In mature, well-performing products, product teams often spend too much time developing incremental improvements, fixing bugs, and tweaking various small knobs. These changes usually do not create new value, but only help maintain existing value. If this approach persists, it opens up a space for new competitors, up to complete disruption, which rarely emerges from within the own organization (also known as the Innovation Dilemma). How to avoid this trap?
Status quo analysis
The easiest way to determine if you are in the optimization trap is to rank the lifecycle of the products that product teams are working on. If less than a quarter of the teams are working on new products, renewal of existing products, or those with high growth potential, you are probably already in the optimization trap.
Challenge 1: Lack of strategy
As a natural fallback option, the optimization focus is chosen in the absence of an alternative more promising strategy. It becomes substituted by opportunities and small iterative enhancements. If a strategy capable of resetting benchmarks were in place, iterative enhancements would receive little priority in comparison. Opportunities would also be chosen more wisely and judged according to their strategic value.
Challenge 2: Local optimization
Teams like to think within their area of responsibility because of their expertise and also for pragmatic execution aspects. However, potentials rarely exist only within the boundaries of individual teams’ responsibilities. If teams deal in a restricted solution space, the potential will also remain restricted. An overarching focus of all teams on just a few topics at the same time can therefore enable both collaboration and the necessary focus on the significant levers. This requires that the leadership is able to reduce the number of topics at the same time to an extent that makes this approach possible.
Challenge 3: Processes & Methods
Agile methodologies, despite all their benefits, have also led to a certain pressure to deliver “valuable” increments in production within short cycles. However, for products in the innovation cycle or in renewal, this is difficult. Therefore, small, incremental and concretely demanded optimizations are gladly developed to satisfy internal stakeholders. Complex analyses, time-consuming prototypes, and larger refactoring initiatives with potential are avoided if no noticeable change can be delivered to customers. Since this approach leads to a dead-end in the long run, efforts should be made to select an appropriate approach in which the work on optimizations and the work on major initiatives are in a healthy proportion to the product life cycle.
Challenge 4: The existing organization
Successful products lead to larger organizational structures supporting the logic of those products. Knowhow, structures, and processes are optimized to drive this product forward. It is not likely that this organization will renew itself from the inside on its own. Especially disruptive innovations should therefore have their own organizational home. This home should have staff, structures, and processes that are appropriate for the new vision. At the same time, it needs a suitable testing ground, including a target group, in which future innovations are made possible by the leadership without fear of their own disruption.
If these steps are not taken, financially strong companies still have the option of renewal through acquisition — with its specific advantages and drawbacks.