MOOC 5
Innovation funnel
How can you organize the innovation process? How can we ensure that our great ideas make it through, but also that
our bad ideas are weeded out?
Let's look at the way to organize the development process of innovation.
Innovation funnel = one of the most fundamental concepts in innovation management that we have.
The idea is that all organizations start with a lot of ideas. How do you make sure that you end up with the good ideas
and not with the bad ones?
The main idea is that you want to apply a funnel.
That means it starts big with a lot of ideas of projects
and gets smaller and smaller.
In the beginning the amount of uncertainty is very
high.
With every step in the development process, this
uncertainty decreases as you develop business
models as customers or test the product in the field.
By the end of the development process, you have a
good estimate how well your idea will perform in the
market.
- in the beginning = a lot of certainty, but low
costs
- in the end = little uncertainty, but high costs
Here is the catch
The longer you're on the process, the costlier it gets to change or abandon the project.
As a rough rule of thumb, cost of change increase by a factor of 10 for each development phase.
Problems:
1. They often end up with too many projects.
They're not able to only select the good projects, they have too many projects in parallel. For example, the
customer required something that might not make the product better, but just more bloated. It's called
scope creep.
2. You might not have a clear yes or no decision.
When in doubt, projects will continue. Managers have difficulty abandoning their own projects. Or there
might not be clear selection metrics. Talk to any startup or small to medium-sized enterprise and ask them
what their metrics and criteria are. Often, they do not know.
3. You might have a lack of engagements by senior management.
This means that you might not have sufficient support for tough decisions, such as telling another manager
that her project will be stopped.
Stage-gate model
Do you know how most organizations structure the innovation process, and what do they use to become better
implementing innovations? They use the Stage Gate Model.
Remember this funnel? The ideas that you have gates doesn't fulfill the criteria at that certain stage gate, the
in the development process of innovation when project of the idea will be killed. This way of working
projects must fulfill certain criteria. If the project gives the organization regular steps where they can
, reduce the number of ideas to more manageable
amount and ensure that good projects pass, and bad
projects are abandoned.
Let's look closer to the stage gates. Each stage gate
functions the same way. During this stage, all
information that is relevant will be gathered and
analyzed. For example, these are technical
characteristics of the product or market research.
Then there's a gate with a goal or kill decision based
on criteria that was developed beforehand.
Now, here's how the stage gate model looks like over multiple stages in the process of developing an innovation.
Stage 0: discovery, or idea generation process. This is where the idea is born.
Criteria: Think about whether the idea is feasible, whether there's a market for a product and whether the idea is
really new. If the answers are yes, the idea passes through Gate 1.
Stage 1, scoping.
Criteria: Here you ask yourself the question, how big can the idea get? What would be the market size of that?
What you need to do: Most of the analysis for this stage is still internal. For example, talking to colleagues in
marketing or operations who can share their opinion. Often the manager will be the reviewer for Gate 2.
Stage 2, developing a business plan. You might decide to do some initial market research and collect more
information.
Criteria: For this, more detailed financial analysis are required.
What you need to do: You present the business case for your idea to review committee. Gate 3 is a crucial point, as
passing this gate will lead to development and substantial investment for the organization.
Stage 3, developing the product.
Criteria: One goal in this stage would be to have a working prototype of your innovation.
Stage 4, the testing and validation stage.
Criteria: It requires you to go into the field.
Innovation funnel
How can you organize the innovation process? How can we ensure that our great ideas make it through, but also that
our bad ideas are weeded out?
Let's look at the way to organize the development process of innovation.
Innovation funnel = one of the most fundamental concepts in innovation management that we have.
The idea is that all organizations start with a lot of ideas. How do you make sure that you end up with the good ideas
and not with the bad ones?
The main idea is that you want to apply a funnel.
That means it starts big with a lot of ideas of projects
and gets smaller and smaller.
In the beginning the amount of uncertainty is very
high.
With every step in the development process, this
uncertainty decreases as you develop business
models as customers or test the product in the field.
By the end of the development process, you have a
good estimate how well your idea will perform in the
market.
- in the beginning = a lot of certainty, but low
costs
- in the end = little uncertainty, but high costs
Here is the catch
The longer you're on the process, the costlier it gets to change or abandon the project.
As a rough rule of thumb, cost of change increase by a factor of 10 for each development phase.
Problems:
1. They often end up with too many projects.
They're not able to only select the good projects, they have too many projects in parallel. For example, the
customer required something that might not make the product better, but just more bloated. It's called
scope creep.
2. You might not have a clear yes or no decision.
When in doubt, projects will continue. Managers have difficulty abandoning their own projects. Or there
might not be clear selection metrics. Talk to any startup or small to medium-sized enterprise and ask them
what their metrics and criteria are. Often, they do not know.
3. You might have a lack of engagements by senior management.
This means that you might not have sufficient support for tough decisions, such as telling another manager
that her project will be stopped.
Stage-gate model
Do you know how most organizations structure the innovation process, and what do they use to become better
implementing innovations? They use the Stage Gate Model.
Remember this funnel? The ideas that you have gates doesn't fulfill the criteria at that certain stage gate, the
in the development process of innovation when project of the idea will be killed. This way of working
projects must fulfill certain criteria. If the project gives the organization regular steps where they can
, reduce the number of ideas to more manageable
amount and ensure that good projects pass, and bad
projects are abandoned.
Let's look closer to the stage gates. Each stage gate
functions the same way. During this stage, all
information that is relevant will be gathered and
analyzed. For example, these are technical
characteristics of the product or market research.
Then there's a gate with a goal or kill decision based
on criteria that was developed beforehand.
Now, here's how the stage gate model looks like over multiple stages in the process of developing an innovation.
Stage 0: discovery, or idea generation process. This is where the idea is born.
Criteria: Think about whether the idea is feasible, whether there's a market for a product and whether the idea is
really new. If the answers are yes, the idea passes through Gate 1.
Stage 1, scoping.
Criteria: Here you ask yourself the question, how big can the idea get? What would be the market size of that?
What you need to do: Most of the analysis for this stage is still internal. For example, talking to colleagues in
marketing or operations who can share their opinion. Often the manager will be the reviewer for Gate 2.
Stage 2, developing a business plan. You might decide to do some initial market research and collect more
information.
Criteria: For this, more detailed financial analysis are required.
What you need to do: You present the business case for your idea to review committee. Gate 3 is a crucial point, as
passing this gate will lead to development and substantial investment for the organization.
Stage 3, developing the product.
Criteria: One goal in this stage would be to have a working prototype of your innovation.
Stage 4, the testing and validation stage.
Criteria: It requires you to go into the field.
