Innovation is hard work. While we often imagine a really clever guy in his garage creating the next big thing, reality teaches us that discipline is a far more important trait to successful innovation than is imagination. Discipline supports creativity and frames the context of an innovation ecosystem.

Key Components of Innovation

Innovation certainly requires discipline and creativity – as well as flexibility – for new product development (NPD) team members and leaders. An innovation ecosystem requires pertinent processes, tools, and metrics to lead to repeatable success. Some of these elements are:

A well-considered innovation strategy,
Product portfolio management and knowledge management,
An NPD process, and
Ongoing team and leadership training.

Let’s take a look at each element in turn.

Innovation Strategy

Every company, large or small, has a strategy. Usually, the strategy is documented and reviewed annually. A corporate strategy describes why the business exists and how it expects to accomplish its mission. An innovation strategy is a subset of the organizational mission and specifically describes the details of the new product development programs.

For instance, I worked with a company that wanted to be viewed as “Number One” in an organic food category. Their vision included customers choosing their brand over all other competitors because the food was healthy. The innovation strategy, therefore, built on the vision of delivering healthy products to the marketplace, yet also had to strike a balance between customer tastes, product features, and the labels of “healthy” and “organic”.

Thus, the innovation strategy breaks down the corporate strategy into specific goals and objectives for a new product development program. Healthy foods must be tasty and have textures and flavors that consumers enjoy. The innovation strategy includes, then, a focus on customer needs and definitions (what does “healthy” really mean?) and on technology development (can we manufacture a low-fat, high fiber product?).

Product Portfolio Management (PPM)

Product portfolio management (PPM) is the system to identify in which projects to invest. Knowledge management (KM) captures technical, product, and market data for future use. Both PPM and KM are critical to long-term success of an innovation ecosystem. Yet, historically, both PPM and KM fail in implementation.

PDMA studies show that only about half of companies have a well-functioning PPM process. This is a disappointing statistic since PPM is how we make decisions regarding which NPD projects to advance and which to halt. PPM provides an evaluation and comparison of all innovation projects based on competitive advantage, market attractiveness, technical feasibility, and profit potential. An effective innovation ecosystem uses PPM to guide data-driven project decisions.

Likewise, an effective knowledge management system captures the tacit knowledge of customers, subject matter experts, and key stakeholders and translates these disparate bits of information into explicit knowledge. It is inherently difficult to ask a customer what features they want in a new product, but KM allows us to save and share customer challenges, desires, and feelings about product usage. KM goes hand-in-hand with PPM by supporting clear definitions of customer needs.

NPD Process

Established NPD processes are also critical to an organization’s long-term success with repeatable innovation. An NPD process needs to be formal and structured with key steps, roles, and responsibilities determined in advance for all innovation projects. However, the specific NPD process deployed by a company should fit its culture, scale of operations, and degree of innovativeness sought. The standard NPD processes that my clients use include traditional staged-and-gated processes, Scrum, and hybrid processes.

A traditional staged-and-gated NPD process follows a linear pathway through a project. Designed by Robert G. Cooper in the late 20^th century, the NPD team will set project requirements early in the process and will build the product according to this pre-determined feature set. Cooper recommends – as do I – to continually test the product assumptions with a wide range of users throughout each stage of the NPD process.

A Scrum process follows the Agile philosophy by adapting the work in a short sprint (e.g. two to four weeks) to the highest priority feature or feature set. Customer involvement is intimate in a Scrum NPD process as the customer both sets sprint priorities and approves the incremental product output from each sprint.

Finally, hybrid NPD processes are becoming the norm in innovation as neither a traditional staged-and-gated process nor an agile/Scrum approach is ideal. Hybrid NPD processes support the innovation ecosystem through continuous communication with the customer while utilizing a formal requirements design and development methodology. Keep in mind that no NPD process is perfect, and an NPD process should be updated regularly to reflect organizational, market, and technology needs.

Team and Leadership Training

A successful ecosystem relies on a clear strategy and established practices and procedures (PPM, KM, and NPD processes). To make the cogs turn, however, people must be motivated and inspired to do creative work while at the same time understanding organizational boundaries and limits. Team and leadership training is the last, but perhaps most critical piece, of the innovation ecosystem puzzle.

NPD teams and innovation leaders benefit from New Product Development Professional (NPDP) and Best Practice Training. In these public or customized workshops, team members safely learn how to clearly identify the innovation strategy, implement PPM and KM, and streamline the NPD process. Moreover, teams learn the tools in market research to understand, test, and validate customer needs with concept tests, prototypes, and post-launch reviews.

Likewise, teams need to develop cross-functional and conflict management skills. These are learned and practiced through Situational Team Leadershipand Virtual Team Training. Virtual teams offer a huge advantage for innovators to tap into local market information while designing a product for global reach.

Finally, leaders need to approach innovation with flexibility, adaptability, and patience. Leaders should be trained in situational leadership, virtual team management, and change management in addition to understanding the overall NPDP best practices. Innovation leaders also need ongoing support since other the NPD function is often isolated from other business functions and requires special skills and business frameworks.

I recommend an ongoing sharing and exchange for innovation leaders with a trusted group of like-minded product management professionals. Having your own personal advisory board facilitated by an innovation expert can help you advance and accelerate your innovation ecosystem. Check out the Innovation Master Mind as a way to rapidly improve your innovation programs through industry collaboration and problem-solving. (Register here for a FREE pilot session of the Innovation Master Mind on 23 January 2019.)

A Successful Innovation Ecosystem

I am constantly reminded of the delicate balance in nature’s ecosystem. Rain, sunshine, and fertilizer allow plants to grow and thrive. An innovation ecosystem requires feeding and nourishment to also grow and thrive. Key elements of an innovation ecosystem are the innovation strategy, product portfolio and knowledge management, an established NPD process, and team and leadership skills development.

Innovation is fun and exciting! When we apply and formalize these elements in an innovation ecosystem, we realize both personal and professional success while delighting our customers.

Learn More

Feel free to contact me more information on customized NPDP training. I can be reached at info@simple-pdh.com or 281-280-8717. I love helping individuals, teams, and organizations achieve their highest innovation goals!

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All of us make dozens, perhaps hundreds of decisions, every day. Should I get skim milk or whole milk in my latte? Should I wear the red shirt of the blue one? What is for dinner – hamburgers or tacos? Or something entirely different? In addition to these daily, personal choices, we also participate in making important business decisions regarding products, services, and programs.

Yet, what is the basis for our decisions and can we improve our capability to make better choices? Making better organizational decisions can lead to increased productivity, higher revenues, and competitive advantages. Decisions are influenced by our emotions (even when we think they are not), biases, and the way alternatives are presented. We’ll take a look at these three elements of decision-making here.

Emotional Decisions

Emotion and social dimensions play a large role in making decisions and can even cause us to make a poor decision. A recent article in the Houston Chronicle (2/15/17) indicated that as many as 8% of women refuse chemotherapy treatment for breast cancer because of the side effect of hair loss. This decision is made on an emotional basis to avoid the social stigma – “She has no hair; therefore, she has cancer.”

Better decisions are those in which we can move beyond emotions to data and logic. A traditional quiz to measure your own dimension of emotional vs. logical decision-making involves simple arithmetic. A bat and a ball cost $1.10. The bat costs $1.00 more than the ball. How much is the ball?

If you answered $0.10, you probably used an intuitive decision-making process. Yet, if you engage a logical evaluation framework, you will find (by simple math) that the ball costs $0.05.

Project, product, and engineering managers need to drive their teams toward more logical decisions over purely emotional ones. Having a “gut feel” that a new product feature should be added is far less objective that is a market test validating the customer value proposition. Using data and information to make investment decisions will lead to better outcomes for projects.

Decision Bias

We are all familiar with the status quo. We keep on doing things because we’ve always done it that way. Without any pressure to change things, we’ll just stick with the same old way. This is known as a “stability bias”. Paired with “sunk cost bias,” decision-makers can be on a dangerous path toward poor evaluation of whether a project deserves future investment.

The sunk cost fallacy is especially relevant for project leaders. Knowing that a past investment has been made, we optimistically assume we can recover those costs if we just work harder. After all, an effective project manager or senior engineering manager should be able to speed up the team’s work, right? Wrong. A past action does not predict the accuracy of a future action. And, in some cases, it is better to cut your losses rather than continue to throw good money after bad.

Again, moving to a careful, data-driven, logical decision framework can help to eliminate effects of bias. Successful product development teams compare anticipated revenues against go-forward costs to make a development decision. Project managers cannot magically make up a 2-month schedule delay on a 12-month project. Moving beyond intuitive decision-making rooted in emotions and bias improves project outcomes. An honest evaluation of whether the project is still profitable if delivered in 14 months instead of 12 will lead to increased motivation and a better result.

Using PPM to Decrease Bias

One way to decrease bias in decision-making is to consider all the available alternatives at once. In this way, each choice is compared against the other options in a fair and unbiased manner. Decision scorecards are especially valuable in focusing a team on key variables and away from emotional judgements.

Product portfolio management (PPM) utilizes decision scorecards to evaluate which new product development (NPD) projects should advance and which should be put on hold. The advantage of this decision-making framework over individual project assessments is that it forces strategic alignment and dialogue among key stakeholders and decision-makers. Every firm has a set of strategic objectives that are supported by NPD efforts. If, for example, a strategic goal is to increase category sales by 15%, the decision scorecard in PPM will include a factor for increased category sales. If the firm is trying to expand its geographical reach, the scorecard will include geographical reach as an evaluation item. Finally, if a company is very risk averse, a PPM scorecard will include an item for probability of success.

Moreover, because a cross-functional team is responsible for conducting PPM, an honest conversation is had about strategy and implementation. Strategic objectives do need revising occasionally and the PPM evaluation can indicate if the firm is on track (or not) to meet those strategic goals. The conversation determining which projects to advance is actually far more valuable than even the results of the PPM analysis. This open dialogue ensures strategic alignment among top executives and project staff.

Improving Project Decisions

All of us participate in business decisions regarding which products and projects to advance within our organizations. We can improve our capability in making these decisions by removing emotional elements, like bias and lack of motivation, and moving toward logical evaluation of alternatives. Decision scorecards are one way to visualize decision data to improve the outcome of a choice.

In particular, PPM scorecards are effective in NPD. PPM drives strategic alignment of projects as well as decision-makers. Additionally, PPM opens up a rick dialogue within product development teams to energize the effective implementation of the innovation strategy. If you’d like to learn more about customer relationships and marketing for new product development, please join use one in a self-study or other NPDP Workshop. Feel free to contact me at info@simple-pdh.com or 281-280-8717. At Simple-PDH.com where we want to help you gain and maintain your professional certifications. You can study, learn, and earn – it’s simple!

Reading Recommendation

A detailed book on creating a business case for R&D projects is The Valuation of Technology by F. Peter Boer (affiliate link). I have a chapter on PPM in NPDP Certification Prep: A 24-Hour Study Guide and additional references at https://globalnpsolutions.com/services/npd-resources/.

Study. Learn. Earn. Simple.

A division of Global NP Solutions, LLC

product portfolio management

Innovation Ecosystem