Doing more of the same old product improvements, extensions and modifications – product renovation – won’t deliver the sales and profit impact needed to grow the business. To the great majority of businesses, product development means line extensions, improvements and product modifications and only serves to maintain market share. Firms increasingly compete for a piece of a shrinking pie by introducing one insignificant new product after another. The launch of a truly differentiated new product in mature markets is rare these days.
The real challenge is growth: Most companies have ambitious growth goals. The trouble is there are only so many sources of market growth. Markets in many countries and industries are flat and increasingly commoditized; achieving growth in market share is expensive; and acquisitions often do not work. And so product and service innovation becomes the logical source of this growth.
Many companies struggle here, however, with development portfolios that are anemic. Take a look at the breakdown of projects in the typical firm’s development pipeline today versus the 1990s. Today’s portfolio features a far higher proportion of improvements and modifications, but new-to-the-market projects have dropped in half.
The answer is bold innovation – breakthrough products, services and solutions – that create growth engines for the future.
The answer is bold innovation – breakthrough products, services and solutions – that create growth engines for the future. This means larger-scope and more systems-oriented solutions and service packages. Examples such as Apple’s iPod are often cited. Note that Apple did not invent the MP3 player; nor was this opportunity in a Blue Ocean; in fact there were 43 competitors when Apple launched! What Apple did succeed in was in identifying an attractive strategic arena (MP3s) where it could leverage its strengths to its advantage and then to develop a solution that solved users’ major problems. The result: an easy-to-use, easy-to-download MP3 system, which also happened to be “cool”.
There are numerous examples of this kind of innovation which may not get the headlines that Apple does, but are certainly no less “bold” if done right. Grundfos in Denmark is a good case in point. Being a manufacturer of industrial pumps may not have the same cachet as an iPod, but Grundfos has found ways to be innovative in a mature, competitive market.For example, the Bio-Booster is an example of a big solution that solved a major problem, namely how to secure fresh water at a remote industrial site, and handle waste water. Simple: a “water factory” shipped in container modules that, once assembled, recycle the water, much like on board the space station.
Another example is P&G’s Olay skin-care business: Once almost given up on by P&G, the business was rejuvenated based on the “one big concept” – preventing the signs of aging on womens’ faces. The company searched for and found the needed technology (outside of P&G) and relaunched the business with multiple new products: Regenerist, Definity, Professional, and others. Olay now does over $2 billion in sales annually.
Finally, look at Green Mountain Coffee Roasters. The company began humbly as a small café in rural Vermont in 1981 and soon was doing its own coffee roasting and selling to local hotels and restaurants. Management saw a unique consumer need and developed an inexpensive and convenient single-serving coffee-maker for households. Green Mountain created the K-Cup and Keurig system and signed up well-known coffee makers. The company has been enormously successful, achieving 2011 sales of $2 billion, and has been able to win against corporate giants like Kraft and Nestle.
There is a pattern here: bold, breakaway product and service innovations – often systems solutions, sometimes new business models – but solutions none the less that tackle major problems that customers are having. This is the type of innovation that we need, and this is what will generate the growth desired by so many firms.
Five vectors must be in place to undertake this type of innovation to yield bolder and imaginative projects that create breakaway new products, services and business models.
Five Innovation Vectors
Our benchmarking studies of hundreds of firms reveals that five vectors must be in place to undertake this type of innovation to yield bolder and imaginative projects that create breakaway new products, services and business models:
- A bold innovation strategy that focuses your business on the right strategic arenas that promise real growth.
Most businesses focus their efforts in the wrong areas – on flat markets, mature technologies and tired product categories, arenas that are quite sterile. One must break out of this box and identify and select at least a few promising strategic arenas with extreme opportunities that will be your next engines of growth.
- A climate and culture that promotes bolder innovation.
Leadership is vital to success. If senior management does not have the investment appetite for these big concepts, then all your bold initiatives and systems will fail. Senior management plays a vital role here in supporting bold projects and in promoting an innovative climate in your business.
- Big ideas to feed your innovation funnel.
Find big problems and look for big solutions; or exploit disruptive trends in the marketplace. These are but two of the ways to generate blockbuster ideas; there are others. You cannot expect a development pipeline full of breakthrough initiatives if you begin with weak ideas.
- The right I2L (idea-to-launch) process to drive these ‘big concepts’ to market.
Creating big ideas is half the battle; you also need to drive these ideas to market with the right system – a rapid, flexible, adaptive and agile gating system.Just because these projects are imaginative and bold is no reason to throw discipline out the window. In fact, quite the reverse is true. Adopt and use an efficient and effective I2L process that drives these bold and perhaps riskier projects to market.
- The right investment decisions – picking the winners.
Making the right investment decisions – evaluating ‘big concepts’ for development when little information is available – is a challenge. Note that traditional financial models, such as NPV, don’t work well when it comes to evaluating major innovations, and will probably kill your best projects. But here are other and better methods to handle making the investment decisions for risky projects.
So if you are looking to create game-changing new products for your company then consider how you fare on the five innovation vectors. Each vector strongly impacts success and if you truly desire this type of innovation, then all five need to be effectively deployed within your organization. My talk at the Stage-Gate Innovation Summit 2014 will drill down into each of these vectors and highlight some of the better ways that progressive companies are creating bold innovation.
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About the author
Dr. Robert G. Cooper is one of the most influential innovation thought leaders in the business world today. He pioneered the original research that led to many groundbreaking discoveries including the Stage-Gate® Idea-to-Launch process.
He has spent more than 30 years studying the practices and pitfalls of 3,000+ new product projects in thousands of companies and has assembled the world’s most comprehensive research on the topic.
Robert G. Cooper, “Perspective: The Innovation Dilemma – How to Innovate When the Market Is Mature,” Journal of Product Innovation Management, Vol. 28, No. 7, 2011.
Robert G. Cooper, “Creating Bold Innovation in Mature Markets,” IESE Insight, Third Quarter, Issue 14, 2012, pp 20-27.
Robert G. Cooper, “Where Are All the Breakthrough New Products? Using Portfolio Management to Boost Innovation,” Research-Technology Management, Sept-Oct 2013, pp 25-32.
Robert G. Cooper, “What’s next? After Stage-Gate,” Research-Technology Management, Jan-Feb 2014.