As the life cycle of products and services continues to accelerate, the need for innovation is increasing. Innovation is a necessary catalyst to growth in all types of business: as society, laws, technology and competition changes, the conditions that allow you to successfully sell a product also change.

Startups are all too familiar with the risk associated with innovation and have mastered how to innovate with a small budget while eliminating risk and maximizing returns. Last night, 1871 invited Bernhard Kappe, Founder and CEO of Pathfinder, to share the secrets they have discovered and explain how large companies can successfully innovate using the lean startup method.

Just what is the lean start-up method? It's a set of practices for helping entrepreneurs increase their odds of building a successful business. The data-driven process helps to reduce risk through hypothesis testing and helps businesses find a scalable business model that works for them.

Here are Kappe's tips for enacting the lean start-up method:

Recognize the risk
New product development is risky: 9 out of 10 new products fail because it is impossible to create an initial business plan that nails buyer projections. To lower this risk and maximize returns you need to interact with the consumer. Interactions like this change everything. “There are a lot of assumptions that you have. Because of that, what you end up building looks completely different than what you started with,” Kappe said.

Take the time to learn
When marketing a recognizable product you have the benefit of an existing business model. A new product means new problems and a business plan composed only of hypothesis and assumptions. Figuring out the product and problem before the execution helps you validate hypothesis, know where your money will go and create a scalable, executable business.

Do not scale prematurely
A business plan built on a hypothesis is likely to have many invalid assumptions that make scaling prematurely a bad idea. Kappe compares changing a business model at scale to moving a big ship. “Since you already have a lot of people moving in a certain direction you are not as agile and you cannot move as fast. Plus you are burning a whole bunch of fuel (money)—it is very difficult,” he said. On top of this, you have more pressure to succeed because of the large amount of money you have already wasted. 

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