Innovation on Tap – A Proven Framework for Commercial Innovation

by admin on April 2, 2010

No Longer a Black Art

In bygone days the practice of product, process or service innovation and development in commercial organisations was a black art practiced by marketers, engineers or scientific researchers…..dependent on the industry. There was either no fixed method for doing this work, or the formal methods that existed were proprietary to the company or even a company site!

Everyone was more or less free to pursue their creative ‘instincts’, and that suited many people very well, some even arguing that by definition you cannot structure what is essentially a creative endeavour.

Although there is some truth in this assertion global competition, cost pressures, and regulatory compliance requirements have combined to force many commercial organisations, especially those in fast changing or capital intensive business environments, to re-examine their practices in this area as a matter of their very survival!

Capital intensive organisations like those developing new aeroplanes, cars, microchips and ethical pharmaceuticals could no longer afford to proceed with new developments that were not tightly managed, as the cost of failure or non-compliance was just too high to bear.

Likewise,  consumer goods sectors such as food and drink, consumer electronics, clothing and entertainment have experienced rates of change in technology and / or consumer preferences that mean they have had to become highly organised just to avoid the risk of developing ‘last years’ product. Practices like:

•    Time-to-Market
•    Design-to-Cost, and
•    Configure-to-Order

have combined with:

•    rate of technological change
•    opening up of global markets and labour forces
•    growth in customers’ power and value expectations, and
•    expanding / changing regulatory regimes

to force companies to get smarter, leaner and more productive just to stay in the game!

Many leading commercial organisations have found that not only can they structure their Product Innovation and Development processes, but that they get better, faster…..and best of all…..more predictable results from it this way.

A Framework for Innovation and Development (I&D)

If you strip away the organisation-specific adaptations, and the many tools and techniques whose jargon and buzz-words can obscure the bigger picture, a common framework emerges.

It is possible to see many variations on this basic framework being deployed in leading commercial organisations, some seemingly unrecognisable, but if you dig beneath the surface most of them have many elements in common with what is set out here…..typically just organised in different ways to suit their specific needs.

One of the strengths of this generic Product Innovation and Development framework is that it reflects good or best practice from across industries and can be readily adapted and tuned to meet specific needs in different companies and sectors….independently of whether they are primarily revenue-up, cost-down or compliance driven!

Four Core Components

Four core components are at the heart of a Product Innovation and Development framework:

Strategic Alignment

This is a means of interpreting vision and strategic objectives into broad areas against which to target investments in Product Innovation and Development – given industry and market trends, growth requirements, changing statutory environments, etc.

An important part of this is allocating funds and other resources to these broad areas of interest in rough proportion to their promise or importance.

Idea Management

This is a means of systematically gathering in ideas for innovations large and small from the people at all layers of an organisation – from an organisation’s customers, suppliers and partners, and from the marketplace at large whether its source is consumers or competitors.

And then being able to store, retrieve, filter and synthesise these as needed as one more potential source of innovative ideas…..people employed by an organisation specifically to ‘innovate’ don’t have a monopoly on good ideas!

Innovation and Development (I&D) Process and Metrics

This process is structured and is often based on a variation of the ‘Stage-Gate’ model.  It represents a logical progression of the steps through which product ideas should flow from their conception to their production or execution.

The model starts with the capacity (if needed / appropriate) to explore advanced new ideas, Joint Venture development partnerships, proposed regulatory regimes or key technologies with long lead times and high intrinsic risks.

This first step ensures that, if and when there is a need for them, the organisation already has some familiarity and hence understanding of both the benefits and risks and can take a considered view of whether their deployment will be appropriate to the need at hand.

From this point onwards, whether the idea was drawn from the incubator, pulled from the idea management process, an outcome of a brainstorming session, or arose in a classic moment of inspiration each Stage further defines, justifies, designs, develops and tests the idea in sequence until there emerges from the other end of the process a fully completed, market ready, regulatory compliant, and economically viable product available for manufacture or execution.

Of course not all product ideas are capable of delivering the desired results, which is where the Gates between each Stage come in.

The Gates sit at logical breakpoints in the I&D process, usually when new information about the product or market environment is planned to be available (e.g. new costings, forecasts, or regulatory impact assessments ready), at a particular point in the product’s development (e.g. focus group, preliminary compliance audit, or prototype test results), and so on.

In each case an appropriately staffed (i.e. often cross-functional and / or including selected external stakeholders) group meets for a Gate meeting (which may be considering one or multiple products) and needs to take two broad decisions about a product.

The first is whether a product idea is allowed to proceed to the next stage based on its own merits, or instead needs remedial attention or even killing off.  The second broad decision is connected with Portfolio Management.

Portfolio Management

This is the process of defining meaningful categories into which products will group themselves.  These vary by industry, but usually revolve around market / customer type, type of technology, price range, regulatory regime, etc.

There are typically two differing types of Portfolio Management approach employed, usually dependent on industry sector and associated market dynamics.

The first tends to be employed by capital intensive sectors that place a few ‘big bets’ (e.g. aerospace) whose failure can ‘break the bank’, or by sectors in which change is so rapid that tight, time-efficient, centralised decision making is a critical success factor (e.g. high-tech).

This is usually a board and senior management decision, coming out of the Strategic Alignment process, and a new product idea is typically admitted to the portfolio at that stage before the I&D process has even properly begun.

The role in this scenario for the Portfolio Management part of the Gate meeting is to ensure that the product is continuing to contribute as predicted and expected to the portfolio of products.  That is to say to monitor that nothing has changed that would lead to making the product a liability to the portfolio.  This is referred to as a ‘Portfolios Dominate’ arrangement.

The second type of Portfolio Management is often employed by organisations operating in sectors which are somewhat less volatile and / or the cost of a failure lower.  Additionally, they frequently need to cope with a large, diverse range of offerings (e.g. consumer goods).

This approach is driven by the I&D process and in this scenario the board and senior management give broad guidance and funding budgets in the Strategic Alignment process, but they do not dictate which specific products to develop…..this can run to many hundreds every year in some sectors!

Therefore it is the role of the Gate meeting to decide not only if the product idea has merit and is sound in itself, but to also decide on the timing of its admittance to a portfolio given the net impact that its admittance will have on the portfolio’s overall performance.

It is not uncommon or wrong for good product ideas to be put on hold until the market timing is right, or they are less likely to cannibalise other portfolio product sales, or the resources to develop them can be made available, etc.  This is referred to as a ‘Gates Dominate’ arrangement.

In both types of Portfolio Management, a common goal is to give senior executives feedback as to how well the organisation’s vision and strategic objectives are being supported by the flow of product ideas in the development pipeline.

They can use this information to periodically correct any perceived misalignments, review current products or product groupings in the pipeline in the light of any new information they have, or to get a view of whether anything is at serious risk of coming unstuck while it is still at a point where they can take effective corrective action.

Clearly, it can also serve as a departure point for periodically re-visiting the organisation’s vision and strategic objectives.

Three Supporting Components

In addition to the core components, there are also three commonly used supporting components found in many approaches to this area.  These can be summarised as follows:

•    People Management – these are important ‘softer’ people oriented skills and capabilities needed by any successful organisation.  It includes things like leadership, teamwork, roles, RASCI matrices, organisational design, behaviour and culture change, communications, and staff education and training.

•    Progress Management – if what has been written so far conjures up familiar images of programmes and projects, that’s because it should…..the only difference is that things have been structured in such a way to suit the requirements of a repeatable I&D capability.

This includes such topics as governance, business case, programme and project management, liability and risk management, and resource and financial management.

•   Enabling Systems and Data – this final area is a catch-all title for all the systems, tools, data, etc that are needed to run an effective industrial scale I&D process.

Reaping the Benefits

Vital to all seven components outlined on these pages is the need to foster dynamic collaboration (e.g. as in Concurrent Engineering) across disciplines, technologies, geographies, companies, regulatory agencies, etc as required.

Ideas, requirements, changes, issues and risks must all be communicated, and complexity managed, between the right group of stakeholders at the right time!

Onto the Product Innovation and Development framework that has now been defined can be hung, in the appropriate places, the relevant techniques and tools that are the jargon and buzz-words alluded to earlier in this paper.

Mentioning specific approaches such as TRIZ, Design-for-Manufacture / Postponement, Rapid Prototyping, Quality Function Deployment (QFD) and Experimental Design is to list but a few.

At this point a cautionary note should be sounded – this framework can also easily be mal-adapted.  For example:

•    becoming a bureaucracy engine / cottage industry where people feed the process data without knowing why, or

•    forcing all projects, large and small, risky and trivial down the same path, when there should be multiple paths of varying rigour to meet the needs of various types of products in development and their associated investment and risk profiles, or

•    not defining carefully which people, from what parts of the organisation and / or stakeholder group(s), are given which roles in the process….this is often a particularly painful mistake in terms of the effectiveness of the process and the predictability of its outcomes!

However, if the framework is well implemented, and includes the necessary training for those who must work with it, it can be a powerful competitive weapon.  The rewards can include:

•    the capability to deliver streams of new or improved products quickly, reliably and in a predictable / compliant fashion.

•    an improved success rate with new developments – although none of this will guarantee the product, once developed, will be a success in the marketplace.  But there will be fewer product concepts that fail to see the light of day even after much has been spent on their development.

And statistics also show that organisations who consistently apply a process such as the one outlined in this paper do in fact also attain a higher market success rate than those who do not.

This should be no surprise as the very essence of the process outlined here is to apply the basic principle of increasing investment spend only as the risks associated with it decrease through more and better knowledge.

That is accomplished through careful market research, feature scoping, business case justification, regulatory impact reviews, and other good practice.  All employed at the correct times and in the right manner, through to the point of launch of a fully developed new or upgraded product.

Bringing into play a regularised, repeatable and well understood mechanism for Product Innovation and Develop can help provide an organisation ‘innovation on tap’ as it were!

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