By: Dr. Scott Edgett / Michael Phillips
The ability to increase business value through innovation is a critical success driver for most organizations. The markets that we operate in provide both opportunity and risk from an innovation perspective as they are rapidly changing. This article takes a look at a useful framework; The Innovation Diamond™, that examines the complexity and addresses some of the challenges in product innovation.
Markets provide opportunities if we get it right and threats if we do not, particularly given the intense competitive nature of most industries. Our quest to realize innovation results is further complicated by the complexities involved for most firms – the sheer number of players to potentially coordinate with in the value chain; rising costs; margin erosion; increasing regulatory, customer and consumer demands; evolving business models; shorter cycle times; and new sources of competition, just to name a few.
The good news is that if you can get it right, you stand to gain a competitive advantage and will reap the benefits of increased revenue and profits.
The good news is that if you can get it right, you stand to gain a competitive advantage and will reap the benefits of increased revenue and profits. Hence, the lure of identifying new growth opportunities, increasing volumes and market share, securing a competitive advantage, improving margins and strengthening brand loyalty, provides a powerful incentive to be successful at product innovation. However, the challenges that organizations face do not make this easy. Developing new products and technologies is consequently one of the more complicated initiatives an organization can undertake.
Take for example the telecom market wars occurring over the past year. Samsung and Apple have emerged as two clear winners that have been able to leverage powerful innovation machines. The competition (Nokia and Research in Motion) have stumbled badly in their respective innovation capabilities and ultimately paid the price in the marketplace.
A useful framework to help achieve better results from product innovation efforts
The Innovation Diamond™ is a useful framework that examines the complexity and addresses some of the challenges in product innovation by separating them into four key themes: product innovation strategy; portfolio management; new product development process; and climate and culture (see Figure 1 for illustration). Interestingly, past studies suggest that organizations that excel or master these four key themes do, in fact, achieve better results from their product innovation efforts.
Figure 1: The Innovation Diamond Model
Let’s examine some of the challenges innovators have in each part of The Innovation Diamond:
Product Innovation Strategy
It all starts at the top. If there is not a clear and crisp product innovation strategy that supports the business strategy, problems begin. Some key challenges are: Do we have one? Is it clear? Is it the right strategy? Is everyone aligned? Are people walking the talk? Are there realistic expectations on new product revenues?
Lack of a product innovation strategy tailored to support the strategy of the business is often cited as a most common problem.
This is the strategic allocation of resources that ensures innovation efforts advance the product innovation strategy. This is also the prioritization of projects in the pipeline to ensure that resources are being tactically deployed on the right projects for the right reasons.
Some key challenges are: too many projects and not enough resources to get everything done, difficulty in deciding which projects to select (when evaluating multiple projects that are competing for the same resources), difficulty in optimizing the portfolio of projects (i.e. short-term versus long-term, high-risk versus low-risk), poor alignment on priorities, and resources that are simply stretched too thinly.
This is the roadmap or playbook that takes each project from idea to launch including all of the activities and decisions that must occur in order to be successful.
Some key challenges are: not enough high quality ideas; not having a standard playbook that can be used repeatedly for projects; leadership that cannot articulate the importance of their idea-to-launch process; employees who have not received training or have not developed a knowledge foundational base on and around innovation best practices; not tailoring the development process to support the business strategy and project needs; being unable to say no to projects and/or the need to be realistic with actual time and resource expectations that otherwise lead to unrealistic speed-to-market pressures; expectations for resource commitments to work on projects that are not in the official process; too many minor projects that negatively impact the resources available for innovation projects; and the inability to yield effective decisions in a timely manner (i.e. everything is a high priority thus creating ‘gridlock’ which in turn results in significant delays).
It is no wonder given the above why achieving and then sustaining success is so difficult for many companies.
Climate and Culture
This is ‘the way the organization works’: the typical behavior, norms, values and leadership style that enables or hinders product innovation performance. Some key challenges are: difficulty in striking a healthy balance between ‘discipline and focus’ and ‘flexibility and judgment’, driving projects to successful completion while managing cross-functional teams (i.e. shortage of trained project leaders, staff turnover, gaps in necessary skills, lack of training and/or experience), management of failure, and poor support from other parts of the organization. In other words, creating and supporting a climate and culture that supports innovation company-wide.
How is your organization performing at product innovation and how does it compare to other companies? Without clear metrics and a way to compare them it can be difficult to know whether you are doing good or bad at product innovation; whether your investment in R&D is producing the desired results, and what areas of your performance in and around the Innovation Diamond might need to be improved or strengthened.
The good news is you can change, the question is do you want to?
By Dr. Scott Edgett and Michael Phillips
About the authors
Dr. Scott J. Edgett is internationally recognized as one of the world’s top experts in product innovation and is the pioneer of portfolio management for product innovation. He is a high profile speaker and sought-after consultant. Dr. Edgett has had extensive experience working with large multinational clients in a variety of industries, principally focusing on issues affecting innovation leadership and capability. He is credited with helping business executives and innovation professionals successfully implement world-class innovation processes that have generated outstanding results. His speaking engagements and consulting work have taken him around the globe to work with many of the world’s best innovators and companies among the Fortune 1000.
Dr. Edgett is Chief Executive Officer and co-founder, with Dr. Robert G. Cooper, of both Product Development Institute and Stage-Gate Inc. He has spent more than 25 years researching and developing innovation best practices and working with organizations in product innovation. He is a prolific author having coauthored seven books including the popular ‘Product Innovation and Technology Strategy’.
Michael Phillips is Director, Professional Development Programs and Affiliations at Stage‐Gate International, providing product innovation and New Product Development process professional development programs to clients globally and across a wide range of sizes and types of organizations and industry associations. Michael has extensive experience in adult education, training, and corporate consulting. He has spoken at a number of conferences and has contributed to a variety of industry trade magazines. Michael has significant experience in the oil & gas, medical, plastics, pulp & paper, and manufacturing industries. He holds a BA from the University of Toronto and an MBA from Henley Management College.