My innovation wish for 2015

2015 Innovation WishI would like to see emerge a different ‘sustaining’ capacity built around innovation as the continuous core, constantly evolving, adapting, learning and adjusting, in perpetual innovation motion.

A truly integrated innovation solution that sits in our organization to allow innovation to be fully leveraged and exploited.

We need to recognize innovation has many touch points, a myriad of dimensions that need to be aligned and integrated. I genuinely believe we need a solution provider, who takes a more holistic view of innovation management that can make a significant advancement on where we are today, in our processes and systems.

These need a total integrated solution as the approach. this has its complexities in the challenges but we do have the potential through technology deliveries, platform constructs, using the flexibility and adaptability found in the cloud and if we combine this with our innovation management understanding, then we can to begin to construct this systematically and thoughtfully. It is very achievable and necessary for our organizations abilities to absorb and translate knowledge into innovating growth, something missing for many.

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Opening up the Stage Gates to let the new innovating world in?

Stage Gate hurdlesThere is no question the Stage-Gate process has had a significant impact on the conception, development and launch of new products. Yet there have been consistent criticisms of it, as the world of innovation has moved on. Today it is faster-paced, far more competitive and global and become less predictable.

The cries of the Stage-Gate process as being too linear, too rigid and far too planned, bordering on prescriptive have often been heard. The gates are too structured and the constant ‘creep’ of the controlling bureaucracy surrounding it in paperwork, checklists and justification has simply led to so much non-value-added work add to the moans and groans.

Surprisingly, the Stage-Gate concept was created in the 1980’s and led to Robert G Cooper’s different evolutions of this evolving and absorbing many new practices and experiences gained by different organizations across this time.

I’ve written previously on this blog site about the concerns within this Stage Gate system if organizations allow the ‘controllers’ to dominate over the ‘creators’ of innovation what can happen. We end up with “self-inflicted wounds caused by jumping hurdles and closing gates on innovation”.

The idea-to-launch gating system is under more threat today than ever before.

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Self-inflicted wounds caused by jumping hurdles and closing gates on innovation

Many organizations have made Stage-Gate or a mutation of it, their ‘go-to’ innovation process that all innovation must ‘somehow’ pass through. Squeezing all types of innovation through this, for whatever people claim is a linear process, is simply wrong.

You can simply say: “we destroyed much to get sometimes so little out as the final outcome, when initially it was seen to be so promising.

The difficulty is that we are still struggling to find a real alternative, although there have been some recent noteworthy attempts, firstly by Jose A Briones and his Spiro-Level 3D approach and then by Paul R Williams, of the American Institute for Innovation Excellence, to move the discussions beyond the Stage-Gate process from this linear into more spiral concepts and beyond.

There has been an awful lot written on Stage-Gate, some people attacking it and suggesting it “guarantees mediocrity for your business”. Clayton Christensen has suggested “the Stage-gate system is not suited to the task of assessing innovation whose purpose is to build new growth businesses, but most companies continue to follow it simply because they see no alternative”

Stage-Gate has certainly earned its place for product management.

Stage-Gate is an ideas-to-launch process that encompasses a solid body of knowledge built up over the years and has for many become the blueprint for managing the NPD process, reinforcing effectiveness and efficiency as its core discipline. I would argue that’s it! It reinforces but at what cost? Innovation can actually miss out! Often it can also extract out much of the very process that we need from great innovation to leap forward and grow our businesses today. More on this later.

Employing this Stage-Gate methodology you can feel safe that there is behind it a body of knowledge on the best practice gleaned from studies of thousands of new product developments. The process takes you through stages or hurdles, passing through gates where ‘go/ kill’ decisions should be made. Organizations that thrive on having a ‘regime’ hold ‘fast’ to the Stage-Gate as their way to manage innovation. This rigidity of a given mindset is one of the real concerns about being totally reliant on the Stage-Gate. It works for product development that is more incremental in nature –the bread and butter of most businesses.

A really short history of the Stage-Gate first.              

Stage-Gate was developed, is registered as a trademark and certainly popularized by Robert Cooper. His first edition was published in 1986 in the early days of understanding the management of the innovation process. He has since updated with a second edition in 1993 and from this it gained its real traction as the recognized process, and established the term “Stage-Gate” clearly to manage within any product development process. His third edition in 2001 shifted the focus and became more taking the concept further on accelerating idea-to-launch. In 2011 he gave us a completely revised and updated fourth edition.  Robert Cooper reminds us that his Stage-Gate process has become the most widely used method for managing new products in industry today.

It has been suggested that this Stage-Gate process is a conceptual and operational map. Well, yes for NPD only maybe it is but today with all the other types of innovation needed to be considered by organizations it is NOT really capable of living up to this claim. I grant you can think through the process conceptually on how to manage this but I feel this grants Stage-Gate more than it really can offer. It is a stage-gate decision process for product development.

Do linear processes manage all the different types of innovation?

Organizations have become so use to thinking only product innovation they are attempting to drive ‘any’ innovation through the same system. This approach is placing so many self-inflicted wounds on the organization, often in the most painful way possible; through lost opportunities on achieving more significant growth, lost chances to fundamentally change the competitive game and ill-fitting attempts to fit innovation through this one process system.

Original fresh ideas get morphed into completely different end products that seem to become more incremental the further they have to accommodate all the jumping over these hurdles and passing through the stages and gates. It becomes the skill in trying to avoid being ‘killed off’ for often a lack of validation (often obscure)  and that famous cry of “give me proof” often of the unknown- how can you?

Stage-Gate ‘plays’ right into the hands of the bean counter, the risk reducer, the keeper of maximizing productivity, efficiency and effectiveness. Each gate, each hurdle forces the denominator down, mistakenly thinking this is reducing cost risk (often of the only true innovative part) and effective management of time will serve the organization well. This fuels the short-term protectionism we all cry about today, as well as it adds even more to the long-term detriment of mediocre innovation entering the market. We are still failing to ignite growth and continuing to disappoint customers with underwhelming offerings that still doesn’t meet their needs.

The Stage-Gate is not the panacea for managing innovation

I would argue we should stop regarding the Stage-Gate as the panacea for managing all of your innovation needs. Stage-Gate handles the incremental product cycle fairly well, but when you are on a more open innovation platform collaboration it struggles to be flexible, agile and fit the different challenges presented by the collaborating parties.

True innovation goes through such an iterative process; processes like Stage-Gate are simply not equipped to manage all of what this entails. Nor does it really pick up well on the growing impact any potential new business model innovation might signify, as it constantly wants to refer back to excepted existing practices and the structures in place and not novel or radically altering ones that can challenge the existing business model. Can you imagine something completely breakthrough or totally disruptive being forced through a Stage-Gate NPD process?

What also does happen when you have to work through separately the potential of the service innovation dimension or the myriad of other types of innovation? Too often we retrofit service instead of running this in parallel.

We have arrived, it seems to me, at a certain point where innovation is often being projected forward to a given solution and then worked back, so it can pass through the Stage-Gate system. Sometimes this is right if you spot a unique opportunity for a job-to-be-done need but we have to be more than careful of this ‘forming’ habit, it can exclude even greater insights and discoveries even here.

Recognizing limitations AND managing in new and different ways.

So we can recognize that Stage-Gate can work well for incremental and well planned out innovation but it ‘stutters’ and can ‘die’ when you need radical, new-to-the-world breakthroughs as you enter those far too many unknowns to try to run them through a system.

Whichever way you ‘wrap’ Stage-Gate it is still a linear process that has to go through justification at each stage and pass through the ‘gate’ in resolving the criteria expected, before it can go on. Irrespective of the innovation this can often load the process with bureaucracy, internal politics and tensions. You increasingly focus on preparing for these ‘gate’ meetings, losing valuable time often not on the idea and concept itself.

Invariably the questions asked to justify and validate requires much rethinking, leading too aspects of the proposal rewritten and then resubmitted, turning even more into growing time delays. This leads to escalating upwards through the gatekeepers to the senior manager, who is not fully engaged in the process, you lose even more time, he often does not have context, you lose precious opportunity, and you lose money in delays while this all gets sorted out, eventually and it goes on and on with growing conflict and tensions.

There is also a shift to ‘status and attainment’ on sitting on these reviewing committees rather than bringing real ‘value and benefit’ and often this gets confused to the detriment of the process . The process often dominates not the product concept itself. Stage-Gate might have become simply a safety first decision-making tool than an actual NPD process to help and assist.

You begin to justify the many unknowns somehow, you cater to the constant demands for proof at every step of the way, or otherwise you will never get your products out of the door.

We just end up with wicked compromises and the original idea deserves better, much better than that.  If we were honest with ourselves, we shave things off, we dilute, we radically alter what were initially great looking concepts and reduces them down to a pygmy of the original ‘wow’ concept.

Lean and rapid principles have some foundation value

I think where Dr Cooper has continued to explore in his Stage-Gate journey has been the move towards his lean and rapid principles. Those are closer to universal needs of all innovation. These are

  1. Have a clear customer focus
  2. Ensure as much front-end loaded as you can in assessment and testing
  3. Spiral development- find ways to be more iterative and greater community engagement
  4. Push for more holistic approaches of effective cross-functional teams
  5. Seek the right metrics, accountability allocation and continuous improvement
  6. Focus on building a more effective portfolio management through funnelling and appropriate resource allocation
  7. Looking to keep pushing for a flexible, adaptable, scalable and efficient process

These are useful ‘generic’ contributions to finding better solutions to having an updated innovation process, irrespective of type (of innovation). A lot about the Stage-Gate has organizing value to incorporate with this more holistic design of a process to manage all innovation ,it should certainly not be discarded but looked at with a different perspective.

What is called for, in my opinion, is to build even more on these lean and rapid principles but also to recognize and go ‘simply beyond’ the often fixating obsession of applying a product development process with decision gates that many currently have. Although it is not a bad organizing principle for business decision checkpoints, we ‘just’ need to go way beyond this to obtain the increased need for flexibility required, by considering all the different types of innovation an organization needs to consider and cater for them in some form of reviewing approach, if we can.

We need a different more agile, adaptable process that deals with innovation outside the ‘norm’ of managing incremental NPD, if we are ever going to move beyond the present, more common incremental mindset prevalent today.

The need to build and extend our capabilities and processes

We must certainly stop trying to treat all innovation projects with the same ‘Stage-Gate’ brush, squeezing it through the same process. We need to develop different ‘templates’ but have perhaps a common recognized set of decision points or organizing principles.

We certainly need to offer more autonomy to teams through a more robust Innovation Governance structure, this is for me critically important. We need to shift the mindset from ‘Go / kill’ to greater informing choices and options to consider. We need to be less reliant on data, more ready to sense, listen and make informed decisions as we go. We must make sure we capture the alignment with senior management on the strategic goals, the priorities and allocating appropriate resources according to the innovation type and challenge.

We need to allow for a greater freedom of thought, of investigating ‘breaking’ ideas, encourage explorations along the way. We need to push for more experimentation, conceptual work, design modelling so as we learn we can quantify, as we quantify we gain increasing identification and organization alignment. We know much of innovation is unstable, throwing out fluid information that is often contradictory; we need to capture these differences in more flexible, intuitive ways.

This calls for a lot more agility in thinking, in accepting often erratic behaviours to see if we can suddenly leap ahead. Hurdles, keeping to prescribed steps and trying to pass through decision gates needs some very fluid approaches but can still be in disciplined, informed ways but with totally different mindsets of searching for ‘better’ innovation outcomes.

The innovation system required today needs to be more flexible, adaptive, agile and scalable.

The system should not dictate innovation, it has to be more adapted to our different innovation needs and their circumstances so we can maximise innovation’s potential to lead growth.

We need to recognize that a breakthrough concept, a disruptive game changer, a new business model proposition or a multiple type innovation (product, service and BM) need different approaches, all much faster to be developed but with increasing levels of uncertainties being built into the ‘system’ not just taken out because we are uncomfortable with this or unsure how to handle this. Simply ask others to help you, there is no shame in this.

There have been significant changes in our understanding of innovation since Stage-Gate was first introduced. In the process, the culture required, the ways to manage, to align and to develop have all evolved. We must stop being a slave to the innovation system in place, often left over through legacies in the system and find ways to go beyond the often rigid, linear Stage-Gate process that organizations are locked into.

Innovation is complex and adaptive

Innovation should be understood as a system that will always have non-linear behaviours, it cannot be stage-managed in isolated events. It is complex and adaptive and the more we recognize the power of unpredictability, the significant variations, need for constant interactions and the careful selection of those ideas that need to be carried forward, the closer we might get to finding a more universally accepted innovation system.

Let’s stop trying to force innovation by jumping hurdles and closing gates that often do not apply, so we end up with self-inflicted wounds because we were on the wrong track.

The case for a more systematic understanding of Business Model Innovation design

Business model innovation is shaping up to be one of the most challenging aspects for leadership of existing business or that aspiring leaders need to fully understand.  The question today being faced by many is how to transform existing business models so as to avoid that race to commoditization and decreasing shareholder value and so to provide improved value.  Equally business model innovation increasingly needs to be able to reduce the threat of new competition that is constantly finding ways to undermine your present business. The Entrepreneur is snapping at your heels like never before.

Leaders need the tools, skills and experience to envision, test and implement new business models more than ever and certainly faster than ever. The worrying aspect today it seems  is that many leaders are still not knowing what it is within their existing  business model that ‘combines’ to make the existing profit engine of the business, those ‘value points’ that really provide the innovation opportunity to sustain or challenge their existing business models.

So what is Business Model Innovation?

There are numerous definitions of a BMI- let me provide three that I trust build the understanding.

In Alexander Osterwalder’s & Yves Piqneur’s book “Business Model Innovation” they simply explain this as “creating value, for companies, customers and society, replacing outdated models that respond to emerging user needs and pressing environmental concerns. A business model describes the rationale of how an organisation creates, delivers and captures value”. The authors offer nine basic building blocks that build up the complete logic of how a company intends to make money through a new BMI. It basically covers the four main areas of the business: customers, offer, infrastructure and financial viability. They suggest you construct a business model canvas through exploring key partners, key activities, key resources, customer relationships, channels (to market), customer segments and the value proposition with cost structure and revenue streams.

In Mark Johnson’s book “Seizing the White Space”, he firstly starts with White space as defined as “the range of potential activities not defined or addressed by the current business model, beyond its core and adjacencies that require a different business model to exploit”. He sees a BMI to have four parts requiring a clear, strong customer value proposition (CVP), secondly the show me the money part- a profit formula that defines how and where the company will capture value for a given set of customers at a given price. The third and fourth element of this framework is key resources and key processes as the means by which the company delivers the value to the customer and itself.

Thirdly, Boston Consulting Group argues a business model consists of two essential elements- the value proposition and the operating model. Within the value proposition you need to be explicit on your target segments, product or service offering and revenue model. In the operating part you need to address three critical parts- the value chain, cost model and organization.

So in summary:

Tackling the 4 main tasks

Business model innovation is really all about game-changing moves, partly dependent on the industry and the circumstances. BMI should be seen as a proactive need for all to explore new avenues of growth and opportunity before others steal in and take the space from right under you.

Understanding your value-added points is essential

Articulating the (existing) business model as a first step leads to exploring ways to add further value. Customers want to be served in increasingly different, more exciting ways that often need lower cost delivery, greater convenience or improved functionality or are genuinely novel to the world. Knowing these value points is vital.

The role of the business model is capturing that value from new innovative insight. Increasingly this is coming from articulating your purpose more than the product or service and discovering the value promise that will gain customers attention and then delivering on it through your redesigned business model. You need to be really clear on the scope of your business and be ready to outsource the rest to others who specialise in that part more efficiently than you can do. This might be in the area of supply chain, technology platforms, research and development, warehousing and storage, support services etc.

The Catalysts of Change needed for a new Business Model Innovation.

The starting point of a new Business Model is to know what the customer is trying to do that they cannot do as effectively as they would wish today. These are regarded as jobs-to-be-done or knowing the unmet needs and often not unarticulated as they have not been recognised or even appreciated  as needed when you ask.  You can recognise these more often through deeper observation to discover the opportunities that are presently not being served correctly. So the executing of the task or job is becoming increasingly more important to focus upon and today I feel less attention should be given to (existing) known product or services that often over-serve the real need of the customer. The critical aspect here though is that it must be delivering something the consumer wants resolving not what you might just think from your own internal perspective, it needs identifying and then validating. If you can correctly identify these then you have a potential innovation match that might need a new business model to support this.

For me, there are four powerful drivers that can galvanise BMI- increased visibility, reducing complexity, providing a different effect than the present and altering the perception with significant impact on today’s understanding.

The reason for today’s emphasis on Business Model Innovation

The challenge is to unravel the (increasing) complexities of a business. There is a consistent need to beat back intensifying competition, not just coming from the normal competition but from emerging entrants that have spotted these breaking opportunities or seen a unmet job that need to be changed and resolve a customer needs. They can quickly translate this into a viable business alternative and scale rapidly to disrupt the existing business providers. This ‘disruptive process’ is happening across all sectors of the manufacturing industry and service and has given rise in these times of increased uncertainty, accelerating global competition and increasingly more choice for the buyer. As a consequence it is getting harder to not evolve constantly and this is increasingly coming through a closer ongoing review that Business Model Innovation provides.

To summarize why you need a clear understanding of BMI

Business Model Innovation is becoming essential to understand and explore. Luckily there is numerous references available to refer too, to draw down examples and to gain encouragement to experiment. It is not something that I would suggest you push away or delegate to others, BMI offers a powerful concept to change the existing ways and to help you identify the present unknowns that can offer new value and growth paths for you and your future business.

  • A business model defines a broad competitive approach to business and you need to articulate this
  • A successful business model needs to ‘earn’ some sort of competitive advantage to the extent it changes the existing offerings available in worthwhile ways, for the consumer to ‘do something better’ than what is presently available.
  • Having a comprehensive understanding on the focus of competition must also mean a greater focus on innovation, as the relentless changing conditions ensures any business and its model must evolve.

Today you simply cannot afford to stand still, you need to innovate your business model consistently.