We talked about how a successful corporation is moving resources from its H1 business, so that it doesn’t get to the end of its egg laying years and then the corporation is in trouble. And it’s taking those resources and it’s investing them in H2s and H3s. These folks that come up with the framework, they recommend a ratio of investing 70% of resources in H1, 20% in H2, and 10% in H3. Now, if you are at a corporation that actually does this, you are a very fortunate product manager. Because most corporations invest much more heavily down here and much less up here.
And the reason for that is the gravity of the existing business, the fact that it is the thing that everyone knows, and it’s producing money. How do we energize the pipeline? One of the failure modes, especially at the level of the individual product manager pitching ideas, is that management expects these new ideas to be obvious and astounding. And to be the obvious success that amazing ideas are only in a retrospect. Awesome ideas only seem awesome in retrospect. Most of the time, these folks that tried these things were just like, all right this seems plausible, let’s give it a try and let’s grind it out.
So what we’re going to talk about now is how we can think about this movement from H1 to H3 and back and forth as kind of a pipeline. Now, I’m using the term corporate innovation pipeline because that is a generally accepted term that you will hear and people will understand if you use it, but it really is much more of a funnel. I mean, you have a massive tapering of new ideas to things that go from this is kind of our H3 here, ideas and testing concepts, to this is sort of where these become H2s to the few that really become scalable and are H1s.
If you can get 1 out of 10 of the concepts you take through this process to even a fledgling business, you’re doing great. As good as basically any Silicon Valley venture capitalist. And so how do you do that? Well, you grind through it. This is how the systematic innovation framework that we talked about before applies to this pipeline very roughly. And so here we’re working on generating new ideas and we want a lot. And then we want to move them to a 90, to a 120 day period across these two things here to test them out.
The key is, running a disciplined process with the right metrics and letting the ideas that are not ready to go just die off, we iterate to new things. And then we take these fledgling businesses, we see if they’re scalable and many will not be. And that’s okay, that is absolutely okay. And then, a few of them will go and become H1s and we start the cycle again in a healthy corporation.
If you are involved in thinking about the picture of how you approach innovation goals, you may find this canvas here helpful. There’s a resource in the resource section if you want to read about this and download a pdf or a Google doc version of it. The independent variable is this pairing between customer segments and personas within those and problem scenarios. So basically, this product market fit that we’ve talked about. And this says innovation metrics, you want metrics for your H3 that are not the same as your H1.
Your H3 metrics should be about testing new concepts, running a disciplined process, taking a MVP through the paces and seeing what metrics you get based on your experiment design for testing the new idea. It’s important to have metrics, it’s important to have a plan, and it’s important to be disciplined. But it’s important that that’s not the same plan as you apply to your H1s. At the center of this is big innovation goals. For example, with Cooped Up, that might be leadership in this backyard chicken cubes base, the feeding and watering. And we identify disruptors and catalysts here, so this might be things like
the ascendance of organic food is a thing that a lot of people want and local food. And the emergence of these backyard chicken coops is a thing that a whole new segment of people that didn’t previously have in inclination to keep chickens want to have. This is creating disruption and we want to think about how do we make, maybe, entrepreneurial investments, so outside investments, maybe in a startup or an outside party? As well as intrapreneurial investments where for instance, a product manager runs this 90 to 120 day process to test the ideas, towards this innovation goal. Why? Why would we duplicate effort like that?
Not duplicating effort is something you worry about in an H1 business, where you’re trying to optimize. Duplicating effort, trying two different ways to solve the same problem, is a great thing to do in a H3 business where what you need to do is, run a lot of disciplined experimentation. Those are some ideas on how to get ideas into the pipeline and move them through. Set the right expectations on timelines. The right expectations on investment. And keep your corporation healthy with a lot of innovation. I think you’ll find that very enjoyable as a product manager and you have now some systematic tools to go at it.