The Role of Excel in Innovation
How to become a responsible user of Excel while applying Lean Startup principles to corporate innovation projects
I love Excel.
I’m always looking for more opportunities to use Microsoft Excel in my life, from automating emails to data analysis of anything. Furthermore, I’m not just an admirer of Excel, I’m a professional promoter. I teach a university-level business course that embeds Excel into every module, with students completing their assignments and exams on a spreadsheet. Some students love it; plenty hate it, but most of them come back years later and tell me how valuable it is to them now in the workplace.
I also love Lean Startup.
My other day job outside the university is helping corporate teams to adapt entrepreneurial principles in their innovation projects and I have witnessed how this customer-focused approach has revolutionized how corporations think and approach the development of new business ideas. I truly believe in the Build — Learn — Measure approach to understanding uncertainty and quickly validating or invalidating assumptions.
Yet these two loves of mine often seem to be in conflict.
When it comes to innovation, companies tend to over-rely on Excel spreadsheets to help them predict the future, as if a properly tuned feasibility analysis will help them divine customer quirks and changing market dynamics. I’m sure Airbus did their fair share of feasibility studies, but that did not prevent the inevitable discontinuation of the Airbus A380 last month, yet another technological marvel without enough paying customers.
So what role does Excel have in innovation projects. The following are just a few ways I incorporate Excel into my work:
- Excel as a Business Model Check
- Excel as a Data Mining Tool
- Excel as a Prototype
- Excel as a Translator for Management
There’s an entire flight simulator hidden in every copy of Microsoft Excel 97.
— Bruce Schneier
1) Excel as a Business Model Check
A business idea is only as good as its business model, and the value of a business model is measured by the bottom line: how much money will it make?
Excel is a great tool to check the validity of your business model at the start. Create a simple income statement based on your business model canvas and see if the output meets your expectations. The key is not to spend too much time trying to perfect every assumption and obtain the optimal forecast. You will need to test those key assumptions anyway but a basic Excel model will help you identify which of those assumptions are “key”, and help you prioritize your experimentation focus.
2) Excel as a Data Mining Tool
While nothing replaces the deep insights garnered from face-to-face customer interviews, there are plenty of insights to be gained from digging deeper into the customer and operational data the company already possesses.
I love using Excel to dig into raw data outputs rather than just relying on standard statistical averages. The average can mask all sorts of interesting outliers, and analyzing the raw data can point to interesting areas for further investigation as well as coming up with subsets of customers to interview. Don’t be afraid to step back from the standard corporate reports and data summary presentations and go deeper with Excel yourself. Often times it is these data deep dives that help me match the small picture of customer interviews with the big picture of general customer behavior.
3) Excel as a Prototype
When discussing prototypes and MVPs, we often look to paper sketches, digital mockups, and quick-and-dirty code to help us measure our value proposition and customer usability. However, there are many instances where a carefully designed Excel sheet can serve as a rudimentary product to test value without doing any design or coding.
Consider a website that calculates prices or loan amounts based on a set of customer inputs. Without building the site or the underlying XML database you can create a simple spreadsheet that does the same calculations and test it’s usability and efficacy via in-person interviews. A basic mastery of Excel will open doors for you to create a multitude of input forms and even automated macros that effectively simulate your proposed digital tool.
4) Excel as a Translator for Management
Corporate managers, especially upper management, tend to speak only in the language of Excel. You can tell them a multitude of interesting customer stories and share with them your creative paper prototypes but they will only be convinced by the numbers: customers, revenue, profit.
A strong appreciation of Excel will help you to translate your Lean Startup efforts into a language they can understand and appreciate. Shift their attention away from raw numbers, i.e. number of customers or total profit, to comparable ratios, i.e. conversion rate, referral rate, churn rate. The right graph or careful designed table will help management to see where your project is headed and make a qualified judgement on funding and support. The opposite is also true; projects that cannot demonstrate clear, fact-based numerical proof are often sunk despite the quality of the idea behind it.
As you can see, while we should not rely solely on Excel to help us divine the future of a product or project, the responsible use of this powerful spreadsheet program can go a long way to support your Lean Startup-based innovation efforts. Are you convinced?
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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