In order to maintain the flow of power, utilities must steady the supply and demand consistently in order to meet demand. Sustainable energy storage has become a big thing in the industry in the last couple of years,. To understand why it is of such importance, let’s have a look at the utility grid.
Typically, most utility grids do not store energy because of the costs involved. As a result, the utilities call upon the use of fossile energy supply to ramp up or down to meet demand. This is ideal because these plants operate most efficiently when running at full power. Utilizing these power plants inefficiently contributes to more pollution than the plants that are running to meet base-load energy demands.
Current Renewable Power Generation Technologies
The most popular renewable energy supplies are:
As you can see, the mix involves supplies that are highly fluctuating and hard to predict by nature and all of them are somehow (indirectly) based on the sun. While the overall capacity is steadily increasing, the major problem remains unsolved.
How to store energy sustainably?
As we speak there are:
Fossil fuel storage
Electrochemical (Battery Energy Storage System, BESS)
Each of them has pros and cons.
General consideration of a sustainable energy storage
The runtime of the storage often dictates the capacity requirements. A storage with higher energy density or larger profile will result in a larger capacity and longer runtime. Larger capacities are typically more difficult to charge.
All energy storage mediums have a self discharge. This is caused for example electrochemical processes in batteries and leakage current through the dielectric.
The self discharge rate is more important for products with longer runtime / larger capacity batteries or products that may be stored in conditions with no light for longer periods. The self discharge rate needs to be considered when determining the system energy usage. The self discharge rates of different technologies and supercapacitors can greatly vary.
The charge efficiency is the ratio at which the storage can store the energy. The amount technology used impacts he minimum charge efficiency of the storage medium.
Last but not least the storage technology has to be as natural as possible with a very low impact on nature during production and operation.
As a conclusion, the sustainable energy storage system of choice has to mechanically separate the high from the low potential. This results in low self discharge rates. At the same time the energy has to be ready to be released and stopped instantaneously to meet peak demands.
Pumped-storage Hydroelectric Energy Storages currently offer the most cost-effective means of storing large amounts of electrical energy sustainably. The basic requirement to apply the technology however is to have sufficient height differences.
So it is no wonder, that the two leading countries regarding Pumped storage vs total generating capacity (Switzerland and Austria) have many mountains.
This is unfortunately bad news for costal areas as there are typically not too many mountains. Another drawback is that it requires to flood whole mountain valleys in some of the most beautiful areas of the world. This is not sustainable.
Inverse Pumped-storage Hydroelectric Energy Storage
If we are looking at pumped-storage hydro, the basic principle is to use gravitation applying force to water to store energy. It is almost the most simplistic way of energy conversion, as Epot is simply converted to Ekin and vice versa.
So why don’t we just switch the principle and have air displace water? Naturally the water wants to flow back by gravitational force.
We just happen to sit on a planet with 2/3 being saltwater which we can’t use for a lot of things with a few exceptions such as fishing, transportation and desalination.
At the same time, it is very likely, that the oceans are where the energy of the future will be generated with ever increasing wind turbines.
The reservoir is anchored at the ocean floor and allows to be filled with air. It has to be saltwater resistant and flexible.
The depth hereby determines the pressure applied to the air evenly by the water cylinder above the reservoir.
So as a rule of thumb: the deeper it is, the more power can be stored.
A floating platform hosts the pump and the generator.
The pump is connected to the air pipe and, when switched on, pumps air into the underwater reservoir. It converts electricity into pressure.
The air pipe is connected to the pump, the generator and the reservoir. It transports the pumped air into the reservoir.
The generator is connected to the air pipe and converts pressure into electricity.
The grid connection connects the float with the grid and renewable generators such as wind farms.
To me this looks like a promising concept for a sustainable energy storage that needs further investigation to discuss obstacles such as what materials could be used for the reservoir, etc.
However as we are desperately looking for ways to store energy in a clean way, this could offer many possibilities and capacity for the future.
Life is too short to do everything yourself.
At the same time many ideas remain in my notebook. So I’d like to release them for the community to use.
Please contact me, give credits and if you really make money (>$1M) with it, send me what you feel appropriate.
As mentioned in a previous article, continuously finding and eliminating bottlenecks is crucial for an organization. It requires openness to improve and willingness to learn. This isn’t always easy but helps you to fulfill your corporate social responsibility to reduce wasting human capital.
The presented approach works with information as well as material flow.
Keep in mind that we are talking about human beings in this context and being the bottleneck / constraint doesn’t mean that this person is not doing a good job!
To understand how to optimize your organization, it is important to understand that the primary goal of the company is almost always to make money. So the only thing that’s really important is that you sell your products profitably as fast as possible. This is called the systems throughput.
The Main Driver Throughput
Throughput is the rate at which the system is able to produce the goods pulled by the market. Sometimes the market can be the constraint too.
Because throughput is a rate, it is always expressed as output unit of time. A unit is in most cases a product. If the goals units are measured in money, throughput will be an amount of money earned per time period per unit of product.
In the case of throughput per time period, throughput is calculated as revenues received for the period minus totally variable costs divided by the chosen time period.
In the case of throughput per unit of product, throughput is calculated as the selling price of the product minus totally variable costs per unit.
Drum-buffer-rope is a concept that bases on the assumption that there is always a constant bottleneck in the value chain (recommended books). This is used to control and optimize the throughput of the overall system. If the bottleneck is not used for controlling, work in progress builds up in the process and binds resources, which in turn costs money and decreases the overall performance.
A good methodology to follow when optimizing to reduce bottlenecks / constraints is:
STEP 1: IDENTIFY THE CONSTRAINT
This tells us where to focus the improvement efforts on. Only an improvement at the constraint makes a difference.
STEP 2: OPTIMIZE THE CONSTRAINT
Before starting to add capacity, we need to use the capacity we already have. “Optimize” means “doing everything possible to use the constraint to its fullest capacity.”
STEP 3: SUBORDINATE THE NON-CONSTRAINTS
The job of all non-constraints is to subordinate their decisions to the constraint’s needs. They should optimize for constraint (and thus system) performance, not their own individual performance, the results of which we witnessed in.
STEP 4: ELEVATE THE CONSTRAINT
Only once we’ve completed the previous steps it makes sense to add more constraint capacity, and thereby increase system performance. Because adding capacity is very expensive in terms of time and money, we do it as a last resort, not a first resort.
STEP 5: RETURN TO STEP 1
The result of the first four steps, and the reason this is a “continuous” improvement method, is that the constraint moves. This requires that you start back at the beginning, and don’t let inertia become the constraint.
Please let me know what you think, either by sharing or leaving a comment below.
Innovation accounting is a key element of the lean startup. Using the ‘measure’ and ‘learn’ of the Build/Measure/Learn, innovation accounting enables entrepreneurs and teams to create useful metrics that offer insight into user engagement, product-market fit, and scalability.
“There’s no accounting for taste,” but for digital product development, there is accounting for innovation.
After all, a startup business environment is all about innovation and creativity, whether you’re in a startup or corporate startup.
So we need some way to hold teams accountable. Considering that a startup is a new venture, there are no existing metrics or data or past performance statistics to use as a baseline.
Eric Ries defines innovation accounting as “a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero.”
In other words, a business developing a new product is surrounded by apparent ambiguity (how do you measure ‘opportunity’?). Here, innovation accounting creates a structure to measure progress and success.
What is ‘innovation accounting’?
The lean startup approach bases on five basic principles:
Entrepreneurs are everywhere
Entrepreneurship is management
Key to lean startup is validated learning, both the product and the client’s business. Innovation accounting is a structured way of measuring progress.
Traditional metrics, such as ROI or market share, are ill-suited to the startup. Ries emphasizes that the use of such measures only encourages exaggeration – either of the initial business plan or the predicted returns – in order to secure funding for the project.
During the product development stage, is market share a concern? Yes, it’s important to know your target user, and yes, it’s a long-term goal to capture as many of those users as possible… but while you’re still building and testing your minimum viable product, the number of users is no indicator of success or failure; the product simply isn’t at that stage yet.
So, how does innovation accounting look like?
The 3 levels of innovation accounting
Metrics and measuring performance is often tricky and three consecutive dashboards should be used for each product, each building on the last with further information and data.
Innovation Accounting 1 – Customer Focus
Key is to start with metrics that are easy to track and relate to activities that are part of the product development. Lean startup is all about understanding the needs of users, so the first level is customer focus.
Examples might be:
Customer discussions per week
Customer feedback per week
Per Customer Revenue
The purpose is to keep development closely aligned with user needs and feedback.
Innovation Accounting 2 – ‘Leap of Faith Assumptions’
The assumptions you’re making about the product and the market from the beginning are a leap of faith.
The lean startup acknowledges that it’s impossible to start building anything new without assumptions. Measuring the truth of those assumptions is part of the second level of innovation accounting metrics.
There are two types of leap of faith assumptions:
value assumptions about the value users will derive from the product
growth assumptions about how new users will find your product
Testing these assumptions through prototyping, MVPs and validated learning that guide the product’s development path is at the heart of the lean startup methodology.
Suggested value metrics to test for positive user behavior are:
Rate of repeat purchases
Willingness to pay a premium price
The recommended growth metrics are looking for indications of sustainable growth:
Word of mouth referrals
Ability to reinvest revenue from one customer and into a new customer acquisition
Ability to recruit new customers as a side effect of normal usage
The focus is to clarify the product’s market fit and readiness for scaling in that market.
Innovation Accounting 3 – ‘Net Present Value’
Net Present Value is a reality check. It tells you what a future product is worth now. Innovation accounting NPV is based on the long-term drivers of your product’s future performance (and value); for example:
Number of website visitors
Percentage of visitors that become users
Percentage of users that choose to pay for the product
Average price paid by each user
Level three shifts the focus to the product’s financial performance.
Hold the product team accountable
Act on the data you have. Is the product team performing to plan? What progress is being made, and in what direction? Is the product development still aligned to identified user needs?
Summary of innovation accounting
Innovation accounting is one of the five basic principles of the lean startup.
It addresses the fact that a startup has no real data history or market traction, innovation accounting involves choosing key metrics that enable you to track and measure what really matters.
We’re used to financial KPIs to monitor the progress of core innovation businesses but in case you’re a (corporate) startup that may not generate revenue until you found product market fit, this is less useful.
A startup as well as a transformational innovation team is essentially an organization built to search for a repeatable and scalable business model. What’s most important in these early stages is validated learning.
So relying on revenue as primary measure of success can be at best counterproductive. Traditional accounting methodologies can stall innovation since they are more suited to core innovation and existing business with products or services. Standard accounting practices like cash flow analysis or financial ratios can put early stage products or businesses in an unnecessarily awkward situation.
Innovation Accounting uses metrics that measure the true progress of innovation, such as customer acquisition, retention, user activity and so on.
One of my favourite models for doing this is Dave McClure’s Pirate Metrics. It defines macro metrics that can be used to model the customer lifecycle. Whilst revenue may be one of them, it’s not the only one.
Get ready to board …. A-A-R-R-R
Pirate Metrics is a 5 metric-model (A-A-R-R-R) designed to represent all of the key behaviors of customers.
How many users you are acquiring
How many users are active
Whether the customer comes back and uses the product again
Whether your customers tell others about their experience and your product
Without measuring progress, developing your product is really just relying on good luck. Analysing and monitoring these 5 metrics can give you a pretty good idea of potential issues. It gives you indications where you need to improve, or where the opportunities for optimisation lie.
Revenue is very important for measuring success of core innovation and existing business, but it’s distracting for transformational innovation and (corporate) startups.
Pirate metrics help to define and measure success when all numbers are (close to) zero and before you actually start capturing some of that value back.
They are leading indicators to revenue before actual revenues are realised.
They can also be used to hold entrepreneurs and intrapreneurs accountable.
The Art of War is an old Chinese military book. The work, written by the ancient Chinese military strategist Sun Tzu, is composed of 13 chapters.
Each chapter is devoted to an aspect of warfare and how it applies to military strategy and tactics. The Art of War remains one of the most influential strategy text and has influenced military thinking, strategic planning, legal strategy, lifestyles and beyond.
Here are some key points applied to business tactics.
Strategic planning, calculating and comparing competitors leads to a successful company
If a company aims to dominate a market, it is fighting for its very survival. Hence, all efforts must be made to understand how to create new products, and that knowledge must be used to properly plan.
The product leader who draws proper plans before getting a new product to the market will defeat the leader who makes none. Therefore, you must always plan and deliberate upfront. By comparing the competitive landscape on seven considerations, you can forecast success and failure:
Which of the two companies have complete support from his teams so that they will follow?
Which of the two companies is more capable?
Which company has advantages of circumstances like outreach, technological advantage and the domain knowledge?
Which company enforces the discipline of its teams and processes more strongly?
Which company has the stronger product teams?
Which company has the better leaders and teams?
Which company has more consistency in enforcing discipline?
Carefully compare the company to your own so that you will know where he is strong and where it is weak. Then plan according to the circumstances. If you know your competitors and know yourself, you will always be successful.
Secure yourself against failure, and wait for an opportunity to succeed
Successful strategists only enter confrontations they know they will win, whereas unsuccessful ones enter and only then begin to think of how they can win.
A skillful company avoids confrontations they may lose, thus ensuring they will fail. But even the most brilliant product teams cannot say exactly when success will come, so they must wait for the competition to make a mistake and provide them the opportunity for succeed.
A successful company knows that to be successful, there are five essential rules:
It must know when to take bold action and when not.
It must know how to deal both competitors inferior and superior to themselves.
It must have a strong, uniform spirit and discipline.
It must take action so that it is prepared and the competition is unprepared.
It must have the capacity and freedom to make decisions without interference from a others in the organization.
Be cautious. Take action only when you have the advantage. Avoid your competition where they are strong and take bold actions in areas where they are weak.
Avoid the competition when its spirit is keen, its structure and appearance are in perfect order or when it has a more advantageous position such as higher morale ground and public image.
Never enter a confrontation (on twitter or elsewhere) simply out of anger; there must always be something to be won. Your anger will eventually fade, but a company’s image destroyed can never be fully be brought back to life.
Avoid the traps your competitors will try to draw you into. Do not lead your company into situations where you get uninteresting as an employer or where you do not know the domain or your allies well.
Product teams are only successful if stakeholders and employees do not cause their own failure
In companies, the product vision is determined by a product team, but a product team is managed by a manager. Hence, by his direction, a manager can impede his team. The most disastrous ways he can do this are by ordering them to proceed or give up when such action is impossible, by attempting to do product decisions with classical project management practices or by staffing the team with inappropriate roles.
These errors shake the confidence of teams and can cause failure.
However, a leader can also exhibit dangerous faults. He can be reckless and lead his teams to destruction, or he can be a hesitant; he can be so choleric or proud that he is provoked by insults and slander from others; or he can be too concerned with the comfort of his own teams and let such considerations hinder tactics.
The leader is also responsible if any of these six calamities befall a company:
If he hurls his teams against a force ten times its size, causing his employees to resign.
If his teams are too strong in relation to the decision makers, causing insubordination.
If the teams are too weak, leading to them being worn down by leaders and giving up.
If the higher leaders are angry and undisciplined, leading them to follow their own agenda on their own accord and cause the ruin of the company.
If the leader is weak and indecisive, resulting in a weak, disorganized company.
If the leader is unable to estimate an competitor’s strength and hurls an inferior team against a superior one, leading to overwhelming defeat.
Companies are only successful if stakeholders and leaders do not cause their own defeat.
Conserve your resources through stratagems, foraging and espionage.
Maintaining an company is expensive: a host of 100,000 employees can cost 160M€ a day.
Prolonged struggles can exhaust the resources of any company, leaving it weak and vulnerable. Hence, aim for quick and decisive success, not prolonged campaigns.
Avoid campaigns against competitors, because this usually takes month of preparations, and many impatient leaders will squander their resources in pointless activities.
The best way to lessen the cost is to capture the competitions (sales) territory whole and intact rather than to destroy it through costly (price) battle. To achieve this, you need a much stronger product vision and empowered employees than your competition.
A skillful leader will subdue his competition without any fighting, which constitutes the ultimate triumph. This is known as attacking by stratagem. Great leaders excel not only at winning but at winning with ease.
Another way to conserve the companies resources is to take them from your competition by foraging locally and augmenting your own strength with the competitors resources.
As single battles can end wars, you should engage market intelligence: it provides decisive information about the competitors disposition as well as carry false information back to him.
Conserve your resources through stratagems, foraging and market intelligence.
Deceive your competition and impose your will on him.
The art of war is based on deception. You must mask strength with weakness, courage with timidity and order with disorder. Confuse your enemy and let him grow careless.
Have your troops feign disorder when in reality they are highly disciplined. When you draw close to your enemy, make it seem like you are far away. When you are able to attack, make it seem like you are unable.
Play with your enemy as a cat plays with a mouse. If he has a temper, irritate him. If he is at ease, harass him; if well supplied, starve him; if quietly encamped, force him to move. If you wish the enemy to advance, hold out bait to him; and if you wish him to retreat, inflict damage on him.
A clever leader seizes the initiative and imposes his will on the competition.
Attack the enemy in poorly defended points that he must rush to defend. Force him to reveal himself so you can seek out his vulnerabilities.
Keep your enemy guessing as to where you will attack, forcing him to splinter and spread out his forces: numerical weakness comes not only from absolute numbers but also from having to prepare for attacks on many fronts.
Deceive your competition and impose your will on him.
Observe the market and your competition, then adapt accordingly.
A good leader knows that there are always positions that cannot be held, roads that must not be followed and commands from the superior that must be reevaluated.
Just as water shapes its course according to the ground it flows over, so you too must adapt to the situation, to the market and to the competition’s disposition.
Observe the market to take advantage of its natural advantages and avoid its disadvantages. In order to fight, do not attack companies with a higher position, or distance yourself from the fundamental core of the company.
Avoid dead ends, environments with small room to move or areas your company doesn’t have a firm stand where small competitors can destroy the entire company. Listen for rumors, events and customer attitudes; they can indicate that a competitor is moving its positioning.
Observe the competition, too. When his employees do not have a clear message for example on social media, they are unorganized. When the employees he sends to the customer start praising themselves for accomplishments of the company, they are suffering from lack of recognition.
And when they start to cannibalizing and consolidating their own portfolio, know that they are willing to innovate.
Adapt your tactics as needed to these circumstances and take advantage of opportunities as they appear.
Observe the market and your competition, then adapt accordingly.
To be successful, manage your employees sternly
Managing and controlling a large company is no different than managing a small one: you must simply divide your teams into smaller numbers and then use technology such as collaboration platforms to control and align your forces.
They will move as one, and the lazy will not dare to do his fair share. A skilled leader leads his company as if he was leading a single man by the hand.
Treat your employees like beloved sons and they will stand by you. If, however, you are unable to command them with authority, they will be as useless as spoilt children.
Discipline among your employees is a sure road to success. But for discipline to be effective, your employees must grow attached to you. Thus, you must treat them humanely while also keeping them under control with discipline.
As a leader, you must be secretive. Keep your competition ignorant and change your plans frequently to keep the competition guessing. (Remark: Sun Tzu also suggests to treat employees the same way. But from my perspective, while in modern time this might lead to short term success, it will destroy the morale and stand-up mentality in the organization and therefore negatively impact the long term success of the company)
Change sides and take long circuitous routes instead of direct ones. Only reveal your hand once you’re deep in the competitions terrain.
When the situation looks bright, tell your employees about it; but when the situation is poor, keep this knowledge to yourself.
The further you penetrate into competitors terrain, the more your employees will feel solidarity.
Put them into challenging situations where there is no solution yet for a specific problem, and they will try their very best to live up to the expectation.
To be successful, manage your teams sternly, keep the competition in uncertainty and challenge your teams.
The key message is:
Product development is a matter of survival for the company, and so meticulous planning and estimating must go into the development. A skilled leader chooses confrontation only when he knows success is secure; thus, he is never defeated. He is observant, resourceful and adaptable. He imposes his will on the competition, deceiving and irritating him to drive him to make a fatal error.
The questions answered:
How can you ensure success?
Planning, calculating and comparing company resources leads to success.
Secure yourself against defeat, and wait for an opportunity for success.
A company is only successful if stakeholders and leaders do not cause their own defeat.
How can you achieve advantages over your competition?
Conserve your resources through stratagems, foraging and market intelligence.
Deceive your competition and impose your will on him.
Observe the market and your competition, then adapt accordingly.
How must you manage your employees?
To be successful, manage your teams sternly and give them hard problems to solve.
Why is it that thinking in terms of projects collide so often with those thinking of products? What is the difference between Project teams vs Product Teams?
Let’s explore this.
Until Agile, most companies had a more or less working product management which was shielding the customers from development team questions.
Historically development teams were embedded in V and waterfall models, which work very well for products where components need to be assembled. In other words you know the whole system upfront and can plan accordingly.
Software development, however, is a creative process which can better be compared to painting a picture. Even a doctor’s visit to check the reason for certain symptoms comes closer than assembling a motor. Software development deals with uncertainty.
Therefore development teams had to adapt. We stepped away from waterfall and project thinking via Agile practices such as SCRUM to DevOps. We made the ability to react to change as quickly as possible to the core of our thought processes.
At the center of this agility is a continuous learning cycle adapted from lean manufacturing namely “build, measure, learn” to ensure continuous, validated learning and to maximize product market fit for our products.
This is why I think it is good practice to clearly distinguish between product and project.
A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources. And a project is unique in that it is not a routine operation, but a specific set of operations designed to accomplish a singular goal. So a project team often includes people who don’t usually work together – sometimes from different organizations and across multiple geographies.
Project teams develop specific solutions for specific customers by assembling existing products and filling the gaps with customization and configuration.
The environment of a project is not suited to develop new products. If you do, you are developing customized solutions which do not scale and have an insufficient market fit.
Project thinking is important to get certain products to the customer that need a lot of coordination and integration. Those products are typically to be integrated into a bigger landscape and require lots of customization / engineering.
The main products of a project team are the planning, engineering and commissioning services to manage complexity and risk.
A product team is quite the opposite to a project team. It is an in many regards well-balanced, cross functional, empowered team that stays together and continuously explores opportunities as long as the product is alive. The goals are defined per iteration and base on moving targets, such as KPIs.
A product lives until it is discontinued. It lives! Whereas a project is defined by its uniqueness, scope, timeline and resources.
This is a major difference, and it seems this difference is hard to understand by many. It regularly leads to misunderstandings and awkward opinions / statements about the other side, especially when one side needs something from the other side.
Project folks expects defined scope to be delivered at a certain date whereas product folks is used to explore what is actually needed and maximize product market fit. For them it’s most of the time less important whether it is this or next month. This does not mean product teams live without a sense of urgency for time to market. Actually, it is quite the opposite. It simply does not matter if you get the wrong value to the customer earlier. What counts is maximum value and high scalability which are aligned with the companies’ vision as soon as possible.
As an organization, product thinking is important to identify what the market actually demands and to decide whether the cost is reasonable to address a certain value pool. It often addresses whole customer segments.
To conclude the importance of Project Teams vs Product Teams, both are equally important and it depends on your business where you set the focus but it is important to understand and communicate the differences as well as to make sure one side can leverage the specific value the other side provides.
At the core of the digital revolution we’re experiencing right now is a mindset change. More and more corporations understand their new corporate social responsibility.
Yes there are new apps, yes there are new gadgets, yes there is more data.
But no data, no new dashboard or app will help you, when your organization is set up to suppress transparency and collaboration, there will be fancy new machines but no one to take the risk to stand up and do the right things with insights from for example analytics.
It is about the need that people have to continuously learn and improve, themselves and their company.
The digital era is a fast changing environment, only fashion industry has faster cycles. 60% of what you learn today will be obsolete within a year.
For this, most companies are not prepared.
And for this reason it is required to implement mechanisms that stimulate collaboration as well as continuous learning and don’t suppress it. Only in a group we are able to learn fast enough to keep up with this pace.
If you don’t, you will be obsolete.
The proposed approach really is a series of different aspects required to collaborate efficiently.
As discussed in my previous article, goals must consistently support overarching goals, starting from vision down to the products of a company and the actual measures in a product have to provide information of the status of the companies goals in real-time.
Incentives in corporate environments
Achieving the goals described earlier is usually enforced by financially incentivizing individuals in the hierarchy to reach the given (profit) goals.
At the same time, most individuals have a private agenda such as climbing up the ladder or earning more money to buy a bigger house.
Because of the combination of incentives and the private motivation, peers are incentivized to create silos.
This leads to the following problem:
Mindset of sharing
During my time in the US I learned “sharing is caring”.
If you generate assets such as services and products, make them available to everyone in the organization to use and sell to the customer.
Count the use of the service you created and paid for. Don’t do margin stacking but report the amount of reuse. It shows how central pieces in the puzzle are. It is easy to do this if you use central repositories by counting dependencies.
Create a culture of reuse. If something isn’t there yet, build and share it. Stop wasting human capital and stop building the same thing over and over again.
Ask employees to publish ideas on a central platform. All employees can vote for the products listed there. That way small things that impacts many gets the deserved attention.
Use it as central place for documentation and enables others to commit to supporting the idea, either financially or with their manpower. At least in times of low business in the own area this could prevent layoffs and protect know how.
Use this tool for reporting financials and goals as well as their status. Make it visible to everyone.
It is important for individuals in the organization to identify themselves with the products. Only someone who does this will be motivated to learn.
Stop product related email chains. Provide a messaging area that can semantically reference the products, processes and people. This way the questions are categorized and are available for others to look up the answer.
Let the teams around this form organically and not only out of the companies structure. See the company structures more like a grouping of people with the same interest and as a channel to a customer segment instead of competing entities.
We are far enough regarding digitalization of communication that people, sharing the same passion, don’t need to be colocated. I would prefer colocated teams that commit together on the work to do (product) though.
Create customer specific projects as separate entries in this tool. Projects executed by solution teams use / group products (including services which I see as product) to fulfill customer needs that are not satisfied with an existing product that has stand alone value.
Credits as measure for collaboration
Once the product platform is in place, allow the contributors to rate the contributions. This can then be used for incentives.
Vision, Objectives, KPIs and Principles
Use tags to link all products to goals. Each team can specify own goals but needs to document and link their contribution to the overarching goals.
Provide easy access to data that can be used to calculate the KPIs that measure the goal achievement.
In this setup it is very important to formulate a clear vision, not only for how the company is supposed to look like, but more importantly what the company wants to be for the customers, the society etc.
Basing on the vision, define objectives and their key results. KPIs are to be defined as indicators that monitor the key results.
Last but not least, setup a set of principles that act as guiding rails in day to day business. They need to be as precise and short to fit all on one baseball card such as “customers go first”. Think about the audience and choose appropriate wording.
To be clear, this shall mean: no abstract and empty sentences. Everybody is supposed to act according to the principles.
This enables the empowered teams to prioritize their work and decide whether preparing internal slides or the customer is more important (to pick up the example above). It allows everybody to justify their decision based on a common set of rules. This also leads to situations that artificially urgent internal demands automatically gets suppressed.
Self Contained Offerings and Modularization
Products are supposed to deliver clear (customer) value, either in form of stand alone, or enablement value.
This value is to be part of the previously mentioned documentation and needs to be linked to customer goals.
Self contained services have to be build around shared requirements and grouped to provide a clear value. An indication that the service contains functionality that should be carved out is, that it provides different values.
A good example would be user management in software or a modular power supply for hardware.
Have the commited team run the ops for that service. If others in the organization need some more functionality, they need to commit resources. Duplicates are not permitted.
In case of the hardware example, the power supply is supposed to be produced by that specific (regional) product team.
Manage the services in the product platform. It is especially important to track the use of shared services to show how central they are to the ecosystem.
Product & Project Culture
In other articles I wrote about the difference between a product and a project. This is why I focus on the core with the following statement.
A product lives until it is discontinued. It lives. Whereas a project is defined by its uniqueness, scope, etc.
This is a major difference and it seems this difference is hard to understand by many. It regularly leads to misunderstandings and awkward opinions / statements about the other side, especially when one side needs something from the other side.
The point is, project folks expects defined scope to be delivered at a certain date whereas product folks is used to explore what is actually needed, maximize product market fit and return on invest. For them it’s most of the time less important whether it is this or next month. What counts is maximum value and high scalability.
As an organization, product thinking is important to identify what the market actually demands and to decide whether the cost is reasonable to adress a certain value pool.
Project thinking is important to get certain products to the customer that need a lot of coordination and integration. Those products are typically to be integrated into a bigger landscape and require lots of customization / engineering. In this case the main products are the planning, engineering and commissioning services to manage complexity and take the risk.
Both are equally important and it depends on your business where you set the focus but it is important to understand and communicate the differences as well as to make sure one side can leverage the specific value the other side provides.
People at Forefront
Innovation is the core of future business and the foundation for future growth and profit.
We distinguish between:
Product innovation: the iterative improvement of the portfolio and its products (what)
Process innovation: the improvements in how we create products
Business innovation: the improvements or changes in the business model. For example to implement a multi-sided platform and to participate in revenue streams, not primarily generated, but enabled by our offerings.
All engaged employees are stakeholders in the business journey. And it is important to give the individual a way to influence future business. This can be done via the previously described product platform.
Especially people in the first line experience the customer journey every day and have the best relationships with your customer base. This can be used to generate viable insights into what the customer is struggling with.
Let these people document the customer experience, typical workflows, tools used, personas, contact persons and pain points in a systematic way. This gets invaluable when making informed decisions on where to invest and during product ideation.
This content can then be referenced by the products in the product platform and gives a clear picture into potentials and how your current solution space matches the problem space.
Especially in larger corporations this view of your company is incredibly helpful when setting up strategies.
Management and an Empowered Organization
Up to know we discussed how to empower your employees by flattening the hierarchy, innovation needs to traverse, to be close to the market and orient the company to deliver the right products with the use of a product platform as central element.
But there is still a void that needs to be filled to keep it all together.
How do you make sure the organization is heading into this right direction and has the capabilities to implement the vision?
In other words:
Who makes sure we’re hiring the right people?
Who gives the direction?
Who gives purpose and vision ?
Who defines the rules of the game?
Who ensures we learn the right stuff about the market?
Some of it will be a logic consequence of an empowered organization.
Hiring for example needs to fill a future demand. If the organization however gets into the situation that capabilities are not available, there is something wrong in the employee employment strategy.
So identifying and building up the know how (especially the learnings about the maket, validated learnings) and to manage the distribution internally is one of the core activities required from the leadership team.
So planning demand ahead with the constant feedback from the teams is essential. On one hand it is important to have the right technological skills but more important is the “drive” potential candidates have.
Don’t hire to fill a gap in skills, but select self directed, autonomous people that have shown their willingness to make a change. I know that team play is a highly requested skill but it is way overrated nowadays.
People who want to perform and make a change but lack team skills will find their way to communicate. Whereas people who lack the drive can communicate but don’t make a change. It is way more complicated to change people’s motivation than to teach them how to communicate.
So focus on finding performers that can demonstrate their ingenuity.
Ask what business they would found, why, how to make money, whom they need for this. Why they didn’t do it yet. Let them draft overviews in the f2f interview and skip one or two abstract “how do you feel about…” questions without context.
Take your time but recruit continuously, not just on demand.
If a manager is required to make day to day decisions, this will lead to resource issues later on. Taking the decisions on a product level is the job of a product team. Between products and on solution level, the teams need to negotiate.
Whether the decisions are right is measured by their contribution to the overall goal, even when this requires to step one or more levels up in the goal hierarchy.
As both teams’ goals are derived from the same hierarchy, there will be a level the new goal of the collaboration contributes to. Both teams have to add the new goal to the product platform.
If the required contribution is exceeding the capability of team (A), a minimal delivery can be negotiated and extended later. If the required delivery still exceeds the resources of a team (A), the requesting team (B) has to implement the part and contribute to the team (A) via pull request.
In some cases, team B can’t contribute to team A, for example if a software team requires certain hardware features. In this case both teams have to use the addressed customer value pool to prioritize accordingly.
So the remaining activities of direction, purpose and rules. A company vision is vital and to keep track of the distance to it is essential. For this, the leadership has to work out tensionable top level goals and support the teams in defining team goals. It shouldn’t be required to dictate the goals from outside.
The product of the company internally (the managements product) are among others the north star / vision, empowered teams and qualified resource availability. This can again be described and shared via the product platform.
Defining management activities as products makes them transparent for employees, associate them to the goals and show how this has an impact on the vision.
See it as a corporate social responsibility to maximize the efficiency of which human capital is used.
Added value and the corporate hierarchy
Typically an organization has several hierarchy levels. Each layer should add clear value to the customer. If all decisions need to be escalated, the layers get overloaded. This is where principles become important. Principles act as guiding rails for every day decision making.
They need to be precise, easy to understand and tensionable. With proper principles, bottlenecks in decision making can be reduced and the resources are offloaded.
This new capacity can then be used to focus the energy on what really matters, the customer.
Hierarchy Value Delta
Every hierarchy level is supposed to add a certain delta to the customer value creation and shouldn’t be responsible for the value, created by the layers below. The responsibility is limited to the added value delta.
Let’s be a bit more specific about what is meant by this value delta. On customers side there is, similar to the own organization, a hierarchy.
So selling a product that improves the efficiency of a plant operator at costs of $19,99 per month can typically be approved either by the operator himself or his boss.
If we are supposed to implement a digital transformation for the customer, the decisions are made on executive level. This requires a different counterpart on your own side. While the products are still sold and under the responsibility of the product teams, the “transformation pitch” is the delta added on the own executive level.
On another level you find transformation of a whole industry, the adoption of certain business models or stimulating the buying environment of a country.
What changes is the excercised influence and the scope but without the responsibility for the aggregated sales (measured with revenue). Instead, these levels are guided using their individual objectives and corresponding measures, such as market share and number of customers.
Stop Aggregating Revenue for Controlling as main KPI
If you stop aggregating revenue in the organization’s hierarchy, measure it only with a flat structure (per aggregation of the product platform) and the use of product specific measures, chances are good that this sparks lots of collaboration.
Guiding KPIs should take the products maturity into account and focus on customer value driving measures such as number of users, an app’s use per user or runway in the introduction phase, given that profit grows with increasing customer base (scalability).
This does not mean not to measure profit, but depending on the maturity, other measures give you better insights into progress and achievement of goals.
Customers in the center
To focus your efforts on maximizing ROI, it is crucial to reduce investments in functionality that is rarely or never used by the customer.
Future growth hereby can only be found by consequently investing in topics the customer is willing to pay for, either with money or data.
Please note that this implies that you shouldn’t only talk to your existing customers. Typically a large portion of growth lies with the potential customers.
So learning from the customer is the only way to build great products. And it’s not the large increments that will get you there most of the time. Large increments bear huge risks and that the customer might not see the balance between value and price.
Choose small chunks that focus on delivering either stand alone value or enablement value. Be playful about this and test alternatives for example with A/B tests.
But most importantly:
Start including measures to verify hypotheses from day one. This is often seen as overhead and done after the product has been built, but at that point the true power of gaining insights is already over. Let insights gained by data guide your decisions how the final product will look like.
Use these insights to identify what’s valuable for the customer and forget what everyone seems to know internally about what the customer wants.
Interviews can give additional insights especially into additional use cases. They are the channel to learn from the customer. In addition they can be used to verify hypotheses.
With an open mind, they will allow you to identify opportunities and get direction for the next increment.
See the product team as your guide for a good product. Let it hike with the customer and allow them to interact with the customer. If they get to a crossroad, ask questions to verify hypotheses such as “if we go that way there might be mountain lakes to catch fish, do you like fishing?” If the customer says yes, head down that road for a while until you get to the next top and you can see whether there are lakes.
Now you already got a new business idea, next time sell a fishing rod. Put it back into the product platform.
Data as the new oil, but what does that mean? What is the actual value of data? And what does this have to do with corporate social responsibility?
Oil is a resource traded globally. Data is an asset, an asset that grows in value through use, similar to intellectual property. A single industrial site’s data is not very valuable. Combining the data generated by thousands of sites, such as oil pads, is a completely different story. Coupling that with data generated in different operating modes creates new insights and increases the value of data for different stakeholders.
If data is so valuable, then why do you and so many others throw it away?
Some try to determine a price for their data and try to understand what they would get when selling it. But the value in data not only lies in its volume. Uber for example connects customers with a demand. Individual consumers provide data on where they want to get to. Uber uses this to match the consumers to drivers. They also aggregate the data to provide insights into market trends and usage patterns. Uber doesn’t sell data, at least not as their primary service, but they do use it extensively to optimize their processes.
It is not about selling data, it is realizing that data is the lifeblood of an organization.
The value of data to Uber is not captured in a pricing approach. Yes, their data is valuable to third parties, but it is more valuable to themselves as they seek to optimize themselfs. Indeed, without data, they could not continue to operate.
Therefore, we can’t think of data value as simply the market price for selling it. We have to re-imagine methodologies for data valuation. The distinction, from data value to data valuation, is crucial. Data value is an asset. Your data has a certain value and is essential to understand what it is in order to make appropriate investment decisions to create products to extract this data. To understand the value of your data you need a methodology for data valuation. You need a way of working out what the actual value of your data is.
Think of data as an asset; organizations invest in assets to create value for their stakeholders. You have to assess and understand what data you have, then you have to put a value on this data so your teams recognize the value of data, treat it with respect inside your organization and increase its value like a refinery. After this, you have to invest to make sure your data is fit for purpose and ensure you have good governance in place, an appropriate data strategy, standards, systems and procedures to ensure good data quality.
Using the data is about finding out how you can use data to create value for your stakeholders. This may be by optimizing operations. It may be through more efficient delivery. It may be by using the data to generate new insights that are valuable themself such as personalized advertisements. Then you can create value by acting upon these insights. Finally, you have assess what you have learned and how to improve in the future.
You iterate between the data valuation and data value phases. The start is data valuation, something that no one has been able to properly implement and that is partly why so many data initiatives fail.
The discussion about value is not unique to data. ~1800 Karl Marx and others try to determine value. Adam Smith Bailey argues:
It is essential to value, that there should be two objects brought into comparison. It cannot be predicated of one thing considered alone, and without reference to another thing. If the value of an object is its power of purchasing, there must be something to purchase. Value denotes consequently nothing positive or intrinsic, but merely the relation in which two objects stand to each other, as exchangeable commodities.
(Bailey p. 11)
Bailey is clearly differentiating between intrinsic value in which value is something belonging to the commodity in isolation from other commodities, apart from and prior to exchange, and a relative notion of value in which value is only something that exists through the relation of one commodity to another.
Cost approach: The value of a data object equals the cost incurred for reproducing an exact copy of that object
Income approach: The value of a data object equals the total economic benefit created by that data object in the future
– Considers data quality as a value determinant – Helps manage data quality effectively Helps raise awareness of data as an asset («price tag for data») and quantify a «minimum data value»Is easy to apply and therefore cost-efficient – Allows internal benchmarking Does not take the value created by data into account – Presupposes high maturity of DQ-tools – Provides no incentive for data managers to save data production cost
– Considers data quality as a value determinant – Analyzes one specific process and how data is used therein – Takes the future value created by data into account (e. g. cost savings, risk reduction, increase in revenue) – Is very flexible and scalable – Reveals process inefficiencies – Is highly subjective in terms of being a company-specific and/or process-specific value indicator – Is dependent on process knowledge and/or expert knowledge and therefore not very cost-efficient
Bottom line in terms of being applicable to data valuation
Delivers valid results, but does not consider the value created by data
Takes the value created by data into account, but is highly subjective and quite costly
I propose that an organization starts with a clear vision and derives valuable data from there. As a starting point, two main categories should be created. Specific data with strong evidence of high value such as position information of moving parts (especially when the parts interact) and asset usage oriented data such as run time of motors etc. The second category contains all other data, which looks like that there is no information in it but you never know what the future will bring. In a second step assign a number that is adequate not to overemphasize data over stand-alone value. Let’s say 10% of the target business pool of a new product for the first category and 1% for the second category.
As a rule of thumb: Complex systems contain more valuable insights simply because it’s hard for humans to see patterns in it but computers might be able to unveil them.
I’m writing this partly also because I believe, that starting the process of treating data properly contains a huge opportunity for all of us. It can contribute to improving processes and therefore stop wasting human capital. This is why I see using data properly as a corporate social responsibility.
Why is it so important to understand what company goals are? Aren’t my goals more important than my customers’ goals?
This sounds simple but it’s sometimes hard to keep in mind when the bullets are flying.
Especially in large enterprises, it is common to break down the goals into sub-goals such as to improve quality, increase innovation, reduce downtime, increase throughput, improve OEE, etc. which replace the main goal of the overall company (make money) during day-to-day operations.
While focusing the daily operations on optimizing them separately, companies are often not able to realize their full potential.
To keep track of the performance of separate entities in the organization, each of the goals gets reported upwards every month or two (sometimes even quarterly).
This leads to a problem:
Typically the reporting of sub-goals is done along with the goals of profit and cost.
In a perfect world, each hierarchy would break down the task to reach a goal into objectives the dedicated entity can influence.
In an imperfect world this introduces another problem:
Goals must consistently support overarching goals, starting from vision down to the products of a company and the actual measures in a product have to provide information of the status of the companies goals in real-time.
I know, you might say: Accelerator? Corporate startup? We’ve got that already.
But let’s be honest, according to HBR 94% of the managers surveyed by McKinsey said they were dissatisfied with their company’s innovation performance. So why is that, when you’re already doing it right?
Fundamentally, a startup within a company is the same as one in a garage: a group of entrepreneurs trying to make the world better using new ideas and inventions.
While to some extent the term “corporate startup” is self-explanatory, let me elaborate what is meant by it.
When talking about corporate startups, we focus on an innovation process inside companies. It is one of many types of entrepreneurship. But first, let’s focus on what’s meant by innovation:
Innovation is often also viewed as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs.
In economics, management science, and other fields of practice and analysis, innovation is generally considered to be the result of a process that brings together various novel ideas in such a way that they affect society.
When it comes to corporate startups, the focus is specifically on adjacent and transformational innovation. In other words, looking at innovation targeting new customer markets and/or new solutions.
“Managing Your Innovation Portfolio” introduces the “Innovation Ambition Matrix.” Corporate startups focus on the top right half of the matrix, the adjacent & transformational aspects.
The core section is typically already well covered by R&D.
Can a Corporate Startup work?
Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business, or as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit.”
In other words, an entrepreneur, by definition is an individual the takes existing resources to innovate and create something new- to generate economic value. Traits of the entrepreneur? Innovation, risk-taking, self-efficiency, opportunity recognition, ability to exploit opportunities, strong locus of control.
What is a start-up? An early–stage venturefounded by an entrepreneurial individual. A startup venture is typically distinguished from an SME or lifestyle business by its degree of innovation, disruptive capacity and…you guessed it, providing (new) economic value.
What distinguishes a startup founder from an entrepreneur? The only difference comes down to that a startup founder is currently running an early-stage venture. Does that still make him and entrepreneur? Yes.
The only distinguishing factor is that an entrepreneur could have a few startup ventures, some which have grown, some which he may have exited. He may still be running his original ‘startup’- but it has grown, and can no longer be called as such. The entrepreneur actively looks for new opportunities to exploit.
Hence- the differences are temporal, and have to do with size, scale and time- of the venture NOT the individual.
So yes, corporate startups can work, why not. You need the right people with the right mindset (which is crucial) and processes.
I’d like to note though that I see it as very important to protect startup and corporation from each other.
There is a “But”
Startups can exist and thrive inside companies, but it is important to acknowledge that the tools and processes are very different.
A startup is typically financed by venture capitalists. It needs to figure out the right mechanisms to value and fund these activities, especially since a startup’s time horizon is much longer than the next annual operating budget.
In contrast, startups in corporations need to convince management of the viability of the new venture. Here it is important to note that it is not only the stand-alone value that is up to valutation, but also the associated enablement value.
This small detail is important when making a go / no-go decision for a corporation because it needs to stay focussed on the core business. Each diversification comes with an associated cost.
Corporate Startups – Transformational Innovation or Obsolescence
Finally, I’d like to make one final point to executives: not only CAN you do this, but your organizations MUST engage in corporate entrepreneurship to remain relevant or you will be obsolete in some years.
The chart above shows both the acceleration of companies disappearing from the S&P 500 as well as their forecast for this trend to accelerate.
While there are a number of reasons for this, the primary one is that the rate of change is accelerating and so transformational innovation is key. Put another way, the things that got your company to its current position in the marketplace will not keep it successful indefinitely.
In the first HBR article mentioned above, in which they set up the Innovation Ambition Matrix, the authors acknowledge there is no “golden ratio”. However, they go on to suggest a good starting point is a minimum of 20% investment in adjacent innovation and 10% in transformational innovation. Interestingly, in follow up research focused just on “high performers that invest in all three levels of innovation” they explain:
Of the bottom-line gains companies enjoy as a result of their innovation efforts, what proportions are generated by core, adjacent, and transformational initiatives?
We’re finding consistently that the return ratio is roughly the inverse of that ideal allocation described above: Core innovation efforts typically contribute 10% of the long-term, cumulative return on innovation investment; adjacent initiatives contribute 20%; and transformational efforts contribute 70%
In other words, to avoid disappearing like your peers on the S&P 500, you need to invest in adjacent and transformational innovation by creating corporate startups.
If you want help building your own corporate startup capabilities, the feel free to explore our webpage further.
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