Innovation management -Part 3

Following the first phase of ‘Idea Generation’ in the Innovation Value Chain, The Innovation Management Series continues with this article addressing the second phase. This phase is called Idea Conversion. It is about taking concepts that have been sourced by an organisation, vetting them for funding and developing them into products or practices. This phase precedes the third phase where those products and practices are diffused, which will be addressed in article four of this series of articles.

Successful innovation processes, be they about new product development, service innovation or business innovation, all have one thing in common: they create something fundamentally new that resonates with consumers and the business. If innovative ideas fail to make connections that resonate with customers and the business, they are unlikely to receive any consideration, let alone funding from the company.

The key input into the selection of ideas which the company will commit resources to is its ideas bank (the output of what the previous article discussed – idea generation phase). A company’s ideas bank would be is a space, either physical or virtual, where people put forward ideas to be advanced by decision makers. Having acknowledged that innovation sources are not always Research and Development (R&D) labs of companies, your company may have decided to follow an open innovation approach, sourcing ideas from its external environment (e.g customers, business partners, start-up companies, and so forth). This innovation idea generation process is not some stand-alone process; it needs to be integrated into a selection and development lifecycle. Thus, two key aspects of the idea conversion phase are selection and development.

Idea Selection

Those that have operated in the innovation space would concur that there is no one-size-fits-all when it comes to idea selection. Your selection method, however, does need to fit with your organisational culture and be transparent for those involved, especially you budding intrapraneurs (entrepreneurs within your company).

From what I have seen in my experience with corporates, a successful transformation of innovation inputs (ideas) to outputs (products & services that will deliver sustainable and, to a great extent, profitable business growth) requires a number of things. I’ll just touch on three aspects: Criteria to help you score business ideas based on their suitability; Screening process; and multi-functional selection team.

Criteria

A typical first step in the screening process is to develop the selection criteria for evaluating the ideas. Formulating the criteria is to be done prior to the generation of ideas and must consider things like the objectives and limitations of the screening (time, cost, capability, available information, etc.), flow of ideas, product development process, and success factors.

The need to be some sort of a weighting approach where, for example, the criteria is weighted according to importance. There is usually some sort of an initial screening stage and more advanced stage(s). In the initial stage the selection criteria can be divided according to “must” and “want” (considering strategic alignment, feasibility, project size and other company specific criteria) criteria. Ideas that make it to the second screening can then be extensively evaluated based on, for instance, “should” criteria. Such crieteria may include factors like expected project success and profitability, product advantage, fit with corporate resources and market factors, product uniqueness, market and technological feasibility of the idea, organizational-fit, time to develop, as well as costs, profitability and investments required.

The screening and evaluation process:

The idea selection process will take different forms in different organisations.  However, I’ve also observed that companies with a more formalised process would typically have a stage-gate flow model of selecting & developing new products and services. They would also implement idea classification and management software. Some have gone on to toy with the idea of implementing the concept of Innovation Coach where all ideas are sent for final screening. There are always pros and cons for each approach. The salient point to consider is that companies need to avoid the trap of starting with a tool (idea classifier & management software) but instead need to first consider their strategies, objectives and culture, and then find a tool that works in its unique context.

Additionally, there needs to be some sort of screening method adopted. This may be a quantitative or qualitative method, or even a combination of both. I would argue that a simple qualitative method is better utilised early on in the screening process to sort out the obvious “misfits” and the more quantitative ones later on in the process when more information is available.

Innovation literature is not short of frameworks for the process of idea screening and evaluation. As a start, I’d suggest to stick with a simple three-stage framework of initial selection that draws from your idea pool, categorization of ideas into clusters based on pre-defined criteria (perhaps using idea classification and management software), development an idea portfolio from the clusters.

Selection team

No matter how sound the selection process is and how good the criteria is, the idea selection team always has to have the final say. Unfortunately, I have seen selection teams often end up being staffed by persons who have creative people that know (or care) very little about customer and markets, managers who are less in touch with innovation and technology trends; and in most cases  team members who who have scant understanding of finance. In my view, the success of innovation hinges on the balance between creativity and commercial acumen. It goes without saying that idea selection teams neeed to to be capable, open minded and multi-functional team. Such a team should typically include lines of business, finance, sales & marketing, R&D, etc., creative people, that will offer different perspectives and key information before resources can be committed on an idea. Whether ideas should be screened one by one or in groups, it is this team that woud have the responsibility to analyze ideas at different stages of the screening process. Although development of the selected ideas may not be the responsibilitiy of the selection team, it becomes necessary that the team contrinues to work with development and commercialization teams.

Idea Development

Lastly, development strategies may take different approaches. For example, your organisation may find value in prototyping once an idea has passed the screening and evaluation stage. Prototyping involves realising the design in a physical form, though at a small scale. The prototype demonstrates capabilities in visual form and provides evidence of the product’s performance; an essential step to prove that the product works before further investing on it. From the prototype, the company would need to re-evaluate the idea and decide to either ‘kill’ it or allow the designs to be further refined in its normal product development life-cycle. Once development is done, we hit the last phase of the Innovation Value Chain discussed in the previous articles of this Innovation Management Series, Idea Diffusion.