Innovation Journey Study 2011 Summary

Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd

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The Innovation Journey for technology-rich product businesses

Final study report - Summary

February 2011

Alastair Ross

Simon Bramwell

Codexx Associates Ltd

3-4 Eastwood Court

Broadwater Road

Romsey, SO51 8JJ

United Kingdom

Company Registration No. 04481932

Tel +44-(0)1794-324167

www.codexx.com

[email protected]


AGENDA

• The landscape for product innovation

• Study objectives, approach and participants

• Taking the Innovation Journey – what did we find?

- Initiation

- Implementation

- Into Market

- Intellectual Property Management

• Learning points for businesses in making their innovation journey

• Phase 2 – the opportunity for Thomas Eggar

ACKNOWLEDGEMENTS

Thanks to the following, without whose support this study would not have been completed:

Professor John Bessant, Director of Research, University of Exeter Business School, UK

David Stead, Marketing Director, Gill, Jennings & Every

Professor Frank Gertsen, Center for Industrial Production, Aalborg University, Denmark

Poul Henrik Kyvsgaard Hansen, Center for Industrial Production, Aalborg University, Denmark

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The landscape for product innovation

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The Landscape for product innovation

The seeds of failure for all too many products lie in the 'fuzzy front end' of the innovation process when

the ideas selected are weak in some way. This can result in effort expended on poor quality ideas with more

innovative ideas rejected at too early a stage.

Developing an effective and feasible value proposition around the original idea for new technology or

new products, together with partners to provide complementing software, accessories and services, is core

to successful innovation.

But of course even strong value propositions can fall on rocky ground if the company has a poorly managed

'back end' when the product is manufactured, delivered and supported in the market.

Having a good NPI process is important but increasingly it is not enough. The importance and challenges of

achieving appropriate IP protection is also growing. Effective IP management can provide strategic

advantages in the market, protect revenue sources and also generate revenue through licensing and sale.

There is increasing opportunity for learning from other sectors in the innovation journey. With the

internet and global communication, business practices are much more visible and transferable.

The growth of Open Innovation thinking means that there are new opportunities for getting new ideas

from outside the business. This can help leverage customer knowledge and other external innovators.

All the time companies face the threat – and have the opportunity – for market change through disruptive

or radical innovation.


Study objectives and Approach

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Study Timetable

Develop goals and questionnaire October – December 2009

Data collection in UK January – May 2010

Data collection in Denmark August – October 2010

Analysis & reporting October 2010 – January 2011

Report Publication February 2011

This study aimed to answer the following question:

What are the key practices applied in the journey from ideas to innovative products that determine success?

This study does not look at the culture or general approach for innovation within an organisation – which we

already know to be critical - instead it examines the innovation journey itself.

Study objectives and Approach

Study Partners

Study lead

Academic lead - UK

IP Practices advice

Academic lead - Denmark


This study focused on the key processes enabling the Innovation Journey

External LinkagesExternal Linkages

Successful innovation requires an holistic system

The Innovation System

LeadershipLeadership

ClimateClimate

StrategyStrategy

ResourcesResources

Ideas Select Implement

Process & Controls

Ideas Select Implement

Process & Controls

©2006 Codexx Associates Ltd

Key innovation practices need to be effectively managed

new productsnew productsnew servicesnew services

business modelsbusiness models

process improvementprocess improvement

new marketsnew markets

market positioningmarket positioning

Learning

Learning

Learning

Learning

Commentary

Research by Professor John Bessant at Exeter University has shown that effective innovation requires a number of factors to be in

place to enable an innovation ‘system’. Codexx developed the ‘Foundations for Innovation’ (F4i) model together with Professor

Bessant to assess organisations’ innovation systems and this showed strong correlation of these innovation practices with overall

innovation performance. Our study on the ‘Innovation Journey’ focuses on one key part of this total innovation system - the design and

effectiveness of the key processes used by businesses to make their ‘innovation journey’ for new products.

Our focus for this study

Foundations for Innovation (F4i)


Implementation

4. Prototype

5. Develop 6. G

o/N

o-go

Initiation

2. Idea Exploration

1. Idea Generation

3. Select

Into Market

7. Prepare

8. Launch& Support

9. Learn

Source: ‘Innovation Journey

for Hi-Tech, Hi-Speed

Organisations’ (unpublished

paper) by Simon Bramwell and

Alastair Ross. 2009

The Innovation Journey for

technology products

The study examined business innovation practices and challenges throughout the innovation

journey from idea to market – using an end-to-end model

We believe that this study is unique; other studies of product innovation focus on some elements of the innovation journey, this study

considers the complete ‘end-to-end’ journey. This journey starts with ideas and ends with products in the marketplace that deliver value to the

product stakeholders – that is: users, customers, the business that developed it, together with its partners .

Commentary

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The study participants were medium to large companies applying significant technology in their

products – we identified innovation leaders for comparison

Companies were invited to participate in the study by Codexx, Exeter and Aalborg Universities and GJE.

13 UK-based companies and 12 Denmark-based companies took part in the study. Participating company sectors included

medical systems, semiconductors, business & consumer electronics, telecommunication systems, adventure clothing,

engineering products, and high-value toys.

Participants – who were typically the Engineering, Development or Innovation Director/Manager - completed a

questionnaire and follow-up email interview. To enable companies to be open and frank in their response, participation

was anonymous.

The Innovation Leaders•We selected the top 1/3 of the participants (a total of 8) based

on their innovation performance* and contrasted those

against the total sample.

•This enabled us to look for correlation between innovation

practices and performance.

•Of the innovation leaders, 6 were B2B (‘Business to Business’)

and 2 were B2C (‘Business to Consumer’) compared to 21 B2B

and 4 B2C overall.

•6 of the innovation leaders were based in the UK and 2 in

Denmark.

•Given the study sample size, in making comparisons between

the Leaders and others and between UK and Danish groups we

only considered an absolute difference of >15% in a practice to

be significant.

•The innovation leaders were well spread across the sample as

measured by revenue (see adjacent diagram).

*Innovation performance was based on the following factors: Organic growth, time to

market, revenue from products launched within last 3 years, quality of products and

NPI performance to plan. This information was gathered from the study participants.

Revenue £m


Taking the Innovation Journey – what did we find?

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We found correlation between innovation practices and performance

This shows that those companies

that applied the highest level of

innovation practices were more

likely to show the highest

innovation performance. This

supports academic findings.

We believe that the reason the

correlation is not stronger, is that

the innovation journey practices

alone are not responsible for high

innovation performance. The other

aspects of the innovation ‘system’

in place within a business –

covering key attributes such as

culture, leadership and strategy –

are also critical but are not covered

in this study.

Commentary

Note: The alphabetic codes represent the companies that participated in the study. Each participant knows their code,

but not the identify of other participants to enable them to determine their performance, but retain anonymity.


Idea Exploration, Market Preparation and Intellectual Property (IP) management

were key to innovation performance

Note: Performance Leaders were the top 1/3

of companies from the study sample with

highest overall innovation performance. This

produced 8 companies – 6 UK-based and 2

Denmark-based

Commentary

When we assessed the practices applied by participating companies across the innovation journey, we found that leaders were significantly

ahead of the others in Idea Exploration, Market/Launch Preparation and in Intellectual Property Management. This points to these areas being

critical to the success of an overall innovation journey – rather than those areas typically focused on such as Idea Generation and Product

Development – which actually show little difference in our study.


Overall Danish & UK innovation practices were broadly similar other than in Idea Exploration and IP

Due to the small sample size, we have only reported on significant differences between the UK and Danish groups in this report – anything

less than a 15% relative difference in scoring we have ignored for this reason. On this basis, the only significant difference was in in Idea

Exploration and IP Strategy & Management where the UK participants scored somewhat better. This showed that UK companies were using a

more sophisticated approach to the exploration of new ideas and a higher focus on IP Strategy. These differences resulted in the UK

companies scoring somewhat better in overall innovation practices and also higher in innovation performance in this study as is shown in the

table.

Commentary

Comparative

Scoring

Innovation

Practice

(Average)

Innovation

Performance

(Average)

UK 60% 48%

Denmark 58% 42%


Detailed findings: Phase 1 - Initiation

Implementation

4. Prototype

5. Develop 6. G

o/N

o-go

Initiation

2. Idea Exploration

1. Idea Generation

3. Select

Into Market

7. Prepare

8. Launch& Support

9. Learn

Effective Initiation creates concepts for new

products with highest potential value.

Excellence in this phase requires a broad and

diverse approach to idea generation, a rigorous

approach to idea exploration and a systematic

approach for selection.


Step 1. Idea Generation – where do new ideas come from?

Today almost 2/3 of new product ideas come from employees in the participating companies. However Leaders relatively get 50% more of their

ideas from customers than do other companies. This shows that Leaders today are embracing ‘Open Innovation’ thinking more than other

companies. However this average covers a very broad spread with some performance leaders getting 90% of their ideas from customers.

Overall the participants expected that there will be a significant growth in the use external sources for new ideas (e.g. customers and suppliers)

over the next five years, using open innovation techniques such as “Crowd-Sourcing”. However the Innovation Leaders do not see a growth

in their use of external ideas – this is already comparatively high today and some of the leaders for example see the % of ideas generated

from customers decreasing from 90% to 80%.

Commentary

Now

Future

All Leaders


Step 2. Idea Exploration – how do companies explore new ideas?

Leaders used a wider set of methods to explore new ideas. This

provides increased insight into both opportunities and challenges for

new technologies and product concepts and so an increased likelihood of

improving the likelihood of successful products.

Prototyping was the most popular way of exploring new ideas,

with more analytical Market Study and User Involvementapproaches having less emphasis. Each of these three approaches has

specific strengths for idea exploration:

– Market Study enables quantitative judgment to be made regarding the

size of the opportunity for a product based on the idea.

– User Involvement is more qualitative but ensures that the idea is

tested and refined for user value.

– Prototyping can help bring the idea to live for user review and also test

against manufacturability requirements.

The Danish companies scored significantly lower in the level of effort

applied to Exploring Markets and Exploring User needs than did the UK

companies, resulting in a lower overall score in Idea Exploration.

Note: Exploration techniques defined were: Market study, User Involvement, Prototyping, Other

Commentary

Average number of techniques

regularly used for Idea Exploration

UK 2.3

Denmark 1.8


Detailed findings: Phase 2 - Implementation

Implementation

4. Prototype

5. Develop 6. G

o/N

o-go

Initiation

2. Idea Exploration

1. Idea Generation

3. Select

Into Market

7. Prepare

8. Launch& Support

9. Learn

Effective Implementation produces

products ready for market.

Excellence in this phase requires an effective use

of prototyping to test new product concepts

against market opportunities and technical and

supply capabilities; it requires an effective

development process and a robust decision point

prior to release for market preparation.


Step 5. Product development – what methods are companies using?

The overall score in the Innovation Journey for Development was a combination of the methods used and the effective use of

Information technology (shown on next page).

Leaders were not ahead in their use of product development techniques in most areas. Indeed Leaders were significantly

less likely to be applying Agile techniques than other companies. Agile development methods are particularly prevalent in software

companies with a focus on speed. Leaders use of formal Project Management techniques such as Prince2 was a little less than other

companies, possibly indicating that lighter project management methods are more effective for those companies.

But Leaders are significantly ahead in their application of end-user involvement and in separating out technology and product

development. This makes sense in that user involvement in development will help ensure that there is more user value in the end

product – and thus a greater likelihood of market success. Separating out technology and product development reduces risk of the new

product being late to market or suffering from functional and quality problems – again increasing likely market success.

Danish companies were significantly more active than UK companies in applying project management, Lean and Agile methods

in their product development.

Commentary

** NPI Team decision

NPI stage-gate review


Step 5. Product development – how are companies applying Information Technology?

Information Technology can provide major benefits in new product innovation – enabling internal and external collaboration,

simulation, CAD/CAM for example. We asked companies how effective they believed their use of IT was in their end-to-end innovation

process. Overall the UK companies scored significantly higher than the Danish companies and this was a key reason why the UK

companies scored slightly higher overall in Product Development practices. Leaders assessment of their IT effectiveness is on average 30%

higher than the other companies, indicating that this is an important area of practice differentiation – however only 6 of the 8 leaders

answered this question, so the sample size is low.

Whilst IT does not replace the value of face-to-face contact, it has a powerful role to play in enabling effective collaboration with users,

suppliers and partners, and in enabling fast time-to-market through computer-aided design and simulation. The role of online collaboration

tools such as web forums, virtual worlds (such as Second Life) and Facebook is increasing the ease by which companies can interact with

their users and through which user communities can bring enhanced value to a product offering.

Commentary

Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd20 of 53

Key challenges across the journey – Phase 2 (Implementation) – participant feedback

Final subjective tests

Competitor product

offerings coming to market

with new features during our

development phase

Technical challenges

Ensuring firm cost-benefits visible

Getting production time

for test production

Customer

collaboration during

implementation

Ensuring design is frozen

Price and quality approval

Ensuring

manufacturing &

supply processes are

robust and dependable

Ensuring sufficient resourcesto ensure fast time to market

Feature creeping and

avoiding up-stream

activities and work with

non-matured

technologies

Specifications will need amending and the key

issue is changing the right ones and not the easy

ones - avoiding the risk of having a

complete product that doesn't deliver

Implementing change at

the same time as the existing

product goes through the

factory. We don't have an

automated engineering

change system.

Inappropriate project

management

Balancing resourcesbetween product maintenance

and new product development

Selecting the right

new products

Buy in from all areas is

the most difficult as we have

so many people and markets

to satisfy

To get attention and

focus on product

launching from

sales/marketing

Availability of the key

technical resources

Keeping to schedule

Taking an end to end view (e.g.

including testing and maintenance)

Product sign off to

meet the launch timings

Customer acceptance of

products. Typically a product is

customised for a specific

customer.

Technology Business Value

ExecutionUsers

NOTE: The above information was provided by the

participating companies when asked for the key challenges

encountered in this phase. We have grouped these comments

around our four identified critical journey activities.

Technology

Users

Business Value

Execution


Detailed findings: Phase 3 – Into Market

Implementation

4. Prototype

5. Develop 6. G

o/N

o-go

Initiation

2. Idea Exploration

1. Idea Generation

3. Select

Into Market

7. Prepare

8. Launch& Support

9. Learn

Effective ‘Into Market’creates

commercial and user value through the

sale, support and enhacement of new products.

Excellence in this phase requires an integrated

approach to market preparation involving the key

development, sales & marketing and supply

functions together with partners; it requires an

effective launch to drive awareness and demand

and ongoing support for users and the generation

of additional revenue and user value through

accessories and complementary offerings. Finally a

Learning stage enables the organisation to capture

experience and improve both its own methods

and the value provided to users.


Step 7. Prepare – how do companies prepare for market introduction?

Commentary

The Leaders were again most user focused, with a high rating for how well they prepared user support for new products and in marking

changes in the product to cope with market changes – but also with high focus on making engineering changes to address product

issues – this is a surprising weakness, perhaps explained by the leaders’ lower scoring in some key product development practices compared

to the other companies. Another reason may be a philosophy of launching products quickly to the market and then fixing issues (an ’80:20’

approach) – this is common and acceptable where much of the functionality is software based. However this can be a risky approach for a

smaller business whose market position is not strong. Indeed enhancing products in market through software enhancements or fixes enables

companies to increase the number of positive ‘touch points’ with users - this can actually improve the user perception of value. This approach

is common for software-based products such as Smartphones, mp3 players and Personal Computers.


Detailed findings: Intellectual Property Management

Implementation

4. Prototype

5. Develop 6. G

o/N

o-go

Initiation

2. Idea Exploration

1. Idea Generation

3. Select

Into Market

7. Prepare

8. Launch& Support

9. Learn

Effective management of

Intellectual Property (IP) is key to

maximising the value of an idea.

Excellence in IP Management requires a

strategy for IP - that is tailored for each

business and their own business strategy –

together with a structured approach to IP

capture, protection and exploitation.

IP Management


IP Management – how does IP management impact innovation performance?

There is clear correlation between IP management practices and overall

innovation performance. This means that companies that are more effective at

product innovation are more likely to have effective methods in place for their

Intellectual Capital (IP) management – covering for example an IP policy, patenting or

design protection.

However companies identified challenges in Costs & Complexity of the IP process

and weaknesses in their own IP Management methods. The cost of effective IP

management is a particular challenge for smaller companies, with the cost of

defending patent infringements perceived as a major particular barrier to patenting

in the first place. The plain fact is that an undefendable patent is tantamount to a

business giving away its ‘crown jewels’.

Key IP challenges identified by participating

companies

Costs & Complexity of IP process•Costs, knowledge

•The cost of the process

•Price and value of patents

•Length of process, legalistic (so avoided by employees) - needs

to be driven

•Nothing is patented due to lack of knowledge/competences

Effectiveness of IP management methods•Currently we do not actively protect our IP.

•Only have one product under patent.

•Bringing new innovation to market it is important to protect the

idea that we can commercially exploit it and recoup investment

and research costs.

•That we have probable operability (non-infringement) and that

key ideas can get the earliest priority date

•How to be more proactive

•Applying too late and losing opportunities/protection

Other•Chinese copies

•International Contract Law. Most of our IP is Know-How which is

not protectable by Patent, but is protectable by Contract.

•No concern, we file about 100 patents per year

•Due to the fact that our new products are based on very old

ideas it is hard to find features that can be legally protected.

•Potential copy from competitors

•How to make the biggest problems for our competitors

•Protecting innovative ideas

Commentary

NOTE: IP Management Practice score was the average of the 9 IP

practice questions on both IP Strategy and IP management that

study participants answered.


IP Management – what’s the strategic role of IP?

The innovation Leaders have a significantly higher view of the strategic benefits of IP than the other companies. This should

help them justify the reason for investing in IP management – alternatively this view could be the result of their accepted investment in IP

management. Less than half of the other companies saw IP as increasing company value. The UK companies have a better strategic

view of the importance of IP than the Danish companies in the study.

The results also highlight that IP is seen by the leading innovators as important in increasing company value, limiting new competitors and

restricting the movement of existing competitors. This looks well understood but the bigger issue highlighted is the fact that so few see the

importance or role of IP in generating income by licensing. It is more likely that companies would take a rounded strategic view if

good foundations were in place to help them manage and monitor their IP. Leaders recognise the value of IP rights for limiting competitors’

activities and accept that the “temporary monopoly rights” granted by patents do create value for the company. But what proof exists that

these measures are in fact increasing corporate value? Is it reported and required at Board level?

Commentary


IP Management – what are the key practices?

The UK and global IP system is a complex one for companies to navigate through and use effectively – this was identified as a key

challenge by the participating companies. For IP to be effectively managed a policy/strategy needs to be in place, together with a

management system.

Our study showed that the innovation Leaders have significantly better practices for the management of IP than the other

companies.

Although the Danish companies showed a lower strategic view of IP compared to UK companies, this was reversed when it came

to their management approach to IP. Whilst they were less likely to set targets (perhaps a more Anglo-Saxon business approach) or rewards

for generation of formal IP (e.g. patents) – which is consistent with their cultural focus on teams rather than individuals – Danish

companies were ahead in all other areas of IP management – significantly in having a nominated IP Coordinator.

Commentary


Learning points for businesses in making their innovation journey

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We identified those innovation journey practices which were most strongly correlated

with innovation performance

Commentary

We examined the correlation of individual innovation practices with overall innovation performance and ranked the innovation practices

accordingly. Four of the Top Ten ranked innovation practices related to IP Management and Three of the Top Ten related to the Prepare

for Market stage. Interestingly, areas we might have expected to appear here, such as Product Development practices are absent. This tells

us that idea protection and market preparation practices are the two areas with highest correlation with innovation

performance – based on the findings from this study.

Correlation with

Innovation

Performance

Correlation of innovation journey practices v Innovation Performance

Innovation Practice


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In conclusion, we made a number of key findings from the study

1. We are unaware of other studies that explore the innovation across the complete journey from ideas to value.

2. Overall our study found significant correlation between innovation journey practices and ultimate innovation

performance.

3. The biggest gaps between Innovation Leaders and the others, in innovation journey practices were in Idea

Exploration, Market/Launch Preparation and in IP Strategy & Management. This suggests that these three areas are

the most critical in determining innovation success. This is an issue for many businesses whose existing New

Product Development processes rarely cover these key front and back-end activities.

4. Leaders had a noticeably higher level of user focus across the innovation journey than did other companies and we

would conclude that this is a key enabler to their higher innovation performance.

5. In contrast, practice areas that might have been expected to have high importance – such as Product Development

– show little difference in practice between Innovation Leaders and the others.

6. Intellectual Property (IP) management practices had the highest correlation with overall innovation performance.

We believe that this is as much an outcome of being an effective innovator as an enabler to becoming an effective

innovator.

7. Overall, there was generally little overall difference between the UK and Danish participants.

8. The study also confirmed that those companies practicing significant Open Innovation today were more likely to

have higher innovation performance than those who were not.

9. The study sample was too small for valid comparisons between business sectors.

1. As defined in the F4i innovation model on page 8


We make the following recommendations for businesses, based on the findings from the study

1. Increase user focus throughout the innovation journey with the ‘voice of the user’ represented throughout

the end-to-end innovation process.

2. Keep flexible to enable late changes from users - a key practice of innovation leaders. To enable this,

ensure there is sufficient flexibility in the product architecture to enable changes and enhancements with

minimal impacts on time-to-market and cost.

3. Focus on users not customers. They may well be the same, but in a B2B (business to business) relationship

they are not. When it comes to product innovation, it is the users who are key.

4. Examine your current NPI/NPD process. A key learning point from this study is that it is in these front and

back-end areas that are critical to innovation success.

5. Give more emphasis to the management of IP (Intellectual Property) in your innovation processes. IP can

offer key strategic benefits if managed effectively. A key starting point is to develop a strategy for IP within

the business.

6. Review your overall innovation system. Whilst the innovation processes as reviewed in this study are a key

enabler to innovation success, there are other key factors such as Leadership, Culture and Strategy within

the business that are major determining factors in innovation success. value

ideasTo request a full copy of this report contact us via www.codexx.com

Innovation Journey Study 2011 Summary

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