14 Oct Improving Innovation Output: Top 4 Challenges and Proven Ways to Overcome Them
By Dave Breda
Highly competitive, successful businesses are able to generate new ideas for products, services, supply chains, and business models on a regular basis. But stimulating creativity, whether it comes from employees, suppliers, customers, or partners, is only one ingredient to successful innovation. The far more difficult part is turning ideas into solutions – not just products – that address specific customer needs. For high-tech and healthcare industries in particular, innovation is lifeblood. Despite its importance, organizations often struggle with their innovation output. Here are four of the most common innovation-related challenges – and some proven ways to overcome them.
Challenge #1: Revenue Growth Is Not Meeting Expectations
Revenue growth can of course fall short of expectations for a myriad of reasons, but one very common cause is lack of innovation. How do you know if this is the prime culprit or a major contributor? A simple and straightforward way to check is by measuring new product revenues as a percentage of total revenues, with new product revenues defined as revenues generated from products that have been launched within the last two years. High performers tend to exceed 50%, and low performers can fall as low as 10%. Learn more about measuring R&D productivity by going beyond time-to-market metrics.
The Solution: Kickstart your ideation process with a series of structured and, if needed, professionally coached working sessions to give a one-time boost to your idea pipeline. After this lift, organizations can restructure the ideation phase of their product development process (the “fuzzy front end”) to increase the flow and speed of ideas through the development process. Making needed changes doesn’t have to be as complicated as you might think. Consider the creation of pathways and a “clearinghouse” within existing structures where ideas can be freely created, exchanged, collected, evaluated, prioritized, and developed. Remember to tap your entire company ecosystem for ideas, not only employees.
Challenge #2: Development Funnel is Overly Populated with Derivatives or Extensions
Derivatives and extensions of existing products are necessary and often a good sign that a company is properly levering its technology and IP, but they can be overemphasized. How do you know when you have the right portfolio mix in your development pipeline? Try looking at total investment dollars allocated to breakthrough products and/or development of platform programs. High performers allocate at least half of their development spend here, while low performers allocate over 50% of their investment dollars to derivatives or extensions.
The Solution: A common reason companies underperform is that they have yet to implement an efficient and effective product platform development strategy. Ideally, you want to launch a wide range of products with varying feature sets and price points but all based on the same technology platform architecture. (Think about the automotive industry where different models that serve different customer segments share the same chassis and engine block.)
Challenge #3: Product Management Has Become Too Reactive to Competition
If “we need this product or enhancement to match our competition” is the prevailing reason for every development effort, chances are you’re being too reactive. Having competitive parity is important, but it should be one of several product development decision criteria. To avoid becoming irrelevant, you will eventually need to innovate and think beyond mirroring current market offerings.
The Solution: Reverse the order of your product development process. Temporarily forget what you know (or think you know) about your products or your competitor’s products. Begin by analyzing how people actually use – or would potentially use – products or services in their daily lives, and then develop solutions that address those usage models. Because too much can get lost in translation between sales and engineering, have your top engineers join customer working sessions to gain first-hand knowledge.
Challenge #4: Innovation is Too Narrowly Focused on Technology or Products
People naturally envision new products and services or a flashy technology discovery when they think about innovation. But so much more can be involved. Business model evolution (e.g., supply chains, sales channels, target segments) can represent a profitable dimension of innovation. Indeed, business model innovations can turn entire industries upside down! Often, high profile innovations and behind-the-scenes business model innovations go hand-in-hand. (Henry Ford’s auto standardization and manufacturing model and Dell’s made-to-order desktop and laptop business model come to mind.)
The Solution: To improve your innovation output, take advantage of both technology/product innovation and business model innovation. Put your emphasis on technology and products aside for a bit, and ask your internal subject matter experts to focus on other aspects of your business: value proposition, customer segmentation, manufacturing, distribution, sales channels, and customer relations. Mining these areas can turn up all sorts of innovation potential! To learn more about business transformations, read John Maculley’s insight on why leading high-tech companies have shifted left.
Innovation Output Improvement: It’s Surprisingly Do-Able
A common misconception is that upping your innovation game requires inordinate amounts of time, money, and disruption. The solutions offered above prove otherwise. Whether you’re holding an idea working session, thinking beyond derivatives or extensions, reversing the order of your product development process, or mining all aspects of company operations, innovation output improvement is within every company’s reach.
About the Author
Dave Breda has more than 25 years of experience creating client improvements in technology-based and time-critical companies. Through consulting and interim management roles, his accomplishments include dramatic performance impacts in product development and operations resulting in critically recovered projects, highly efficient product pipelines, and fully ingrained best-in-class practices. Mr. Breda earned his MBA degree from the Darden School at the University of Virginia and his engineering degree at the University of Colorado, Boulder.