SUMMARY PART 2: MANAGING AND EVALUATING INDIVIDUAL INNOVATION IDEAS THROUGH THE PIPELINE
Part 2 discusses best practices for taking innovation initiatives from ideation to commercialization. It recommends using a project management approach involving defining the project, dividing it into tasks, sequencing tasks, and creating a budget. It also outlines 8 tests to evaluate the potential of ideas, including whether they offer valuable benefits, have marketing and scaling potential, a qualified leadership team, intellectual property control, financial return on investment, social responsibility, and fit with organizational strategy.
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Presenting Project Prioritization And Selection Powerpoint Presentation Slides. Modify the colors, font type, font size, and the background of the slideshow and save it in formats like JPG, PNG, and PDF. It is completely customizable and can be altered as per your needs. This PPT can be projected on a standard screen and widescreen size without any fear of pixelation. It is compatible with Google slides. https://bit.ly/30fi7Yw
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VALUE ENGINEERING IN RESIDENTIAL HOUSE CONSTRUCTIONIAEME Publication
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project to balance the factors above said. Value engineering is an efficient tool among them for fostering the construction quality with an aim of low cost and high services. The value engineering study is carried out with analysis of basic functions of the project and based on that analysis unwanted elements in the project are scrutinized and eliminated.
Chapter 2
The New Products Process
*
The Procter & Gamble Cosmetics SagaStarting point: senior management commitment to new products.P&G’s Cosmetics business unit had no clear product strategy, unfocused product initiatives, and too many customer segments being targeted – in short, a lack of focus.P&G Cosmetics skillfully used all three strategic elements and made the weak business unit profitable.
*
P&G Cosmetics and the PICSituation Assessment:Underserved consumer market that wanted quality facial product such as cleansers, eye products, etc.Supply chain was uncoordinated as production and shipments were not tied to demand; market forecasts were not driving shipping schedules.PIC recommended a strategic focus on products for the face – other opportunities would not be pursued.
*
P&G Cosmetics and the New Products ProcessP&G Cosmetics used a phased process like that of Chapter 1.Project teams established early in process.Consumer research done early and used in the process (the voice of the customer).Tough evaluation steps were carefully implemented as new products were compared to best practices and benchmarks.
*
P&G Cosmetics and the New Product PortfolioP&G Cosmetics systematically added new products such that maximum buzz and excitement was created in the marketplace.If already several eye makeup products on the market, they would not immediately launch another. Management called this an “initiative rhythm” for product launch.
*
P&G Cosmetics and the Role of Effective Team ManagementSenior Cosmetics executives were committed to success as was corporate level management.Initiative Success Managers were hired to lead strategy development, manage evaluation meetings, train employees, etc.The best team leaders were sought and rewarded based on performance.
*
The Phases of the New Products Process
Phase 1: Opportunity Identification/Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
Phase 5: Launch
Figure 2.1
The Evaluation Tasks in the New Products Process
Figure 2.2
Opportunity Identification/
Selection
Concept Generation
Concept/Project Evaluation
Development
Launch
Direction;
Where should we look?
Initial Review:
Is the idea worth screening?
Full Screen:
Should we try to develop it?
Progress Reports:
Have we developed it?
Market Testing:
Should we market it?
*
Phase 1: Opportunity Identification/Selection
Active and passive generation of new product opportunities as spinouts of the ongoing business operation. New product suggestions, changes in marketing plan, resource changes, and new needs/wants in the marketplace. Research, evaluate, validate, and rank them (as opportunities, not specific product concepts). Give major ones a preliminary strategic statement to guide further work on it.
*
Activities that Feed Strategic Planning for New ProductsOngoing marketing planning (e.g., need to meet new aggressive competitor)Ongoing corporate plan ...
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[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
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2. INTRODUCTION
PART 1: INITIATING NEW-STREAM INNOVATION
PROJECTS
PART 2: MANAGING & EVALUATING INDIVIDUAL
INNOVATION IDEAS THROUGH THE PIPELINE P.107
PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES 2
3. PART 1: INITIATING NEW-STREAM INNOVATION
PROJECTS
New Product Development (henceforth “NPD”) -3 parts p.98
• Do the right project: The funneling process p. 99
• Do the project right: Methodology flowchart p. 100
• Detailed description of the methodology for simulation
of the fuzzy front end stage p.101
3
4. PART 2: MANAGING AND EVALUATING INDIVIDUAL
INNOVATION IDEAS THROUGH THE PIPELINE P.107
Part 2A: Use Project Management Philosophy, Tools,
And Techniques p. 108
Part 2B: 8 Tests To Identify “High Potential” Ideas For
Innovation Investment p109
4
5. PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES
Criteria and tools for selecting projects for company’s
innovation portfolio.
Sometimes choose lesser projects per “8 tests” because
they best fill gaps in the firm’s innovation portfolio
5
8. New Product Development (NPD) – The “Fuzzy
Front End” – 3 Parts p.98
1. Do the right project: The funneling process (selection) p.
99
2. Do the project right: Methodology flowchart (execution -
flowchart) p.100
3. Detailed description of methodology for simulation of the
fuzzy front end stage (execution – steps detailed) p. 101
8
9. Part 1, Section 1. Do the right project: The funneling process
(“fuzzy front end”) p. 99
Source: Katz, 2011,available at http://www.innovationexcellence.com/blog/2011/11/29/
rethinking-the-product-development-funnel
9
10. 1a. Evaluate choice sets by using computer
based modeling p. 100
Computer simulations of the NPD process help reduce
the uncertainty or “fuzz”
For each alternative design (and implied performance
levels, time and resources needed), it can model, (show
us) estimates of various metrics like….
10
11. 1b. For example, shows resource information, like
need vs. availability, for a given “mode” or way of
doing a given step in production process
11
12. 1b. (cont’d): Has resource management information,
ability to add/subtract resources, and see effects of
those changes
12
13. 1c. For example, shows duration of activities,
dependencies – which must happen in sequence
or can occur in parallel
13
14. 1d. Simulation shows cost/benefit tradeoffs
for different “modes”, or for different features
For example:
• Mode choice: “re-use existing parts components”
versus “new development of components”
• Feature choice: heavier car door offers the customer
a feeling of greater higher quality and safety, but at
the expense of fuel economy and price.
14
15. 1e. Computer simulation/modeling improves odds
of success on the fuzzy (uncertain) front end
• Interactively experience effects of any given change or option.
• Thus greatly reduces uncertainty by providing a formal method of
understanding the trade-offs and identifying the “best” solution
• “Best”? For whom?
15
16. Part 1, Section 2. Do the project right: Methodology flowchart p. 100
16
17. Part 1 Section 2a. Do the project right:
Methodology funnel flowchart introduction p. 100
• The fuzzy front end: where we do market research, get validation of
value propositions and product-market fit.
• Well-defined projects take less time and money, operate better.
• We use a well-planned and structured process.
• The above illustration summarizes it. Let’s elaborate on each step.
17
18. Part 1, Section 3: Detailed description of
methodology for simulation of fuzzy front end
stage p.101
• Stage 1: Discover
• Stage 2: Definition
• Stage 3: Design p. 102
• Stage 4: Development
• Stage 5: Delivery
• Example: p.103
Now let’s look at each of these.
18
19. Stage 1: Discover
Develop a program plan:
1. Identify stakeholders’ needs, expectations
2. Define design alternatives that fit the above constraints
3. Allocate project budget
4. Define time-to-market
19
20. Stage 2: Definition
Select the design based on “life-cycle cost/benefit
and risk analysis” i.e. likely to be most profitable
vs. estimated risk.
•The rest are “no go.”
•Assign core team to lead implementation of the
chosen project.
20
21. Stage 3: Design p.102
• Analyze technological and operational modes (options) that best meet
project constraints.
• Core team prepares the project basic data set. Comprised of…
• This design stage yields a more detailed project data set. still very
incomplete, enough details to:
• Evaluate its estimated costs, benefits and risks
• Make an informed Go/No go decision
21
22. Stage 4: Development: Use project data set
from Design Stage to: p.102
• Build alternative project plans that fit project
constraints of the data set.
• Select the “best” one. Define “best.”
• This decision process often involves getting the core
team and key stakeholders together to agree on
details (such as…?)
22
23. Stage 5: Delivery p.102
Project launch
• This structured approach minimizes, but does not
eliminate, the complexity, uncertainties, and risk of
the NPD selection process.
• Maximizes odds of success – of choosing the highest
potential ROI relative to risk.
23
24. Illustration: Defense sector example of parameters
considered in front-end project management p.103
5 projects considered, each evaluated in terms of following
parameters (at top of each column in the following table):
• Cost
• Scope
• Complexity
• Product type
• Number of disciplines needed
• Duration of project
• Risk or Total Risk Level (TRL)
24
25. Sample table of projects evaluated in fuzzy front end process
25
26. Sample table of projects evaluated in fuzzy front end process (cont’d 1)
26
27. Sample table of projects evaluated in fuzzy front end process (cont’d)
27
28. SUMMARY PART 1: INITIATING NEW-STREAM
INNOVATION PROJECTS
New Product Development (NPD) – The Fuzzy Front End p98
1. Do the right project: The funneling process p. 99
2. Do the project right: Methodology flowchart p.100
3. Detailed description of the methodology for simulation
of the fuzzy front end stage p.101
28
29. PART 2: MANAGING AND EVALUATING INDIVIDUAL
INNOVATION IDEAS THROUGH THE PIPELINE p.107
29
30. PART 2: MANAGING AND EVALUATING
INDIVIDUAL INNOVATION IDEAS THROUGH
THE PIPELINE p.107
•Introduction p.p. 107
•2A: Use Project Management Philosophy, Tools, And
Techniques p.108
•2B: 8 Tests To Identify “High Potential” Ideas For
Innovation Investment p.109
30
31. Part 2. Introduction p.p.107-8
Best practices for taking innovation initiatives
from ideation to commercialization.
•2A: Use Project Management Approach p.108
•2B: 8 Tests To Identify “High Potential” Ideas
p.109
31
32. Part 2A. Use Project Management (PM)
Approach: Philosophy, Tools, & Techniques p.p.
108-9
4 key steps to applying PM to innovation:
1. Definition: Define the project
2. Division: Divide project into tasks
3. Sequencing: Plan task sequence
4. Budgeting: Create budget and resource plan
32
33. Step 1: Defining the project p. 108
•Define scope and objectives.
•Identify the consumer and other relevant
stakeholders.
•Clarify resources needed.
33
34. Step 2: Divide or break down project into
tasks p. 108
•Each a manageable task or work package via
formal “work breakdown structure.”
•Each task small enough to handle for those
assigned to it
•Size of parties responsible for task vary with size
of task, project, and organization.
34
35. Step 3: Sequencing - plan task sequence p.p.
108 -9
• Some can be done in parallel others need to be in sequence.
• Choose sequence that best meets time, cost, and quality
constraints. Usually tradeoffs between speed, cost, and
quality or performance.
• Need to find tradeoff that best fits firm’s needs and
priorities, as defined in step 1.
35
36. Step 4 Budgeting: Create budget and resource
plan
• Once tasks defined & scheduled, estimate resources needed
& include them in project budget.
• If purchases from vendors, it’s a straight (price per unit or
hours) x (units or hours needed) calculation.
• If use internal resources like staff or machine time,
calculate cost based on time and internal cost per hour
estimates.
36
38. Part 2B: Identifying “High Potential” ideas for innovation
investment – innovate or die p. 109
• Innovators: For example can innovate via:
• New products, new markets (Apple)
• New work processes s (Dell, Walmart, Amazon,)
• New insights into demand (Formula 1 for budget hotels in Europe)
• “Stagnators”
• Eastman Kodak (photography)
• Sylvania (light bulbs)
• Xerox (copiers and….what else?)
38
40. Part 2B: 8 Tests To Identify “High Potential” Ideas p109
Test 1: Valuable benefits?: Why buy it? p.110
Test 2: Marketing?: Got channel & demand?
Test 3: Scalability?: Mass produce efficiently? Quality? 112
Test 4: Leadership team: Qualified? p. 113
Test 5: Intellectual property control? Rights? p.114
Test 6: Financial return on investment: Good ROI?
Test 7: Corporate social responsibility?
Test 8: Fit with organizational strategy? p. 115
40
41. Test 1: Valuable benefits test: why buy THIS?
THE main test of commercial viability.
How is it superior to competing or substitute solutions?
What is added value vs. the competition?
Value proposition compelling & clear enough to be profitable?
What problem solved, or delight provided, better, cheaper, or more
conveniently, than the competition?
Test: can you articulate the value proposition clearly and succinctly?
41
42. Example 1: Clear, short value proposition template
For the target customer
Who specific needs, requirements, demands, buying criteria
We provide solution name/description
That gives specific business benefits/value to clients
Unlike the competition
Who provide solution, features, functions, benefits
Our company more/better approach, solution, functions, benefits
That offers a better customer experience
42
43. Exercise: Write a clear, short value proposition
using this template
Can you fit your value proposition into this template?
“For ______________ who _______________,
we provide ________________________________
that ________________________________. Unlike other [your
industry, for example, IT services] firms, who
________________________, our company
______________________________
that _______________________________.”
43
44. Test 2: Marketing: channel & demand? p. 111
1. Channels: Can we establish effective supply
chain & distribution channels?
2. Enough demand at profitable price point?
44
45. Test 3: Scalability? Mass produce efficiently? Quality? p.112
Once we move to mass production and distribution:
•Unit costs stay within budget?
•Maintain quality, reliability, customer support?
•Will it function ‘in the field’ under all anticipated
conditions?
45
46. Test 4: Leadership team: qualified? p. 113
1. Individual members have the skills, personality traits,
experience to do their jobs?
2. Does the team as a whole:
a) Have the full set of complementary skills & experience to
lead whole project?
b) Function together as cohesive unit under stress typical to
new product development & launch?
46
48. Test 5: Intellectual property (IP): Control? Rights? p.114
Have control or rights to all relevant IP via one or more
of the following:
1. For IP we created: protect & control rights + access
via :
a) Blocking strategies to prevent others from legally.
b) “Run fast”: simply plan on innovating faster and
staying ahead of competition. (cont’d next slide)
48
49. Test 5: Intellectual property (IP) p.114 (cont’d)
1. For IP we created: protect & control rights + access via
(cont’d):
c) Clear, documented efforts to hide the IP as a “trade
secret.”
d) Form joint ventures (JVs) with other entities to share IP.
2. For IP we don’t control, license or purchase relevant IP
rights for relevant jurisdictions (where will sell it)
49
50. Test 5: IP(cont’d) – consequences of failure
can be DIRE!
Long, expensive legal battles, like Apple vs
Samsung. Each has billion dollar annual IP
budget.
An IP dispute can kill a small company by
draining needed resources (time, money) or
scaring off potential investors.
50
53. Test 6: Good ROI?
Minimum ROI required?: For-profit enterprises
usually require a minimum return on investment
(ROI) for a given level of risk.
Consider Risk Premium: The higher the risk, the
higher the expected ROI to justify the investment.
53
55. Test 7: Social responsibility: environmental, social
& community outcomes OK? p. 115
1. Environmental: impact is neutral or positive.
2. Social & community: If material threat of vocal
resistance from groups hurt by the project, consider
steps to minimize/eliminate threat.
3. Related issues: legal compliance, reputation, “5 P’s”
people planet, public probity, and profit outcomes.
55
56. Test 8: Fit with organizational strategy – Introduction
p. 115
“In-house” commercialization of valuable IP isn’t always the best option.
Reasons to sell, license, or share technology (via JV) include:
1. Lack internal resources/capabilities: Lack funds, channels, expertise.
2. Lack strategic fit: if invention is unrelated to the core business, in-house
commercialization risks diluting or losing focus on existing mainstream
business lines.
56
57. Test 8: Fit with organizational strategy - Bank Example (1) p. 115
A large bank produced a certain software innovation that service and had
potential well beyond that bank’s applications and industry.
Two basic options:
1. retain the IP and:
a.Keep exclusive use as a trade secret, to create a competitive advantage
b.commercialize it internally, sell as a product/service, as a separate profit
center
2. Sell or license it to a third party for development and distribution
57
58. Test 8: Fit with organizational strategy - Bank
Example (2): Cost/benefit vs. strategic
considerations p. 115
Cost/benefit per 8 tests: A first consideration - how can we best
create revenue and profit from it? How ensure it passes these 8
tests?
Overall business strategy concerns: However, there are multiple
strategic issues that are likely to be at least as important.
Strategic questions include….
58
59. Test 8: Fit with organizational strategy – Bank Example (3) List
of strategic considerations (p. 116)
1. Impact on long-term competitive advantage in existing banking markets?
2. Dilution risk & how manage it? Commercialize in house vs. sell/lease/JV?
3. How will existing customers react to our decision?
4. How will it impact our reputation?
5. What are the strategic risks and returns?
6. If 3rd party commercializes it, can we control distribution to deny access to our
direct competitors?
59
60. Test 8: Fit with organizational strategy - Bank
Example (4) Their decision (p. 117)
Avoided dilution risk: spun off the software to a 3rd party IT business
capable of marketing it, under its own brand and license.
Accepted risk of losing potential long term new revenue stream and
competitive advantage. Denying access to competitors impossible.
The bank negotiated a three-year lead time before buyer could sell the
software to competitors.
60
61. Test 8: Fit with organizational strategy - Nokia case (p. 117)
Strategic principles, such as retaining focus, don’t always apply.
Nokia developed new mobile phone technology while main business was
timber / forestry.
Mobile phones & timber not good strategic fit. But Nokia’s shareholders gained
a decade of great wealth creation.
Only in retrospect is it clear Nokia decided correctly. Mobile phone opportunity
was vast, & Nokia’s internal capabilities proved capable. Thus the opportunity
justified the dilution risk.
61
62. Using these 8 tests p. 117
These 8 tests are filters for selecting projects with best cost/benefit
relative to risk of underperformance or failure.
Apply them throughout the NPD process, not just at the earlier stages
of the fuzzy front end. Indeed, as project advances, have more
information and evidence, so can apply the tests more accurately.
They apply to organizations of all sizes: albeit in different ways. For
example, test complexity typically grows with size of the company.
62
63. PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES
63
64. PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES Introduction - 1 p.p. 119-20
Evaluate projects not only by their individual merits per the 8
tests, but also by how well they fit with the firm’s portfolio of
ongoing innovation projects.
If the IP portfolio is weak in filling certain company needs,
then projects that DO meet those needs become more
desirable, and might be chosen over others with higher overall
scores in the “8 tests.”
64
65. PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES Introduction - 2 p. 120
Just like a football team needs 11 players with different skills at
different positions, so too the IP portfolio needs projects that fill
different company needs.
Thus at times, a team might choose a lesser player over a better one, if
that player best fills a certain skill gap on the field.
Similarly, an organization’s “Go/No go” decision might depend more on
what gaps it needs to fill than on which project ranks highest in overall
individual merit per the “8 tests.”
65
66. Example: The need for steady earnings
Organizations have many goals, like long-term survival & competitiveness, and
meeting various compliance and performance measures.
For example, companies prefer steady earnings, ideally steadily rising earnings.
Why?
Investors hate risk. They interpret steady performance to imply lower risk.
They’ll pay more for shares in these lower risk businesses, and pay their
managers better.
Thus (all else being equal) firms prefer steady over volatile earnings and other
measures of financial performance.
66
67. Example (cont’d): How the need for steady
earnings influences “Go/No Go” decisions
One way firms try to keep earnings steady is by timing new
products and services launches, and their implied earnings
streams.
Thus a lower ROI project might be approved over higher
yielders if it is the one most likely to produce a given earnings
stream when needed.
67
68. Example 1: A typical new product NPV
probability distribution
68
69. Example 1: Re-evaluating a project’s estimated NPV
throughout the NPD process
Throughout the NPD process, we repeatedly apply the 8 tests to re-evaluate
project viability and its probable net present value (NPV).
During the development phase of each project, its NPV probability distribution
would shift based on new information. For example:
• solving a technical problem might increase estimated NPV, thus shifting the
NPV probability distribution to the right
• doing some market research would likely move the distribution to the
left or right, depending on whether the research indicated a higher or
lower chance of success
69
70. Example 1: Re-evaluating a project’s estimated
NPV throughout the NPD process (cont’d)
So for each new innovation initiative we can formulate a dynamic
approach to probabilistic value creation on a project-by-project basis.
The next illustration adds timing estimates of that revenue stream, and for
an entire portfolio of innovations.
Thus it illustrates how firms would be identify projects most likely to
produce a given earnings stream when needed to keep revenues steady,
and ideally, steadily rising.
70
71. Example 2: NPV probability and timing estimates
for each project in an entire innovation portfolio
71
72. Example 2: Estimating probable value AND its
timing for each project in an innovation portfolio
Here’s another approach to measuring and managing the portfolio of
innovations: showing both estimated project value AND its timing.
Expected value of success = (a single probability of success estimate) x
(estimated value created upon success)
Value = revenue, or profit estimates (or both).
This approach allows firms to identify and select projects that will
contribute value when needed to keep earnings steady and/or rising.
72
73. Example 2: Explanation & comments
Outer circle size shows project profitability, the inner circle showing
probability weighted against expected profit
Horizontal axis shows timing of first revenue expectation (launch date).
Vertical axis shows the divisional split of these products or another
categorization.
Illustration 2 communicates a picture of both:
• Potential and likely value of each project
• timing of that value – allowing selection based on value timing needs
73
74. Summary Part 3: Portfolio of Innovation Strategies
Evaluate projects not just on their individual merits, but also on how well
they fit with the firm’s overall goals.
For example, a firm might select a project ahead of others that score higher
on the 8 tests because it:
• Delivers a given value stream when needed to keep certain financial
metrics steady or steadily rising
• Provides diversification into a certain product category or emerging
technology in which the firm wants a presence
74
76. PART 1: INITIATING NEW-STREAM
INNOVATION PROJECTS p.98
New Product Development p.98
• Do the right project: The funneling process p. 99
• Do the project right: Methodology flowchart p.100
• Detailed description of the methodology for simulation of the fuzzy front end
stage p.101
• Stage 1: Discover
• Stage 2: Definition
• Stage 3: Design p.102
• Stage 4: Development
• Stage 5: Delivery
76
77. PART 2: MANAGING AND EVALUATING INDIVIDUAL
INNOVATION IDEAS THROUGH THE PIPELINE p.107
2A: Use Project Management Philosophy, Tools, And
Techniques p. 108
4 key steps to applying project management to innovation
•Definition: Define the project
•Division: Divide or break down project into steps
•Sequencing: Plan sequence of tasks
•Budgeting: Create budget and resource plan
77
78. PART 2: MANAGING AND EVALUATING INDIVIDUAL
INNOVATION IDEAS THROUGH THE PIPELINE p.107 (cont’d)
2B: 8 Tests To Identify “High Potential” Ideas For Innovation
Investment p109
• Test 1: Valuable benefits test / valuable benefits? p. 110
• Test 2: Marketing test: Got channel and demand? p. 111
• Test 3: Scale up/ Scalable? p. 112
• Test 4: Leadership team p. 113
• Test 5: Intellectual property p. 114
• Test 6: Financial return on investment / ROI
• Test 7: Corporate social responsibility
• Test 8: Fit with organizational strategy p. 115
78
79. PART 3: THE PORTFOLIO OF INNOVATION
STRATEGIES
Evaluate projects not just on their individual merits, but also
on how well they fit with the firm’s overall goals.
Projects that might have lower overall scores on the 8 tests in
Part 2 might still merit selection if they fill a gap or weakness
in the innovation portfolio’s ability to meet those goals.
79
82. Case Study: Innovation the Lego way p. 105
Lego goes from near bankruptcy to financial health, robust growth.
How? By building capability for systematic innovation that produces wide
range of successful new products &product lines.
“Executive Governance Group” means innovation culture from the top down,
lead by senior management
Lego divided operations into 8 areas, seeks to drive innovation in all, thus
fuel continued growth.
82
83. TOTAL INNOVATION p. 106 (Nagil & Tuff, 2012)
For every project portfolio, allocate a certain proportion of projects &
resources to these types of products and innovation levels:
• Core: incremental changes to existing offerings (Mercedes Benz
“AMG” or VW “GTI,” sportier versions of existing models)
• Adjacent: expanding into related products, such as moving along the
value chain (e.g. from Apple products to Apple stores).
• Transformational: innovating to create new products for new markets
(Sony Walkman, or Tesla’s high-performance pure electric vehicle)
83
84. POSITIONS IN MARKETS AND PORTFOLIOS: TACTICS TO
POSITION INNOVATIONS p. 107 Schmidt and Rhee (2014)
• A low-end approach: if performance is weak, lower price point to draw price-
conscious consumer (Formula 1 hotels, Air Asia).
• A high-end approach: if proven high performance, high price (Porsche Cayenne)
• A niche-features approach: if has specialized benefits highly valued by small market
segment, high price if they’re affluent (memorabilia)
• Other examples: new-attributes high-end, radical innovation, etc.
• Choose one, or a portfolio of approaches that mixes positioning and price points.
84
85. VALUE CREATION THROUGH INNOVATION p. 110
Kim & Mauborgne, 2004
For some firms, their innovations themselves are their unique value
added that differentiates them from competitors. For example:
• Formula 1 hotels’ innovation: Eliminate or minimize what customers
don’t value, excel in the real value drivers (bed quality, room
quietness, hygiene), cut cost significantly.
• Other examples: Ikea (beautiful cheap furniture, good service &
cheap delivery), Air Asia, etc.
85
86. CASE STUDY: NEW ZEALAND NATURAL: MARKET-DRIVEN
ICE-CREAM INNOVATION p. 111
Struggling ice cream chain becomes successful via innovation.
Key insight & innovation: taste preferences vary across regions ,
depending on culture, diet, so match flavors to local tastes.
• Chinese eat few dairy products, so they prefer less sweet flavors, like
green tea flavor, which masks a strong dairy presence
• In contrast, US consumers eat more dairy products and sweets, like
‘cookies and cream’ flavor.
86
87. WORLD’S BEST INNOVATION PRACTICES? P&G –
“AGILE GIANT” p. 113 Brown & Anthony, 2011
• Focus on what consumers want: make it simpler, more convenient, cheaper.
• Strategic portfolio mindset: disciplined active measuring & managing projects, ‘by
the numbers’ & strategically (contribution to overall P&G needs/priorities).
• Trial & error
• Big bets based only after successful small bets provide validation
• Invests in resources needed to succeed + education, interdisciplinary idea exchange
87
88. RADICAL AND INCREMENTAL INNOVATION p. 117
Treacy, 2004
Innovation portfolios need to strike a balance between the proportion of radical
and incremental innovations.
Incremental innovations help maintain revenues, market share, and customer
satisfaction while the next disruptive innovation remains under development.
Failing to invest in higher risk radical innovations carries its own dangers: risk of
missing the next technology that could threaten your core business, or of missing
the next chance for outsized value creation and growth.
88
89. MATCH THE APPROACH TO THE MARKET DEVELOPMENT
p. 118 Moore, 2004
Overview:
Moore categorizes innovations into 7 distinct types or stages
He asserts that:
Specific types of innovations tend to work best in at certain stages of a
market’s development or maturity
Therefore your innovation strategy should be to first understand what
stage of development your market has reached, then focus resources
on the kinds of innovation that best suit that kind of market.
Now look at details:….
89
90. MATCH THE APPROACH TO THE MARKET DEVELOPMENT
(cont’d 1): 7 Types Innovation p. 118 Moore, 2004
1. Disruptive: where new markets are created, can grow fast and furiously (social media &
Facebook)
2. Application innovation: existing models or technology applied to new industries (sharing
business models such as Uber& Airbnb use existing technology applied to taxi and lodgings)
3. Product innovation: incremental innovation to existing products (most Apple products)
4. Process innovation: innovations in supply chain, distribution channels (Dell, Walmart).
5. Incremental refinements to existing offerings: (software upgrades)
6. Marketing innovation: (Amazon customized emailing, EBay online auctions
7. Business model innovation: (Amazon’s shaping cloud computing or Apple’s shift into online
music supply and retail bricks-and-mortar Apple stores.
90
91. MATCH THE APPROACH TO THE MARKET DEVELOPMENT
(cont’d 2): Market Maturity Stages p. 118 Moore, 2004
1. Early stage: new market, rapid growth as demand spreads to general
population (the bottom and rapidly rising middle of the “S” curve
2. Middle Stage: achieve mainstream penetration, upper half of steep part of
“S” curve. Demand growing but so is competition.
3. Mature stage: hitting upper, flattening part of “S” curve
91
92. MATCH THE APPROACH TO THE MARKET
DEVELOPMENT (cont’d 3): p. 118 Moore, 2004
• Innovation types 1-2 most effective in early stage
markets
• Types 3-4 best fit for middle stage markets
• Types 5-7 for late stage
92