A New Framework for Disruptive Innovation Management - Dr. Jose a. Briones


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Product innovation has been described as the way out of today’s difficult business environment. However, the rate of success of development projects, in particular white space or disruptive innovation projects remains too low.
We believe that a reason for the low success rate is the erroneous application of methods designed for incremental innovation like Stage Gate to projects with high levels of uncertainty. In this presentation we will discuss the different types of development projects based on degree of uncertainty, and the creation of different project tracks. Projects are managed using different tool sets based on the best fit between information available and decision making needs.

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A New Framework for Disruptive Innovation Management - Dr. Jose a. Briones

  1. 1. A New Approach For The Management Of Innovation Processes Jose A. Briones, Ph.D. SpyroTek Performance Solutions @Brioneja June 9, 2014
  2. 2. 2 • Introduction to the problem • Review of conventional Stage-Gate • Classification of Innovation Projects • The Spiro-Level approach • Summary
  3. 3. 3 • Stage-Gate® is a registered trademark from Stage-Gate International’s Product Development Institute Inc. • “The fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright” - Copyright Act of 1976, 17 U.S.C. 107 Legalese
  4. 4. • Product innovation has been described as the way out of today’s difficult business environment. • The rate of success of development projects, in particular disruptive innovation projects remains too low. • We believe that a reason for the low success rate is the erroneous application of analysis methods designed for incremental innovation like NPV and DCF to projects with high levels of uncertainty Twitter: @Brioneja www.Brioneja.com
  5. 5. 5 • Ratio of R&D needed per unit of GDP output has gone from 1:1 in the early 90’s to ~3:1 in 2009 (Source: Dr. William Strauss, FutureMetrics) • Success rates of innovation projects can be as low as 2.5% but rarely exceed 20% depending on when we define a project launch • Effectiveness of product development process is broken • We can no longer throw Ph.D.’s at a problem Problem
  6. 6. Twitter: @Brioneja www.Brioneja.com One of the biggest problems that a product manager encounters when starting an innovation program is to reach consensus on the definition of innovation. This is more than a semantics issue. Without agreement on exactly what the goal is the team is unlikely to achieve it. Many companies suffering from innovation fatigue, driven by confusion between innovation & invention
  7. 7. Twitter: @Brioneja www.Brioneja.com
  8. 8. Twitter: @Brioneja www.Brioneja.com • The traditional definition of innovation has been simply “a new method, idea or product”. • We believe that this definition of innovation is obsolete, and that being new is not enough for something to be called innovative.
  9. 9. Twitter: @Brioneja www.Brioneja.com • “An invention is a new (previously undiscovered) method, device, process, algorithm, or tangible material that can be used for a specific purpose”
  10. 10. Twitter: @Brioneja www.Brioneja.com • Classical definitions of innovation and invention overlap each other!! • We must establish the difference between innovation and invention.
  11. 11. Twitter: @Brioneja www.Brioneja.com • “Big new ideas more often result from recycling and combining old ideas than from eureka moments” @stevenbjohnson
  12. 12. Twitter: @Brioneja www.Brioneja.com Twitter: @Brioneja www.Brioneja.com
  13. 13. • Incremental or sustaining • Occurs in linear fashion • Radical or disruptive • Occurs in non-linear, discontinuous or iterative fashion Product 1 Product 2 Product 3 Projects Product Twitter: @Brioneja www.Brioneja.com
  14. 14. Twitter: @Brioneja www.Brioneja.com Twitter: @Brioneja A measure of • The magnitude an unmet need is met • Desirability The degree by which a product or service meets a need either functional, pragmatic or psychological Magnitude of value in marketplace tied to segment – essential
  15. 15. • We propose a definition of innovation as the intersection of invention and value. • The magnitude of increasing value that the invention brings to the user or market subsequently defines the innovation further as incremental, radical or disruptive. Twitter: @Brioneja www.Brioneja.com
  16. 16. Twitter: @Brioneja www.Brioneja.com Incremental or Sustaining innovation • Marginal improvements along current feature set. • Product line extensions: Bigger, better, faster. Radical or Breakthrough innovation • Order of magnitude improvement or increase in benefits along the same features • Digital vs. Analog technology: Plasma vs. CRT TV’s Disruptive Innovation • Delivers value along a different feature set not prioritized by the existing offering and user base • Results in an order of magnitude increase in rate of adoption or change in user behavior • Features vs. Design - iPhone
  17. 17. 17 •Projects at different levels of uncertainty must be managed differently •Expectations must be different •Tools to manage them must be different
  18. 18. 18 • Where do they all fit? • When do I use each tool? • What is a reasonable expectation? Proliferation of Solutions
  19. 19. 19 • Create a unified framework for innovation projects/product development that 1. Provides the flexibility needed for innovation to work 2. Still has the metrics needed for proper measurement of progress and resource allocation. Challenge
  20. 20. Process People Culture Twitter: @Brioneja www.Brioneja.com
  21. 21. • Idea Generation • Idea Selection • Project Management Projects Idea 3 Idea 1 Idea 2 Twitter: @Brioneja www.Brioneja.com
  22. 22. • Standard processes for innovation management reflect the linearity of incremental innovation • Stage Gate • Waterfall • Do not work well in disruptive or radical innovation Stage 1 • Discovery Stage 2 • Business Case Stage 3 •Development Twitter: @Brioneja www.Brioneja.com
  23. 23. 23 "I am going to come to you with a contrarian view of innovation, deeply researched, with more than $7-million worth of data behind the assertion that the Stage-Gate model as we know it today is…going to guarantee total performance mediocrity for your businesses. Larry Keeley, president of Doblin, Inc April 2006
  24. 24. 24 “The Stage-Gate system is not suited to the task of assessing innovations whose purpose is to build new growth businesses, but most companies continue to follow it simply because they see no alternative” Clayton M. Christensen
  25. 25. 25 Project is managed in a linear fashion “The Stage-Gate system assumes that the proposed strategy is the right strategy, the problem is that except in the case of incremental innovations, the right strategy cannot be completely known in advance” – Clayton M. Christensen Source: Product Development Institute, Inc.
  26. 26. 26 Xpress and Lite Variations of Stage-Gate Source: R.G. Cooper, Stage-Gate International These modifications still use a linear approach to innovation project management.
  27. 27. 27 • Iterations occur within a stage, with no mechanism to start over Source: R.G. Cooper, Stage-Gate International
  28. 28. 28 • • “Simultaneous Execution” and “Stage Overlapping” can also be used to address some of the Stage-Gate deficiencies, but are not enough to overcome the restrictions of the linear approach.
  29. 29. Disruptive Innovation • Iterative • Estimates • Flexibility • Virtual teams Classical Business Management • Efficiency • Forecast • Progress Measurement • Resource allocation Twitter: @Brioneja www.Brioneja.com
  30. 30. 30 • For Disruptive innovations, 1 round of VOC’s is not enough to be the cornerstone of a project • Customers cannot say that they want what they do not know • Customers can only provide feedback on incremental modifications on what they do know • Iterations are needed where customers evaluate a prototype and a new cycle starts, complete with a new VOC, market and business analysis
  31. 31. 31 • Incorporate classification via level of uncertainty in your project portfolio management • Modify innovation management into a real spiral approach • Manage different types of projects using levels on the Spiral
  32. 32. Project Portfolio Classification By Uncertainty Spiral Approach to Innovation Management Use Of Different Tools At Each Level Of The Spiral Twitter: @Brioneja www.Brioneja.com 3 2 1
  33. 33. 33 Market Product NewExisting New Existing Conventional product development categorization fails to acknowledge the differences in available information within each space Adjacent Markets vs. Blue Ocean
  34. 34. • Projects are classified by how much we do NOT know • Degree of uncertainty defines the track they take TechnicalUncertainty High Medium Low Market Uncertainty Low Medium High Positioning Options Stepping Stones Platform Launches Enhancement Launches Scouting Options Source: The Entrepreneurial Mindset Twitter: @Brioneja www.Brioneja.com
  35. 35. • Spiral has 3 levels • Axis = Resources and Time • High uncertainty projects start at level 1 • Move from learning/discovery to definition/forecast 1 2 3 Time Resources Twitter: @Brioneja www.Brioneja.com
  36. 36. Level 1 Level 2 Level 3 • Project analysis repeated • Different Tools Selected • Level 1 tools feed subsequent levels • WHEN Vs. WHICH Twitter: @Brioneja www.Brioneja.com
  37. 37. Resources Resources TimeTime Level 1 2 3 VOC Idea Generation Technology Assessment Prototype Development Customer Testing Business CaseValue in Use Analysis Regulatory IP Strategy Supply Chain Analysis Roadmap/Timeline Risk Analysis The Spiral Approach to Innovation Management Launch Quadrant I Quadrant IIQuadrant III Quadrant IV Twitter: @Brioneja www.Brioneja.com
  38. 38. 38 • Must reduce the projects’ level of uncertainty • Transform options and stepping stones into platforms • Generate products/opportunities from the platforms that can be managed with conventional financial and project management tools
  39. 39. 39 Level 1 •Positioning and Scouting Options •Stepping Stones Level 2 •Platform Launches and Projects Level 3 •Enhancements and individual product launches
  40. 40. 40 • Time and resources start small, increase as the levels go up • The analysis is repeated at each level, but the tools used for each level are different. • Level 1 uses tools more suitable for high levels of uncertainty, i.e. Discovery Driven Planning, Probabilistic Decision Analysis • Level 3 uses more conventional management tools, i.e. Linear Stage-Gate, NPV
  41. 41. 41 •Management and Project teams define number and type of reviews • Agreed upon timeline and level of resources defines the number of reviews • By Quadrant • By Level • Level 1 does not need as many reviews as Level 3
  42. 42. 42 Level 1 •Discovery Driven Planning •Knowledge to Assumption Management Level 2 •Product/Technology Roadmaps •Multigenerational Product Planning Level 3 •Linear Stage-Gate •Agile Development
  43. 43. 43 Level 1 •Market Perceived Quality Profile Level 2 •Kano Analysis Level 3 •Conjoint Analysis
  44. 44. 44 Level 1 •Unmet Needs – KJ Analysis Level 2 •Job to be Done Level 3 •Product Features VOC Level 1: Broad and shallow VOC Level 3: Deep and detailed
  45. 45. 45 Level 1 •Reverse Income Statement •Real Options Level 2 •Probabilistic Decision Analysis Level 3 •NPV •DCF
  46. 46. 46 •A modified Spiral approach to innovation project management can be used to: • Integrate project portfolio management by level of uncertainty • Manage different types of projects using the appropriate tools • Maintain the right framework to track progress and resources but provide the flexibility that innovation projects need for success •This approach has already been successfully used to create a disruptive innovation product for the construction industry
  47. 47. 47 “We keep rediscovering that the root reason for established companies’ failure to innovate is that managers don’t have good tools to help them understand markets, build brands, find customers, select employees, organize teams, and develop strategy” “Some of the tools typically used for financial analysis, and decision making about investments, distort the value, importance, and likelihood of success of investments in innovation” “There’s a better way for management teams to grow their companies. But they will need the courage to challenge some of the paradigms of financial analysis and the willingness to develop alternative methodologies”
  48. 48. • This framework for innovation projects provides • The flexibility needed for successful innovation projects in any industry • The metrics needed for proper measurement of progress and resource allocation. Twitter: @Brioneja www.Brioneja.com
  49. 49. 49 • Jose A. Briones, Ph.D. (Brioneja) • Twitter: @Brioneja • Brioneja@spyrotek.com • www.Brioneja.com