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Whitepaper: Innovation - a game of chance?


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Matthew White, Head of Opportunity Discovery at Sagentia, provides an insight into how you can weight the innovation dice in your favour.

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Whitepaper: Innovation - a game of chance?

  1. 1. Innovation - a game ofchance?Weighting the innovation dice in your favour
  2. 2. Innovation - a game of chance?Executive summaryInnovation is the key to survival in which end users find no value and do nottoday’s complex global market buy. So what can companies do to turnplace. Companies need to regularly the tables? How can companies ensurelaunch new products and services that their new innovations are successful?to keep ahead of aggressive In our experience, the main cause ofcompetition, win new customers failure is the way that many companiesand provide security for the future. approach innovation. Often they do not seek to really push boundaries, theyBusiness gurus now talk of the new mitigate what they perceive as high-risk‘creative economy’, the ‘core competence opportunities by sticking to ‘routineof creativity’ and ‘macro innovation’ – the innovation’ that results in incrementalbig idea that will boost the fortunes of a developments and uninspiring linecompany. In fact, a recent survey of leaders found innovation to be ahigh priority. But how much of it is going Successful innovation strategies challengeon – and more importantly, how much is the way we do things but manage riskdelivering real end user value, return on effectively. They maintain a clear focus oninvestment and subsequently boosting understanding stakeholders; identifyingcompany profits? unmet needs and valuable trends; pushing creative boundaries in a focused manner;Other figures indicate that 96 percent of continual technical, business andinnovation initiatives fail to meet return on stakeholder validation; and the ultimateinvestment targets – a massive failure creation of concepts that delightrate. With thousands of products and stakeholders and deliver real businessservices being launched around the world value. Innovation should not be a game ofevery year, huge sums of money are chance.being wasted developing new products, in 1 © Sagentia 2011
  3. 3. Innovation - a game of chance?IntroductionBusiness leaders around the world are But how much of this is reality in businessseeing great changes in the markets in today? How much innovation is reallywhich they operate. For example, going on and, more importantly, how muchcompanies in China have moved from of it is successful and generating profit?being just a low-cost centre formanufacture, to now delivering full turnkey According to a recent survey, 96 per centdesign and manufacture of increasingly of innovation initiatives fail to meet returncomplex products for both themselves and on investment targets. With thousands oftheir clients. Western companies are products and services being launchedunderstandably taking advantage of this every year, huge sums of money andopportunity to outsource detailed resources are being wasted developingdevelopment to a lower cost environment new products, in which end users find nobut what does this then leave behind? value and do not buy.Innovation is the obvious answer. All innovation carries an element of riskUnsurprisingly a recent survey of CEO’s and genuine breakthrough innovation is,and government leaders carried out by by its nature, the riskiest. However, manyIBM found that ‘innovation’ was high on companies struggle to manage these riskstheir agendas – it has to be, it is going to on a project by project basis. When this isdeliver the future of the business. The combined with a short term perspective oncritical and most valuable element of the the likely returns, organisations take whatentire innovation process is undoubtedly is perceived as the low risk option andthe front end – the identification of real pragmatically shy away from truestakeholder needs and their translation breakthroughs.into deliverable and valuable new product As a result, many innovation strategiesconcepts. focus on launching a steady stream ofAs a result, the knowledge economy has, product enhancements and lineaccording to business gurus, been extensions. Whilst incremental innovationsuperseded by the creative economy. is a hugely valuable part of an innovationIncreasingly, they tell us, ‘the new core portfolio, in our view failure to developcompetence is creativity - the right-brain medium to long term innovation projectsstuff that smart companies are now leading to ground breaking new productsharnessing to generate top-line growth’. or services presents a much higher risk to the ultimate success of a business.Managing Innovation RiskBreakthrough innovations deliver Finding current unmet needs of userssomething new, something of value and stakeholders.something that stakeholders didn’t know Understanding and capitalising onthey needed. But where do these trends to meet future needs.breakthroughs come from and how can Disrupting the value chain with newcompanies consistently create them? technology or practices. Identifying where new technologies willFundamentally they all start with the disrupt a market/product or service.discovery of an opportunity. However,repeated success comes from “With a good innovation team andsystematically developing a deepunderstanding of the areas of opportunity. great insight into the problems to beThis leads to insights and inspiration. addressed, only then can you enter the more creative phase of a project.”There are many sources for discoveringpotential opportunities, for example: 2 © Sagentia 2011
  4. 4. Innovation - a game of chance?We use a range of tools to explore these makeup of the team look like? High levelareas, which can include ethnography, strategists or those with an eye for detail?scenario planning, disruptive technology Logical thinkers or creative powerhouses?searching and value chain analysis. We believe that teams ideally shouldDiscovering and selecting the right consist of individuals with a diverse rangeopportunities requires a combination of of personality traits.analytical rigour and creativity. We buildteams that have access to broad cross- They are very challenging to manage butsector experience and deep technical, ‘cover all the bases’ and make it possibledesign, market and business knowledge. to rapidly build and kill concepts. A teamThis provides the ability to validate and of substantially similar personality typesprioritise the output from the ‘understand’ on the other hand will be easy to managephase rapidly. but tend to lack capability in certain areas, creating a potential downfall and an addedIn our experience, while many element of risk.organisations understand the value ofidentifying the unmet needs of their users, Having chosen a team, the secondthey fail to understand who other key challenge is promoting the value of earlystakeholders are. These other failure. The ability to ‘kill’ concepts for thestakeholders may influence purchasing right reasons as rapidly as possible is key.decisions or the manner in which a A team used to delivering incrementalproduct is used. innovation or product development will expect to always deliver successfully.For example, imagine a new product However innovation is risky. Manyconcept that could reduce by fifteen concepts or opportunities areminutes the time taken to carry out a inappropriate because, for example, theycomplex surgical procedure in a hospital. don’t address a real need, they cannot beThe concept is genuinely revolutionary technically delivered or they will notand is well received by the surgeons who provide a sufficient return on investment.might use it. It would appear to be avaluable opportunity. The objective therefore is to kill bad concepts as soon as is realisticallyHowever, when we delve a little deeper, possible. This will in turn free upwe find that the surgical procedure being resources that can be used to developaddressed normally takes two hours. those concepts that do have real futureReducing the time taken by fifteen minutes value. A team that continually uses moreactually provides very little benefit to the resource to get a ‘bad’ concept to becomehospital because it does not allow ‘successful’ will deliver late failures andsurgeons to ‘fit in’ another operation – it perpetuate the impression of breakthroughdoes not increase throughput, which is a innovation being too risky.key metric for the hospital. With a good innovation team and greatThe purchasing manager for the hospital, insight into the problems that need to bea key stakeholder, will not pay for this new addressed, we can enter the moredevice as there is no return for the creative phase of a project. Manyhospital. Considering this additional organisations already understand thestakeholder suddenly changes the value value of using a broad range of creativityproposition significantly. tools. However, it is important to emphasise how involving the right groupAnother weak spot for organisations is the of people from a wide range of functionsapproach to creating innovation teams. and disciplines, and ensuring the teamOrganisations typically bring together a remains immersed in the world of the keygroup of the brightest and the best – often stakeholders and end user, are key factorsindividuals who have excelled in their for success at this point.respective fields. This creates twochallenges. Firstly what should the 3 © Sagentia 2011
  5. 5. Innovation - a game of chance?The biggest challenge we find is that through and result in weak final conceptscompanies either conceive a handful of – and another opportunity to introduce risknew ideas, or are unable to deal with the into the process.challenges associated with managing alarge number of ideas, say 200 – 400. It is important to mention at this stage thatYou cannot stifle creativity at this point, it innovation need not necessarily be groundis crucial that participants are taken to the breaking technology. A perfect exampleextremes of their creativity in order to of this is Apple’s iPod, which broughtunleash real breakthrough ideas. together existing hard drive technology, wrapped a software package to enableWhat is required, therefore, is a means of legal music file downloading around it, andappropriately structuring the innovation created a well designed and compellingspace. The team needs to be confident user experience.that it has understood what the potential None of this was rocket science but whatspace for innovation looks like, that it hascovered this space and not missed Apple did exceptionally well was toopportunities and that it has selected the understand and anticipate market ideas to take forward. They took a well calculated risk and created a highly desirable product that theWe have specifically developed a range of competition, so far, has not been able tostructured innovation tools to provide the match.required confidence and minimise risk inthis creative phase. Having built a portfolio of leading candidates, further iterations of testing and“Breakthrough innovations deliver validation must be carried out from asomething new and of value. technical, business and stakeholderSomething that stakeholders didn’t perspective. Each of these is important ifknow they needed.” all the internal business sponsors are going to give the go ahead for furtherHaving generated a large number of funding.ideas, an iterative process of idea It is important to provide a vision of thedevelopment and filtering can be used to concept that excites all of the sponsorsgradually get down to a sensible number and internal stakeholders. The visionof ideas to pursue. must effectively communicate what theWe believe that the most effective way of concept is, why it is valuable and how itcarrying out this selection is to focus can be delivered.initially on removing ideas that are not An approach to breakthrough innovationappropriate. We only start to identify or that draws on the areas outlined above isrank the most valuable ideas when the extremely involved and detailed. It is bothnumber involved is relatively small, say resource and time hungry but in ourless than 50, and they are reasonably well experience, it will deliver results. When itdeveloped. is deployed appropriately it can eliminateRanking preferred ideas at the beginning much of the risk associated withof the process is both highly resource developing breakthrough products orintensive and also ineffective as the ideas services. Critically, it can enableoften change as they are developed. This companies to match the needs of thecan result in good ideas dropping out of customer and meet return on investmentsight before they have been thought targets. 4 © Sagentia 2011
  6. 6. Innovation - a game of chance?ConclusionBusiness gurus are absolutely right when ultimately prevail. The initial, often heavy,they say that a company’s core investment of time and resource will paycompetence should be innovation. dividends and enable companies to create and launch new products that are aHowever, in today’s complex and dynamic significant step ahead of the competition,market place, winning organisations will are desirable and meet return onbreak away from short-term, incremental investment targets.innovation strategies and embrace thechallenges associated with breakthrough With this approach, innovation becomesinnovation. Innovation strategies that managed, structured and planned – and,provide the capability to develop therefore, not a game of chance.breakthrough products and services willFor further information please contact, call +44 1223 875200 or visit our website at 5 © Sagentia 2011
  7. 7. SagentiaSagentia is a global innovation, technology and product developmentcompany. We provide outsourced R&D consultancy services to startups through to global market leaders in the medical, industrial andconsumer sectors.With global headquarters in Cambridge, UK, and US headquartersin Cambridge, Massachusetts, Sagentia works with clients from frontend market needs analysis through to transfer to manufacture.We deliver innovation around new technologies and new generationproducts and services that provide commercial value and marketadvantage. The company also assists business leaders to createstrategies for technology, innovation and growth.www.sagentia.cominfo@sagentia.comSagentia Ltd Sagentia IncHarston Mill One BroadwayHarston 14th FloorCambridge Cambridge, MA 02142CB22 7GG USAUKT. +44 1223 875200 T. +1 617 401 3170