By: Dr. Scott Edgett
We know that innovation capability is a critical driver of strategic growth targets. We also know that innovation success is not a one-time occurrence, but the result of an organization’s ability to conceive, develop and commercialize new products and services on a sustainable basis. In this article Dr. Scott J. Edgett discusses a model for measuring if your organization has a mature innovation process with well-internalized innovation capabilities.
The internal innovation capability is an ongoing journey as companies strive to continually improve performance. A practical model for assessing where an organization is in its journey and where improvements can be made is the Innovation Performance Framework™, which leverages four key components:
- Innovation strategy
- Portfolio management
- Idea-to-launch processes
- Culture and leadership
An innovation strategy provides the business’s innovation direction and focus to ensure alignment and support of the organization’s broader plans and goals. Portfolio management ensures that sufficient funding and human resources are provided to enable the strategy and that the pipeline of projects does reflect the innovation goals and priorities of the company. The idea-to-launch process (commonly called a Stage-Gate process) is the enabling component that provides the playbook for how the organization manages new product development from ideation to commercialization. Finally, organizational culture and leadership underpins and supports all innovation ambitions.
We also know that innovation success is not a one-time occurrence, but the result of an organization’s ability to conceive, develop and commercialize new products and services on a sustainable basis.
However, every business is at a different place or level of maturity in the innovation journey. Even business units or divisions within an organization can have differing levels of maturity and capability with respect to innovation. Also, the varying stages of maturity in each of these four critical drivers of innovation can also seriously impact an organization’s innovation capabilities and abilities to successfully drive new products from idea to launch. For example, a company may be able to create a very strong innovation strategy but have poor internal processes to enable it. Or, it has not developed a culture that matches the innovation direction that the leadership desires.
The first step in determining your organization’s level of innovation maturity is to measure where it is today with respect to the four components of the Innovation Performance Framework. This is achieved by addressing questions such as:
- What are your innovation strengths and weaknesses?
- Are your drivers of success consistently applied year-to-year and division to division?
- Is your organization’s performance improving over time?
- Are you continuously improving your innovation capability?
With a valid assessment of current capabilities, management can then determine what steps are needed to either move the organization forward to a higher level of innovation maturity or work to sustain current acceptable levels.
The varying stages of maturity in each of these four critical drivers of innovation can also seriously impact an organization’s innovation capabilities and abilities to successfully drive new products from idea to launch.
As an example, let’s take one component of the Innovation Performance Framework, the Idea-to-Launch process, and explore what it takes to reach a level of process maturity that provides management with the confidence that projects can be developed and commercialized successfully on a sustainable level. Ask questions such as:
- Does the organization have adequate internal processes in place?
- Are these processes working?
- Are governance procedures in place to ensure that the right projects are selected for the development pipeline?
Exhibit 1 shows benchmarking results that provide an excellent first step to answering these types of questions and assessing the maturity of your Idea-to-Launch process. The data represent the results from 211 companies in which innovation performance was evaluated using a composite score of three performance metrics: profitability versus R&D spending, performance against sales objectives, and performance against profit objectives.
To make a preliminary assessment of your company, take each of the six measures below and evaluate your organization’s capability. For each question, score your organization from one to ten, where a score of ten indicates that the practice is in place, working very well and producing the desired results. Then compare your score with the benchmark scores.
Six Key Measures of Idea-to-Launch Process Maturity
- A formal process is in place: A well-defined idea-to-launch process (a Stage-Gate process) is in place that provides a clear roadmap for the activities that need to occur in order to successfully conceive, develop and launch new products in a timely manner. Note that 90 percent of the best performers have this in place. Evaluate your organization’s performance rating using this measure and the next five by assessing your capability using a scale of 1-10.
- The process is visible and documented at an operational level: This means the innovation process is more than just a high-level conceptual model. Detailed activities are defined for each stage, complete with the documentation that is needed for the teams. Best performers score 75 percent compared to only 52 percent for the worst performers.
- The process is actually used: Project teams do not just pay lip service, but actually use the process to help them drive ideas through the various stages required to develop and commercialize the product. Best performers are three times better than the worst performers.
- The process enables project teams: It enables project teams to access the resources they need to succeed and to get products developed and to market in a timely manner. Teams perceive the process as an enabler to help them navigate through the organization. Seventy percent of best performers have an enabling process versus 23 percent of the worst performers.
- The process is efficient, scalable and adaptable: It can be adapted to the needs, size, and risks of different projects. There are various versions of the process to match different types of project complexity. For example, there may be a five-stage, five-gate process for major high risk or complex innovation projects and a simpler, more streamlined process for lower risk projects, such as minor modifications and extensions. Better performers are nearly twice as likely as poorer performers to have adaptable processes.
- Gate meetings are effective: The governance of the process works. The organizational structure permits timely meetings with decision makers that yield good decisions. There are well defined decision frameworks for the gates (decision points) and the decision makers are clearly identified. Best performers are three times more likely to have effective gate meetings.
If you are scoring high on all six measures of idea-to-launch process capability your organization probably has a mature innovation process with well-internalized innovation capabilities.
Note, however, that the best performing companies are not satisfied with the status quo. They are applying continuous improvement mechanisms to this critical capability. They recognize there is always room for improvement and, as they learn from experience, they use these learning’s and reap the benefits. The winning companies continually update their processes to leverage more effective ways of working, improving efficiency by removing non-value-adding work or outdated methods, and introducing new techniques and tools. These types of organizations strive to raise the innovation performance bar each year to ensure they remain ahead of the competition.
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About the author
Dr. Scott Edgett is internationally recognized as one of the world’s top experts in product innovation. He is the pioneer of the critical practice of new product portfolio management, and principally focuses on issues affecting product innovation leadership and capability. He has spent 25+ years consulting and advising some of the world’s best innovators and companies among the Fortune 1000, and has extensive experience working with large multi-national companies.
Additional Reading and References
- Edgett, S., “Innovation: A Critical Capability”, The European Business Review, Jan-Feb 2014.
- Cooper, R. and Edgett, S., Product Innovation and Technology Strategy, Hamilton: Product Development Institute, 2009.
- Cooper, R. and Edgett, S., “Best Practices in the Idea-to-Launch Process and Its Governance”, Research Technology Management, Vol. 55(2), pp. 43-54, 2012.
- Edgett, S. New Product Development: Process Benchmarks and Performance Metrics, Houston: American Productivity and Quality Center and Hamilton: The Product Development Institute, 2011.
- Stage-Gate is a registered trademark of Stage-Gate International. See stage-gate.com
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