Overcoming Barriers to Sustainable Growth through ......Derald Kopren, Business Consultant, Sopheon...
Transcript of Overcoming Barriers to Sustainable Growth through ......Derald Kopren, Business Consultant, Sopheon...
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Turning Great Ideas into Great Products Page
Overcoming Barriers to
Sustainable Growth through
Innovation in Consumer
Goods Markets
Part 2: Turning Great Ideas into
Great Products
Bryan Seyfarth, Director of Product Strategy, Sopheon
Derald Kopren, Business Consultant, Sopheon
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Page 2 Turning Great Ideas into Great Products
Table of Contents
Executive Summary ............................................................................................................................................................... 3
The State of Innovation in the Consumer Goods Industry .................................................................................... 4
About the Front End of Innovation ................................................................................................................................. 5
Impediments to Developing High-Value Ideas and Concepts .............................................................................. 6
Five Principles of Effective Idea and Concept Development ................................................................................ 7
Drive Ideation with Strategy.......................................................................................................................................... 7
Connect Innovators to Other Ideas and to One Another .................................................................................... 8
Create Communities that Encourages Ideation ....................................................................................................... 8
Design Idea Flows for Consistency and Collaboration .......................................................................................... 9
Ensure Seamless Connections to Concept Development, Screening and Execution ..................................... 9
How Sopheon Can Help ................................................................................................................................................... 10
Related Reading .............................................................................................................................................................. 12
Reference Notes............................................................................................................................................................. 12
The information in this document is subject to change without notice. No part of this document may be
reproduced, stored or transmitted in any form or by any means, electronic or mechanical, for any purpose
without the express written permission of Sopheon.
Copyright
© Copyright 2012 Sopheon plc. All Rights Reserved.
Accolade, Vision Strategist, Idea Lab and Process Manager are trademarks of Sopheon plc.
Stage-Gate is a registered trademark of the Product Development Institute.
All other trademarks are the sole property of their respective owners.
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Turning Great Ideas into Great Products Page 3
Executive Summary Many consumer goods companies have an abundance of ideas. Some don‟t have
enough. Others simply generate a lot of bad ones. By “bad” we mean low-value ideas
or ideas that end up not contributing to an organization‟s strategic goals. Consider
these statistics:
A survey by Sopheon and CGT magazine found that only 18 percent of
new products released by consumer goods companies were considered
by the originators to be “highly innovative.”1
In the same survey, nearly 60 percent of consumer firms said that their
products weren‟t sufficiently differentiated from the competition.2
A recent Nielsen study discovered that only 6 percent of new
consumer products generate the level of category growth needed by
retailers to justify expanded shelf space.3
The inference is clear: not enough high-value ideas are entering the pipelines. And in
today‟s business climate, in which many consumer goods firms struggle to maintain
their margins, the difference between average ideas and great ideas can be the
difference between disappointing and delighting your shareholders.
The viability of the front end of an innovation process cannot be gauged solely on
the basis of the number of ideas entering the funnel. Rather, it should be judged by
the business value of the best ideas being brought forward, and an organization‟s
effectiveness in converting those ideas into products. Most companies would prefer
20 bad ideas and one single outstanding idea to 21 ideas that are merely good. “In
the world of innovation, the extremes are what matter, not the average or the
norm.”4
This paper is the second in a series addressing the primary barriers confronting
consumer goods firms in their efforts to achieve sustainable business growth. It
focuses on one of the most critical phases of innovation management: the front end
of innovation. It examines challenges and solutions to successfully building and
maintaining a robust pipeline of ideas and concepts, and introduces the five key
principles of an effective front-end process:
Drive ideation with strategy;
Connect innovators to other ideas and to valuable knowledge sources
to facilitate discovery;
Create communities that encourage ideation;
Design idea flows for consistency and collaboration; and
Ensure a seamless transition from ideation to concept development and
execution.
Adherence to these principles can make the difference between a portfolio of
average ideas and a portfolio of great ideas… that become great consumer products.
The viability of the front end
of innovation should be
judged not by the number of
ideas generated but rather
by the business value of the
ideas being brought forward,
and the effectiveness in
converting those ideas into
products.
Adherence to the principles
introduced in this paper can
make the difference
between a portfolio of
average ideas and a
portfolio of great ideas…
that become great consumer
products.
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The State of Innovation in the Consumer Goods
Industry
Executive teams in consumer goods firms face a critical imperative as they strive to
bring more value to shareholders. They must find new ways to grow the business,
often with unprecedented resource constraints. The essential role of innovation as a
growth engine is undisputed. Eighty-four percent of the senior executives
participating in a recent global survey by McKinsey said that innovation is extremely
or very important to their company‟s growth strategy. Sixty-eight percent said that
they believe new products and services in existing markets provide the most direct
path to organic growth.5
Fact is, even the most innovative products can be reduced to commodities over
time. As this happens, their financial value to the business steadily diminishes. The
challenge is to avoid the usual trajectory of decline by creating a predictable, evergreen
pipeline of innovative, high-value products that ensure sustainable market
differentiation.
In our work over the years with consumer goods prospects and customers, we have
identified four common barriers to creating sustainable differentiation through
innovation. Part 1 of this white paper series focused on the challenges of innovation
execution, and how to successfully execute a gated process. This paper addresses a
second area of challenge—ensuring that your organization has a strong pipeline of
high-value ideas and concepts feeding into the execution process.
The challenge is to avoid the
trajectory of declining
financial value resulting from
product commoditization by
creating a predictable,
evergreen pipeline of
innovative, high-value
products that ensure
sustainable market
differentiation.
Figure 1: Barriers to Innovation Success. Sopheon’s research and experience have determined
that there are four primary reasons consumer goods companies struggle in the pursuit of their
innovation objectives.
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Turning Great Ideas into Great Products Page 5
About the Front End of Innovation The outputs of your innovation efforts can only be as good as the input into the
process. A corollary truth is that the value of your new products or services is
directly linked to the value of the ideas and concepts you choose to develop.
Some companies struggle to get enough new ideas into their innovation processes.
But in general, new ideas are rarely in short supply. Most organizations have an
abundance of them. If anything, they have too many.
Our research and experience have shown that although it is important to maximize
the number of ideas at the front end of the innovation cycle, it is equally—if not
more—important that those new ideas be of high value. So how do you generate
more good (i.e., high-value) ideas? And how do you make sure that bad (i.e., low-
value) ideas are eliminated before they enter the development process and start
consuming precious and expensive resources? Knowing the answers to these
questions, and acting on them, will significantly enhance your organization‟s ability to
generate desired returns on innovation investments.
Figure 2: Overall Impact of Front-End Activities on Costs and Revenues. Best-
practice companies have a significantly higher number of ideas entering their vetting process.
But their innovation funnel has a tighter collar. On average, only 5 percent of ideas advance to
concept, compared to 23 percent in a typical company. An even smaller percentage make it to
development. These process differences result in dramatically higher new product success rates
and substantial reductions in the amount of resources wasted on project failures. The real win,
of course, is a lot more profit and revenue from new products.
The value of your new
products or services is
directly linked to the value of
the ideas and concepts you
choose to develop.
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Impediments to Developing High-Value Ideas and
Concepts
In our research and experience, there are five impediments that consistently deter
consumer goods companies from generating more high-value ideas.
1. Business silos block the nurturing and development of ideas.
Sixty-two percent of the participants in a recent survey of consumer goods
manufacturers indicated their number-one challenge at the front end of the
innovation process is that “ideas are not broadly visible and therefore can‟t be
reused by others.”6 In many cases, this problem is rooted in functional and
geographical silos that impede communication and interaction related to ideation
activity. Such barriers can also hinder idea development. Some of the best ideas
come about when people find ways to break through these artificially imposed
boundaries and collaborate with others.
2. Ideas do not transition to concept development and execution, and end
up in a black hole.
In the same survey noted above, the number-two challenge at the front end of the
innovation process was that “good ideas „get stuck‟ and don‟t move forward into
development.” This issue was cited by 51 percent of respondents.7 It‟s another
way of saying that ideas are often lost in the potential black hole between idea
generation and the pipeline to execution. When employees see this happening,
they quickly lose interest in contributing to the ideation process.
3. Inconsistent processes for managing ideas cause inconsistent
prioritization.
Most companies do not have consistent methods for facilitating idea generation. In
many instances, each region, brand, or business unit does it differently. And even
within those organizational groups themselves, it is not uncommon to find a lack
of process consistency. Sometimes methodologies change from year to year. The
overall result is disorganization and chaos, and process dynamics that frequently
resemble those of the old idea suggestion box—an idea comes in, someone
decides if it has merit, and it either dies or disappears into the ether.
4. There’s no way to identify connections between ideas, or between
people.
Another common hindrance to effective idea development is a lack of support for
linking people to other ideas, people, and knowledge sources that may be relevant
to the idea they are bringing forward. To create higher-value ideas and concepts,
the submitters should be made aware of related ideas and expertise that already
exist and that might be leveraged. For many organizations, there is no systematic
way for such linkages to be made. Individual innovators toil in isolation, not
knowing if a colleague is developing a synergistic concept in some other part of
the business.
5. Ideas are unrelated to business strategy.
Too often, the ideas being generated are out of step with the strategic direction
and priorities of the organization. This issue is prevalent among companies that
simply launch idea generation programs and leave it up to the employees to figure
out what kinds of ideas are needed.
Ideas are often lost in the
potential black hole between
idea generation and the
pipeline to execution,
resulting in a loss of
motivation by employees to
contribute to the ideation
process.
Some of the best ideas come
about when people find
ways to break through the
artificially imposed
boundaries of functional and
geographical silos and
collaborate with others.
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Turning Great Ideas into Great Products Page 7
Five Principles of Effective Idea and Concept
Development Despite the significant challenges at the front end of the innovation process, most
consumer goods firms can make this critical phase a predictable, consistent and highly
productive aspect of their innovation efforts. We have identified the following proven,
best-practice principles which, when followed, will improve both the quantity and quality
of ideas entering the front end of your process.
1. Drive Ideation with Strategy Even when companies understand the importance of the front end and invest in systems
to address those requirements, potentially great ideas can be squandered. That is
because, too often, idea portfolios stand alone. They, and the systems governing them,
are “islands” in the organization, disconnected from both innovation strategies and
execution processes.
Simply stated, idea generation, selection and development should be directly linked to
defined strategic priorities and direction. Driving ideation with strategy helps to ensure
that resources are focused on the right kinds of ideas, those that relate to areas that the
company has identified as being the most commercially promising. Unless idea generation
and development are aligned with innovation and product strategy, the idea portfolio can
become filled with low-value, non-strategic ideas.
Tools such as idea „“challenges”, when linked to strategic innovation plans, increase the
probability that incoming ideas will be a good fit with identified market opportunities,
product and technology plans, and corporate growth strategies. For example, if the
company has identified new consumer segments of the market where you want to drive
growth, idea challenges can be launched that target specific consumer needs within that
segment. These challenges can prompt people from anywhere in the organization—from
the R&D lab to the shop floor—to come up with ideas that will address those needs.
Driving ideation with
strategy helps to ensure that
resources are focused on
ideas that are a good fit with
identified market
opportunities, product and
technology plans, and
corporate growth strategies.
Figure 3: The Business Value of Strategy as the Driver for Ideation. Top innovators apply
exceptional rigor to winnowing incoming ideas and making sure that resources are focused on those
new product opportunities that have the strongest alignment with innovation strategies and the greatest
commercial potential. This approach results in more product successes, significantly lower expenditures
on product failures (in some cases up to 57 percent less), and more revenue from new products.
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2. Connect Innovators to Other Ideas and to One Another The best ideation systems provide support for connecting similar ideas to aid
discovery, synergy, symbiosis and further development. A pair of ideas may be of low
value on their own, but when combined they may have great potential.
Connecting idea submitters to individuals who have made related submissions or to
relevant subject matter experts can also contribute to the development of higher-value
ideas. Often, people focused on developing ideas for a particular brand, region or
platform will have ideas or expertise that are widely relevant to others. For example,
consider brand teams that may be working on very different product offerings but that
are targeting the same consumer segments. The consumer insights that make a brand
extension a winner in one area may be directly relevant for brand extensions in other
areas, multiplying the value of that insight.
Enabling ideation process participants to more easily make connections across brands,
regions or consumer segments facilitates serendipity and often increases the potential
worth of ideas as they pass through the front end of the innovation funnel.
Increasingly, enterprise innovation systems such as Sopheon‟s Accolade® Idea Lab™
solution can foster this connection by automatically notifying idea submitters and other
stakeholders of relevant ideation activity, thereby reducing the effort required to share
new ideas.
3. Create Communities that Encourage Ideation High-value ideas and concepts don‟t happen on their own, they are developed.
Effective development requires a climate that nurtures creativity and helps produce a
culture of innovation. Reward and recognition programs can play a role here.
However, it is most important that an organization‟s actions reflect an understanding
that good ideas do not emerge from rigid structures such as gated processes, but
rather through inputs among peers, teams, and internal and external communities-of-
interest.
Innovation excellence requires an infrastructure for identifying and supporting
development of the most commercially promising ideas. Many top innovators have
realized great benefit from creating communities to support collaboration and by
implementing tools that automatically increase the visibility of ideas of high interest to
community members.
For example, communities-of-practice might be organized around target consumer
segments or consumer trends in which the organization wants to encourage discussion
and knowledge-sharing (e.g., “restaurant-quality dining experiences in the home”).
Increasingly, technology support from innovation management systems is being used to
facilitate global participation in these communities. The dynamics of these systems
allow anyone in a community to build on new ideas via collaborative discussion, and
enable idea submitters to improve and develop their ideas based on community
feedback. Ongoing communities-of-practice are excellent forums for answering
questions, solving problems and sharing knowledge.
Enabling innovators to easily
make connections across
brands, regions or consumer
segments facilitates
serendipity and often
increases the potential value
of ideas as they pass
through the front end of the
innovation funnel.
Effective development of
ideas and concepts requires
a climate that nurtures
creativity and helps produce
a culture of innovation.
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Turning Great Ideas into Great Products Page 9
4. Design Idea Flows for Consistency and Collaboration As previously noted, good ideas do not emerge from rigid, gated or phase-based
structures but rather through interaction and discussion. There must also be
consistent but flexible workflows that focus on building and improving ideas. Because
most new ideas are relatively raw, they must be enhanced and nurtured before they
are of good quality. It is not uncommon for an idea to take on an entirely new form as
it passes through the innovation funnel.
Too often, companies fall into the trap of simply collecting ideas using a “suggestion
box” mentality. This means there is essentially no front-end process at all, just a means
of submission. What is worse, no consideration is given to the collaborative process
that must occur in order to truly develop a great idea.
A best-practice approach to front-end processes ensures that what drives ideation at
the outset is a strategy and/or a consumer insight. Then, consistent steps are laid out
to help contributors understand how they can submit ideas to help address that
consumer need. Additionally, explicit provision must be built into that process for
encouraging and capturing community feedback and discussion on an idea before it
proceeds into a business review.
5. Enable Seamless Connections to Concept Development,
Screening and Execution In order to operate effectively, ideation must be tightly integrated with other critical
front-end business processes. In consumer goods firms, this means that the ideation,
concept development and screening, and commercialization processes must be closely
knit. An effective stand-alone ideation process is not enough—ideas must be able to
flow easily into concept development and execution, and lessons learned during those
downstream processes must be able to come back upstream into the idea
development process.
The connection between idea and concept development is an area where many
companies fall short. One reason is that ideation systems are often not designed to
support both processes. During idea development, process capabilities should
emphasize enablement of divergent thinking, wide-open discussion, creativity and
brainstorming. However, in concept development, process capabilities should be
focused on support for convergent thinking, rigorous evaluation, and tough decisions.
Additionally, concept development typically involves a screening process in which third
-party research organizations such as Nielsen or IRI are engaged to evaluate the
concept against formal benchmarks.
In order to support effective innovation, front-end systems must encompass ideation,
concept development and screening, and then provide a smooth transition into
innovation execution. Important historical information should accompany each idea as
it proceeds through the cycle. This ensures that critical information is retained from
stage to stage and—more importantly—provides the context that is required for
others to learn why a concept was successful or not.
Consistent but flexible
workflows are required
for building on and
improving ideas.
In consumer goods firms,
the ideation, concept
development and
screening, and
commercialization
processes must be
closely knit.
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Page 10 Turning Great Ideas into Great Products
How Sopheon Can Help
For over ten years, Sopheon has provided offerings to consumer goods firms that are
looking to improve their innovation results. Our flagship innovation management
solution, Accolade, provides robust, best-practice-based capabilities that enable
companies to increase the effectiveness of their gated processes (such as Stage-Gate®),
improve their portfolio decision-making, and have greater success with their
innovation growth strategies. In recognition of our market leadership, for two years in
a row Consumer Goods Technology (CGT) readers have voted Sopheon one of the
top ten providers of new product development and introduction solutions to
consumer goods manufacturers.
Another reason for this recognition is Sopheon‟s breadth of experience in helping
consumer goods manufacturers improve the front end of their innovation processes.
To accelerate the value that consumer firms can achieve in the front end of innovation,
Sopheon has partnered with world-leading consulting firm Kalypso to introduce FEI
Optimizer, a joint offering that enables consumer goods companies to transform the
front end of the process. The offering brings best-in-class software from Sopheon—via
the Accolade Idea Lab platform—together with expert services from Kalypso, an
acknowledged thought leader in consumer goods innovation. The combination enables
consumer goods firms to dramatically improve ideation and concept-development
processes. The result: bigger and better ideas and concepts that generate improved
business results.
We recognize that organizations vary greatly in the maturity and sophistication of their
front end of innovation practices. Regardless of where your organization stands, we
can demonstrate how the FEI Optimizer solution can provide your organization with a
comprehensive process for successful idea generation and development, all within a
framework that is uniquely suited to your business. It enables global teams to gather,
In recognition of our market
leadership, for two years in a
row Consumer Goods
Technology (CGT) readers
have voted Sopheon one of
the top ten providers of new
product development and
introduction solutions to
consumer goods
manufacturers.
Figure 4: Comparing Idea Development with Concept Development and Gated Execution.
The transition from phase to phase requires a fundamental shift in orientation. Unless they support all
modes of activity, innovation systems can become “black holes” for submitted ideas.
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Turning Great Ideas into Great Products Page 11
exchange and develop ideas, and collaborate on building them into transformational
innovations. Among other benefits, the solution will allow you to:
Increase the number of high-value ideas and concepts in your pipeline; Align ideation efforts with market, technology, and corporate growth
strategies; Convert small ideas into high-impact, commercially-promising concepts; Automatically connect submitters to other knowledge sources to better
develop ideas; Apply consistent, sustainable methods for generating, organizing and
evaluating ideas and concepts; Enable cultures and communities to participate in the innovation process; Enable a workflow of ideas and concepts in a way that meets the unique
requirements of the front end of innovation; and Seamlessly advance your best ideas into concept development, testing,
and on to commercialization.
Furthermore, because this solution is based upon on our Accolade Idea Lab platform,
it is seamlessly connected to the rest of our Accolade suite of innovation management
solutions, including our offerings for gated process management, portfolio
management, and innovation planning.
We encourage you to contact us for further discussion on how we can assist you in
improving the business results from your innovation process.
We can offer practical
assistance with
improving ideation and
concept development
processes. Contact us on
learn more.
mailto:[email protected]
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Page 12 Turning Great Ideas into Great Products
Related Reading in the Sopheon Resource Center
The Prepared Mind: Best Practices for Selecting and Managing Winning New Product Ideas
Author: Frank van Ruyssevelt, Business Consultant, Sopheon
Guided Ideation: A Management Approach to Creativity-Based Performance
Author: Anders Hemre, founder of Interknowledge Technologies and the former chief knowledge officer at
Ericsson Canada
Overcoming Barriers to Sustainable Growth through Innovation in Consumer Goods Markets, Part 1:
Successfully Executing Gated Processes
Authors: Ed Herzog, Vice President Consumer Goods Market Development Sopheon; Bryan Seyfarth,
Director of Product Strategy, Sopheon
Reference Notes 1 CGT Magazine (2011) “New Product Development: Product Launches Hindered by Major Challenges”,
September 2011. 2 CGT Magazine (2011) above. 3 ASCHE, M. (2012) “Five Ways to Drive True Innovation and Increase Sales”, Nielsenwire. 4 GIROTRA, K., TERWIESCH, C., and ULRICH, K. (2009). Idea Generation and the Quality of the Best Idea.
MANAGEMENT SCIENCE Vol. 56, No. 4, April 2010, pp. 591-605. 5 McKinsey Global Survey 2010, McKinsey & Company. 6 CGT Magazine (2011) above. 7 CGT Magazine (2011) above.
http://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/ThePreparedMindIdeaWP.aspxhttp://www.sopheon.com/RESOURCECENTER/ThirdPartyResearchUniversityStudies/HemreGuidedIdeationwhitepaper.aspxhttp://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/SuccessfullyExecutingGatedProcforCPGWP.aspxhttp://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/SuccessfullyExecutingGatedProcforCPGWP.aspxhttp://blog.nielsen.com/nielsenwire/consumer/five-ways-to-drive-true-innovation-and-increase-sales/
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Fax: +1 952-851-7599 www.sopheon.com
About the Authors
Bryan Seyfarth, Ph.D., is director of product strategy for Sopheon, and the consumer goods segment leader for
Sopheon‟s Accolade solution suite. Bryan is an acknowledged expert on product development process
optimization for consumer goods manufacturers. His perspectives and analysis have appeared in such publications
as CGT and Retail Leader, and he is a frequent conference presenter. Bryan has advised consumer goods
companies throughout the world on the use of innovation best practices to improve new product output and
financial success. He can be reached at [email protected].
Derald Kopren, business consultant at Sopheon, has more than 20 years of consulting experience. He has played
a key role in the implementation and integration of innovation solutions for major corporations in a range of
industries. Derald can be reached at [email protected]
About Sopheon
Sopheon (LSE:SPE) is an international provider of software and services that help organizations improve the
business impact of product innovation. Sopheon‟s Accolade® solution enables end-to-end innovation
management, including innovation planning, ideation, innovation process execution, in-market product
management and product portfolio management. The software suite‟s Vision Strategist™ component automates
the roadmapping process, helping users to visualize and plan the future of products and technologies. Accolade‟s
Idea Lab™ component assists organizations in generating, selecting and developing winning product ideas.
Accolade Process Manager™ automates the product innovation process and provides strategic decision support
for the management of product portfolios.
More than 40 percent of Sopheon‟s current customers are in the consumer goods sector. Among them are many
of the largest and most innovative companies in the industry, including such well-known brands as Kimberly-
Clark, PepsiCo, Electrolux, Beiersdorf, Philips, Dr. Pepper Snapple Group, Land O‟Lakes and Rich Products.
Sopheon has operating bases in the United States, the United Kingdom and the Netherlands, with distribution,
implementation and support channels worldwide. For more information on Sopheon and its software and service
offerings, please visit www.sopheon.com.
mailto:[email protected]:[email protected]://www.sopheon.com