Managing Innovation in Shrinking Product Cycle
Great brands and great companies are built by innovation. A company’s longevity hinges on how well it’s able to adapt to change. Uncertainty is an inherent characteristic of innovation, and it carries the risks of market acceptance, feasibility, technology changes, and cost and time overruns. Concurrently, companies are facing increased pressure to deliver new products and features on short, well-defined timelines. The need for innovation and predictable delivery cycles seems contradictory, yet companies must find ways to balance both. Let’s examine how companies can create a framework for successful innovation.
Innovation is a team effort that requires the participation of all organizational stakeholders. Creating the right climate for innovation begins with setting up a channel for ideas. While most companies have a suggestion box or a feedback form for new ideas, many fail to sustain the initial enthusiasm. Mechanisms for soliciting new ideas must have:
• Transparency. Clearly define the types of ideas likely to be considered when asking for feedback. This will provide focus to stakeholders.
• Communication. Nothing stifles innovation more than the perception that an idea will end up in a corporate black hole. Keep the communication channels open from the time an idea is received until it’s rejected or implemented.
• Periodic review. If an idea is ahead of its time, make sure to save it for later review.
Understanding both the risks and benefits of innovation is vital for deriving the optimal execution paradigm and is preliminary to making the decision on investing in the innovation. Examples of innovation risks include lack of market acceptance, time and cost overruns, technology changes rendering the innovation obsolete, competition, and collateral damage to existing products. Examples of innovation benefits include IPR, increased market share, penetration into new markets, and increased revenue from existing customers.
Quantifying risks and benefits at the outset of development is imprecise, yet it’s necessary for budgeting and limiting exposure. The simplest way to quantify risk is to sum up probabilities of all risks and multiply that by total estimated development costs. This formula doesn’t consider costs of collateral risks such as a decrease in existing revenue streams and opportunity costs of benefits from alternate resource utilization.
The right implementation framework is a function of various factors: company maturity, existing product dependency, organization structure, technology, future strategy, and type of risks. Innovations that are heavily technology-oriented and can be categorized as inventions need a different framework from new product features. Innovations that are in the high-risk, high-benefit category may require a different methodology to mitigate risk. Whatever innovation and the implementation model, the two common objectives are to achieve results quickly and to minimize risk.
A possible framework may incorporate elements from agile development methodologies that are internalized and adapted to suit the corporate culture, organization mix, and existing assets. IBI
Innovation is a team effort that requires the participation of all organizational stakeholders. Creating the right climate for innovation begins with setting up a channel for ideas. While most companies have a suggestion box or a feedback form for new ideas, many fail to sustain the initial enthusiasm. Mechanisms for soliciting new ideas must have:
• Transparency. Clearly define the types of ideas likely to be considered when asking for feedback. This will provide focus to stakeholders.
• Communication. Nothing stifles innovation more than the perception that an idea will end up in a corporate black hole. Keep the communication channels open from the time an idea is received until it’s rejected or implemented.
• Periodic review. If an idea is ahead of its time, make sure to save it for later review.
Understanding both the risks and benefits of innovation is vital for deriving the optimal execution paradigm and is preliminary to making the decision on investing in the innovation. Examples of innovation risks include lack of market acceptance, time and cost overruns, technology changes rendering the innovation obsolete, competition, and collateral damage to existing products. Examples of innovation benefits include IPR, increased market share, penetration into new markets, and increased revenue from existing customers.
Quantifying risks and benefits at the outset of development is imprecise, yet it’s necessary for budgeting and limiting exposure. The simplest way to quantify risk is to sum up probabilities of all risks and multiply that by total estimated development costs. This formula doesn’t consider costs of collateral risks such as a decrease in existing revenue streams and opportunity costs of benefits from alternate resource utilization.
The right implementation framework is a function of various factors: company maturity, existing product dependency, organization structure, technology, future strategy, and type of risks. Innovations that are heavily technology-oriented and can be categorized as inventions need a different framework from new product features. Innovations that are in the high-risk, high-benefit category may require a different methodology to mitigate risk. Whatever innovation and the implementation model, the two common objectives are to achieve results quickly and to minimize risk.
A possible framework may incorporate elements from agile development methodologies that are internalized and adapted to suit the corporate culture, organization mix, and existing assets. IBI