor in an ecosystem depends on every other factor, either directly or indirectly. (National Geographic Encyclopedia)

It’s pretty clear that ecosystems don’t just happen; in the physical world they take millions of years to settle into a viable pattern. And in the world of organizations it’s going to involve much more than just assembling a set of components. It will need active management to secure the emergent properties.

Systems of this kind aren’t just a challenge in the world of commercial innovation. In fact social innovation – making changes to create a better world – requires even more attention to assembling ecosystems which create value. Take the World Food Program, one of the agencies within the United Nations which tries to help deal with the severe and age-old challenge of making sure people get enough to eat. They have a long history of innovation and recent examples include the Optimus programme which aims to improve efficiencies on the supply-chain which eventually makes it possible to feed a hungry child – or not. Optimus uses digital tools to help, and it worked as an effective pilot project back in 2015 in Iraq. But scaling it required many players coming on board and working together, not least national governments. Thankfully the results have moved the needle in the right direction; Optimus now operates in 20 countries including Ukraine, Yemen and Syria, reaching close to 7.5m beneficiaries and with efficiency savings (which equate to more effective food relief) running at over $50m.

So ecosystems matter in the innovation journey to scale. Which introduces three challenges for innovators:

· How to find complementary partners?

· How to form them into a coherent value network?

· How to get that value network to perform as an ecosystem?

All three of these rather depend on having a good understanding of who ‘they’ are and the different roles they play. So we need a map and a way of charting our journey to scale using it. We’ve developed a model for our new book about scaling innovation which identifies 9 core roles which entities in a value network can play:

Value Creators

· 1. Value Creators are those who develop new value – the innovators. This can be one organization, a partnership or joint venture, or it can be done across a distributed network. The key aspect of this creation is that it is new value.

· 2. Value Consumers are those who consume the value which our system creates. Although we often talk of ‘the market’ we should remember that such ‘markets’ are often multi-layered. Our innovation might be used by individuals, businesses, organizations or governments. For many products and services, those who gain value from it may not directly purchase it – that’s often the case with public services like education or health.

· 3. Value Captors – so far this looks a simple enough story – value being created and consumed. But there’s another key role here which is occupied by those who capture value from the innovation not by using it, but by being a part of it.

This is where the entrepreneur takes their profit from the risks they have expended. It is investors in the company which launches and sells the product or service. And it’s all the other supply-side players whose complementary goods and services link together to create the offering.

We need these different players to be part of our value network, our ecosystem. But we also need to recognize that they need an incentive – what’s in it for them? Importantly this doesn’t have to be a financial gain or reward – it could also be an investment in learning new approaches or accessing new markets or it could be about reputation and social identity. Think about the brand-building possibilities for companies which help scale social innovations as part of their ESG story.

These 3 entities are ‘bookends’ – the principal players in the value process. But there’s a second set of roles played by ‘movers’ – those entities which enable the process to happen. These include:

· 4. Value Conveyors are players actively involved in the process of adding value to how our solution comes into being and how it is experienced by consumers. Essentially, the value of the innovation grows through the activities they perform. They are more than just channels: their actions actually increase the value of the innovation itself, be it a product or service. Conveyors might be supply side partners upstream or marketing and distribution partners downstream; either way we need them in our ecosystem to ensure value gets created and moved to where it can be consumed.

Brownie Wise’s performances at Tupperware parties were the stuff of legend. She had all sorts of tricks including throwing a container full of tomato soup across the room to demonstrate the strength of the seal (no messy carpets). But her real contribution to the success of the brand was in the role she played as a conveyor, mobilizing an army of other women to act as demonstrators and sales agents across the country.

· 5. Value Channels are passive in the sense that, like roads or railways, they exist as infrastructure but are independent of the nature of the traffic using them. They are important, necessary elements in scaling but they are not sufficient to assure scale. If they weren’t present or if they are disrupted then value movement couldn’t take place, but they are not active elements in the value creation process. It’s important to think about them not least to explore dependencies and how alternatives might be brought into play.

Think about the huge impact to global value flow when the container ship Ever Given got stuck in the physical channel of the Suez Canal for a week back in 2021! Or the way in which the containers on that ship represented a revolution fifty years earlier in the way that the channel of intermodal transportation (road/rail/sea) operated – Malcolm McClean’s innovation of containerization literally changed the world.

· 6. Sometimes there is a role for Value Coordinators to help to make connections and bring different players together to enact value. For example, a department store offers a physical space in which multiple value creators can connect with value consumers; street markets and large-scale shopping malls offer a similar opportunity. Today’s platform businesses like Alibaba, Amazon or Apple build on this model, providing ‘digital department stores’ across which millions of transactions can take place between creators and consumers.

A third group of players in our value network are those we call ‘shapers’ – because they do just that. They shape the potential amount of value that can be created, consumed, moved and captured within a value network.

· 7. Value Cartographers are the ones who make the maps; they play key roles in structuring a market and determining how much value is possible within a value network. Examples might be regulators, trade unions or influential umbrella organizations. Cartographers can play a major role in accelerating – or slowing – the journey to scale. Think about the current moves towards scaling electromobility; much of the journey to scale will be influenced by the regulatory roadmap. Policies like subsidies or tax relief on electric vehicles, or those which militate against fossil fuels, will provide acceleration – for example, the UK has a target of no new cars running only on fossil fuels by 2035. Equally, legislation to ensure compliance can slow down scaling possibilities – think about the EU’s stance on genetically modified organisms which has acted as a brake on investment and exploration of this technology.

· 8. Value Competitors compete with us for the attention of value consumers. They might be direct competitors offering a similar product or service or they might be indirect competitors – for example Netflix is not only in competition with other streaming services but with other ways in which people might allocate their attention– reading, sleeping, looking at their partner while having a conversation. The important thing is that these competitors all shape the context in which value creation/consumption can take place.

· 9. Lastly we have Value Complementors – entities which complement the value an innovation offers. Sometimes they are essential: Thomas Edison’s attempts to revolutionize domestic lighting arrangements depended on having something (an electricity supply) into which users could plug his new light bulb innovation. Bluetooth devices like intelligent earphones depend on having the technology available and operating to a common standard.

So nine different roles which may be present in a value network. Some are obvious – for example, we clearly need a value creator and a value consumer to bookend our model. But even here the lines can blur. Consumers can also play a role as creators – think about what Lego has done with its efforts to engage users as co-creators. GiffGaff is a small but highly successful player in the tightly competitive world of mobile phone networking; its excellent customer service record is in no small measure down to the way in which it has engaged its community of consumers to play this role…

And some are less obvious but important. Take cartographers and the ways in which they can make or break scaling efforts. Mobile money is still an exciting new field for apps and hardware players – yet it’s been a reality in east Africa for over a decade. M-PESA has been a transformational innovation and has scaled around the world – but its early success depended critically on the support of the central bank rather than its opposition to newcomer ideas. It helped create a fertile regulatory landscape within which mobile money could develop and scale.

Sometimes these roles are emergent – for example the TV and movie industry is increasingly interacting with fans who organize themselves into active communities whose activities and opinions can influence (for better or worse) the scaling possibilities of a core offering. Think about the role played by the ‘Star wars’ community with its conventions, costumes and huge online presence. This is not directly controlled by the film companies but instead exists alongside it, complementing the rate and direction of development. Fans of this kind increasingly play a role in creating new characters and backstories for fringe players who later make it to the mainstream of the media offerings – think about some of the Star Wars spin-offs. Robert Jenkins work atMIT has been tracking the huge influence such fandom has on innovation in the creative industries.

It’s useful to think in terms of the different roles we need and how they might interact, first to help us in our hunt for finding partners. But we also need to form them into viable ecosystems – each system has different configurations but drawing a system boundary is a good starting point. Then we have to work with them to create high performing ecosystems – and this is where the work really starts. It’s about creative relationship building, getting to win-win partnerships.

Which is another story, one which we’ll follow up in a future post.

You can find out more on the model and our approach in The Scaling Value Playbook, published shortly by de Gruyter.

Image Credits: John Bessant, Ian Gray, Pixabay

You can find a podcast version of this here and a video version here

And if you’d like to learn with me take a look at my online course here

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Scaling Innovation – The What, Why, and How

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Scaling Innovation – The What, Why, and How

GUEST POST from Jesse Nieminen

Given that innovation is responsible for roughly 85% of economic growth, it’s without a doubt a pretty big deal for the success of both individual organizations, as well as for the society at large.

However, to achieve the level of impact that many are looking for from innovation, you can’t simply “create something new”, and then just hope the results will come. You will need to commit to systematically pursuing those results by scaling viable ideas into products or businesses that create value – at scale.

That is of course easier said than done. If you think it’s hard to come up with innovations, just try scaling one up. In this article, we’ll explore the topic in more detail and provide you with actionable tips on how to actually scale an innovation.

What does it mean to scale an innovation?

To explain what it means to scale an innovation, let’s first take a step back and look at the lifecycle of an innovation.

To begin, every innovation starts from a rough idea or concept. Often you may have a specific goal in mind, or a problem to be solved, but sometimes it can just be a cool idea that you think could really make an impact. From there, you first need to validate that the idea makes sense, and then build a product or a service that meets a real need in the market.

With these steps taken care of, the next part is to scale the innovation. At this point, we have all the pieces in place to create value, but we haven’t yet unlocked that value for the vast majority of the available market.

Lifecycle of an Innovation

So, as you may see from the chart above, scaling is the part where most of the value creation and impact comes from. With that said, we can define scaling an innovation as the process of expanding the presence and the use of the innovation to be as widespread as possible to maximize that impact.

Scaling innovation is the process of expanding the presence and the use of the innovation to be as widespread as possible to maximize the impact the innovation can have.

While on paper that sounds straightforward enough, it’s extremely important to first clarify the vision of what successful scaling looks like for your innovation, and what metrics you will use to measure your success here. For some, it might just be revenue or profit, for others it could be the number of customers or users, the impact you’ve delivered, and so on.

Most of these metrics are of course related, but when you start with the end in mind and gradually work backwards from there, you are much more likely to succeed because everyone in the organization will know what it actually is that you’re aiming for.

With that goal in mind, you can start narrowing in on the methods required to get there, which is what we’ll be focusing on next.

Dimensions of scaling an innovation

Traditionally, scaling innovation is seen as a matter of advancing the adoption, or the diffusion, of innovation. This is best visualized with a chart depicting the adoption curve, which you’ll find below.

Technology Adoption Lifecycle

The idea is that to scale an innovation, you need to cross that chasm and go from a few early adopters to the mainstream market where the volumes are significantly higher.

While that is certainly true, we can dig a bit deeper to understand scaling in a more nuanced, and more practical, way.

In reality, there are three dimensions to scaling an innovation.

Dimensions of Scaling Innovation

Let’s look at each of them a little closer.

Scaling Up

First, scaling up is about creating the preconditions for scaling effectively.

Before we start talking about scaling up, we’ll assume that the basic prerequisites for scaling are in place, namely that there’s a clear vision and a product-market fit for your innovation, and that the market potential is large enough for there to be something to scale to, even if the market isn’t there today.

Assuming those prerequisites are there, you need to ensure that:

  1. you can produce enough of the innovation to scale
  2. you can do that efficiently enough to be financially and operationally viable

For some products, such as software and other immaterial goods, that first part is pretty straightforward. For others, such as most complex manufactured goods, even the first one will be a real challenge.

Having said that, the second part of being efficient enough will prove to be a challenge for virtually every innovation. Even for a software product, acquiring, serving, and retaining customers profitably at scale is often more difficult than people realize. For other, fundamentally less scalable goods and services, this is often excruciating.

In addition to these two more practical aspects, there’s a third and more ambiguous component to scaling up, and that is the social and institutional adoption of the innovation.

How well you scale up affects how large of a scale you can ultimately reach.

For example, with an innovation as mundane as the modern umbrella, men who used it were initially ridiculed. So, before the umbrella could really take off as an innovation, societal norms needed to change. In other cases, there may be regulatory hurdles or other institutional considerations that might need to be addressed before an innovation can ultimately scale.

Regardless of the specifics, scaling up is necessary for every innovation that wants to reach significant scale.

However, what many people don’t pay enough attention to is that how well you scale up affects how large of a scale you can ultimately reach. If you can’t produce the goods at volume, and at low enough of a price while still being profitable at a unit economics level, there’s an obvious limit to your potential to scale.

Scaling Out

Scaling out is what most people think of when it comes to scaling an innovation. It’s the geographical or demographical expansion of the innovation to a larger audience.

In its simplest form, scaling out simply means getting a wider market share and audience for the innovation within an existing market. As we covered earlier, this typically means moving from those early adopter market segments towards the mainstream.

Scaling out is what most people think of when it comes to scaling innovation as it’s where you expand the innovation to a larger audience.

However, it doesn’t have to be limited to just that. Sometimes the same products or services can be sold and used in other geographical areas, or even in other industries or entirely different use cases, both of which unlock new markets and additional demand, and thus lead to a larger impact for the innovation. A well-known example of this is Tesla using their experience and innovations in electric car batteries to expand to stationary energy storage.

Paths for Scaling Out

Regardless of which path you choose, often these efforts to scale out to new segments or industries do require additional work to adapt the innovation or its positioning to the differing characteristics of these new segments, markets, and audiences.

Scaling out to new market segments can increase complexity a lot, so be mindful of the operational implications of your strategic decisions here.

This naturally adds complexity, which makes the scaling up part we covered earlier more challenging. So, be mindful of how you scale out and what the operational implications of your strategic decisions here will be.

Scaling Deep

The third, and the least well-known method for scaling innovation is scaling deep. This essentially means that you unlock more impact for your innovation by expanding and maximizing the use of it, typically for the people who already have access to it.

This usually requires you to either change people’s behavior to increase usage, or alternatively come up with innovative means for improving the utilization rate by enabling more people to make use of the same assets. Scaling deep is partly a matter of culture and mindset, and partly a more practical matter of having the right components in place for enabling and encouraging active use of the innovation.

Social Media

A classic, albeit somewhat controversial example of the first type would be social media algorithms. They are designed to provide users with engaging content to keep them entertained and thus stay in the service for longer, which leads to more revenue from the same number of users.

An example of the second type would be cloud computing. By adding network, virtualization, and software layers on top of the computing hardware, cloud providers can get more use out of the same hardware, which unlocks value for both the service provider and the customers.

This is how Amazon not just significantly reduced costs in one of their major cost centers, IT infrastructure, but actually turned that into Amazon Web Services (AWS), an additional growth business that now accounts for the majority of the profits for the entire organization.

Scaling deep is about unlocking more impact for your innovation by expanding and maximizing the use of it. This can help reduce the need to scale up or out, or alternatively maximize the impact from doing so.

Scaling Deep can reduce the need to scale up or out, or alternatively, maximize the impact from doing so. As such, it’s an excellent compliment for most innovations. However, it’s just that: a compliment. Your primary method of scaling should always be either to Scale Up or Scale Out depending on whether your bottleneck is more on the supply or demand side.

Even in the case of AWS, which has created entirely new vectors for scaling out and has dramatically subsidized their costs for scaling up, it obviously wouldn’t have been possible without Amazon already being at significant scale.

What’s the takeaway? These dimensions are distinct but very much intertwined.

If you can scale on all three of these dimensions in a coordinated way, you will not only be much more likely to achieve significant scale with your innovation in the first place, but also maximize the potential for scale and impact from those efforts. If you build momentum on one of the dimensions, some of that momentum will carry over to the other dimensions, which again helps you accelerate change going forward.

As such, pay attention to each of these dimensions and try to consider all of them in your plans to scale innovation. That doesn’t mean you should focus on all three from the get-go, on the contrary, but planning with the big picture in mind can allow you to make much more educated decisions.

Scaling innovation in practice

As we’ve established above, there unfortunately isn’t a one-size fits all solution to scaling innovation.

Achieving breakthrough success with an innovation, which is the goal of scaling innovation, always requires many related and adjacent (usually more incremental) innovations.

This is an extremely common pattern that you will see happening over and over again if you just start paying attention to it. Square co-founder Jim McKelvey has done a great job in describing that in more detail in his recent book called the Innovation Stack.

A well-known example is the lightbulb. Edison patented his famous design back in 1879, but most households didn’t yet have access to electricity, so it wasn’t something they could benefit from. It took countless other innovations and another 45 years before even half of US homes had one, even though the benefits were obvious.

In practice, scaling an innovation is simply an iterative and exploratory process where you focus on eliminating whatever bottleneck is preventing you from scaling, one by one. And, as we saw in the example of the lightbulb, sometimes these can be much bigger and more fundamental than you may think at first.

Process of Scaling an Innovation

Often you can just copy solutions other people have already used for the same or a similar problem (which you should always go for if you can), but many times you will also need to innovate something completely new and occasionally even go beyond your core product.

With that said, there are some common patterns that can be helpful for structuring your thinking when faced with some of these bottlenecks. However, as each innovation is ultimately new, and thus unique, these won’t necessarily fit every case.

Having said that, we’ll share one framework for each dimension of scaling below. We’ve also created a toolkit that includes the frameworks as editable templates, along with some examples and other supporting material, which you can download here.

Overview of Scaling in Practice

Demand side

For most organizations and innovations, the demand side is likely the source of most bottlenecks.

The way we see it, this is not just about drumming up interest and demand for your product, but also about making sure that it fits the needs and budgets of the buyers in your market. And of course, you need to make sure you’re in a market, or at least one that has the potential to become, large enough to accommodate your scaling efforts.

Unlike what people often think, product-market fit isn’t enough for a business to be scalable. You also need to have the right business and operating models, as well as use the right channels.

In other words, scaling out isn’t just about product-market fit, as people often mistakenly think. You also need to have the right business and operating models and use the right channels. Brian Balfour has written an excellent five-part series about this, which I highly recommend you read.

Product-Market-Model-Channel Framework

The basic idea is pretty simple: your business needs to align all of these aspects in a cohesive manner to be able to scale. If even one of them is wrong, growth will feel like, as Balfour puts it, “pushing a boulder uphill”. It will take way too much capital, effort, and time. However, get the four elements right together, and the growth will come naturally.

What’s important to understand here is that the model isn’t a static picture you just do once. If the market changes, or you run into challenges that force you to change one of these elements, you’ll need to review each element and make sure the big picture still works.

Supply side

For some products and businesses, especially those with physical products, the supply side often becomes a key consideration.

Here, the bottlenecks can be extremely varied, and dependences on external suppliers can lead to challenges that are hard to overcome.

In general, what top innovators do differently from the rest of the companies is that they almost always vertically integrate their value chain as they are working towards scaling up.

There are many benefits to this approach, such as reduced overhead, but the key differences are in increased quality, and most importantly, the company’s ability to control their own destiny and innovate more freely because they’re not being constrained by their supply chain.

Top innovators vertically integrate their value chain to address bottlenecks and turn cost centers into additional sources of growth and profit.

The classic example is Apple, and the way that they control both the hardware and software of their products. In recent years, they’ve been increasing that integration in both directions. They’re moving upstream to offer more services on top of their operating systems, as well as downstream by designing their own processors, which has provided them with a big performance advantage.

Apple vertical integration

However, there are many others. Amazon, Microsoft, Tesla, Google, Netflix, Nvidia, and pretty much every innovative company is trying to do the same in the scope of their own business.

The basic idea is again simple: if a part of your supply chain becomes a major bottleneck, or is a major cost center, you should try to take control of those parts to address the bottlenecks and turn cost centers into additional sources of growth and profit, just like Amazon has done with AWS, but also warehousing and shipping.

That isn’t to say that vertical integration wouldn’t be challenging or have downsides. It certainly is and does. Because of these limitations, it’s generally advisable to only vertically integrate to the parts of your supply chain that either are a clear bottleneck or could become a key competitive advantage for you. However, top innovators often have little choice but to take these steps if they want to move fast enough and have enough control to be able to scale their innovation to its full potential.

Vertical Integration

Another key consideration on the supply side is simply the architecture of your products and services, and the process you have for delivering them. It’s obviously much easier to have a scalable architecture and automated processes for purely software or content focused businesses, but how you craft these does  play a huge role for complex physical products too.

This is again a very extensive topic on its own, but the goal should be to try to make the manufacturing, delivery, and service of your products as seamless and scalable as possible. As with everything else we’ve discussed so far, this too is an iterative process.

However, to provide you with a slightly more practical framework to get started, here’s Elon Musk explaining how he’s learned to approach this topic after his early struggles of trying to do that with the extremely complex products at SpaceX and Tesla.

While Musk specifically talks about the process in the scope of engineering for scale, these same principles also apply to your organization and internal processes too.

And, as Musk explained in the video, it’s easy to get tempted by the promises of optimizing for efficiency and automation, but if you haven’t addressed the big picture first, these will often end up just being a big waste of time and money.

So, make sure to start by first eliminating those unnecessary requirements and parts or tasks, and try to simplify the design before you focus too much on optimizing for efficiency and automating.

Process of Engineering for Scale

Utilization

In addition to supply and demand, we still have the third dimension of utilization to cover. The idea with this “scaling deep” part is to find creative ways to make the most out of existing supply to either unlock new demand, maximize the utilization of those assets, or simply to increase your customer retention by finding ways to get more value for them from your products.

As you may have guessed by now, the specifics vary quite a lot on a case-by-case basis, but the flowchart below can hopefully serve as a starting point for your efforts in this area.

Pathways for Scaling Deep

To summarize, there are three common paths you may take here.

The first is to find ways to increase the usage of assets that are only being used a fraction of the time through practices such as asset sharing and virtualization.

The second is to move from one-off purchases to a subscription to eliminate friction and increase the usage of the services.

The third is to find additional ways to expand the use of the product. This is usually done either by finding new value-adding uses for the same product, or simply by activating usage through means such as improved quality, usability, better communication etc.

However, sometimes it might even be necessary to work around tougher and more pervasive issues, such as regulatory considerations or even the changing of societal norms.

While increased utilization isn’t often that glamorous or exciting, it can really make a difference in making your business and operating models efficient enough to allow you to scale volume faster and more sustainably.

Conclusion

Scaling an innovation won’t be easy. It will always take years, and an endless amount of hard work with an extreme focus on solving each and every bottleneck standing in your way.

Hopefully you’ll find some of the frameworks and playbooks we’ve introduced in this article useful for shaping your thinking, and for building your organization and processes, but you’ll inevitably come across plenty of challenges where you’ll just need to figure out the solutions yourself. Still, if you want to truly succeed with innovation, that’s what you’re in for.

So, be prepared for those challenges, and be realistic with your expectations and timelines. For example, the “growth gap” can easily sneak up on your organization if top management has unrealistic expectations for the financial returns of innovation.

In general, large organizations have some disadvantages, but they also have huge advantages when it comes to scaling an innovation, so look for ways to leverage those advantages to your benefit.

And finally, make sure to surround yourself with top talent that’s prepared for the ride. Scaling innovation is teamwork, and it takes a special kind of a team to pull it off. You need people that are used to constant change, have a growth mindset, and the skills needed to solve whatever problems your domain may have.

As mentioned, scaling innovation is a journey that happens in small increments, and at times, it will feel frustrating. But if your team persists, keeps on learning and solving problems, you can eventually close in on whatever the full potential of your innovation is.

Image credits: Pexels, Viima

This article was originally published in Viima’s blog.

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