Innovation process management means introducing a new, innovative product to a market that is ready to buy it at a reasonable but profitable price.
Amazon utilizes innovation process management to great effect. The recent availability of Amazon dash buttons is a perfect example of the company’s innovative processes at work. Dash buttons allow for push-button ordering of common household products, right where those products are shelved. A homeowner could, for example, leave a Tide dash button on the washing machine and press it whenever laundry detergent is running low.
When Amazon dash buttons were first introduced on April Fool’s Day in 2015, they were thought to be a prank, according to Fortune.
By 2017, Amazon was receiving four dash button orders per minute (up from one per minute in 2016). Along with previous Amazon innovations such as the Kindle and Amazon Prime, the dash button seems to be a success.
Aspiring C-suite executives pursuing an online executive MBA degree can learn much from studying recent innovation successes like this one and discover why proper innovation process management is invaluable in today’s economy.
The Innovation Pipeline
Without a well-defined innovation process, an unmotivated inventor or shortsighted decision-maker can hamper the success of new ideas. Alternatively, an employee might suggest an idea and a manager could approve it without thinking through the funding needs and staffing commitments involved.
Making more well-considered choices requires a defined process, and organizations need a “self-regulating, evidence-based innovation pipeline,” according to professor Steve Blank and Col. (ret.) Pete Newell in Harvard Business Review.
“Instead of having a committee vet ideas, [organizations] need a process that operates with speed and urgency, and helps innovators and other stakeholders to curate and prioritize problems, ideas, and technologies,” according to Blank and Newell. “This prioritization process has to start before any new idea reaches engineering. This way, the innovations that do reach engineering will already have substantial evidence — about validated customers’ needs, processes, legal security, and integration issues.”
Blank and Newell go on to list several important steps to instituting this innovation pipeline:
Innovation sourcing: This first step involves a team generating a list of current problems and potential technologies that could solve those problems.
Curation: After the team formulates a few new ideas, the next step involves both internal and external surveys designed to determine whether the problem is widespread and what solutions are likely to appeal to customers or clients. During this stage, some ideas will be scrapped due to unfeasibility while others are designated as candidates for the next step.
Prioritization: After ideas have passed through the curation phase, they need to be categorized according to priority. Blank and Newell suggest using the McKinsey Three Horizons Model to classify ideas before ranking their priority:
• Horizon 1: Does the new idea provide ongoing innovation to the company’s business model and core capabilities?
• Horizon 2: Does the idea extend the company’s business model and core capabilities to a new market or demographic?
• Horizon 3: Can the idea take advantage of disruptive opportunities?
Solution exploration and hypothesis testing: During this phase, team members will not only test their ideas’ feasibility and strength in the market, but they will also review regulations and policies that could affect the project. The goal of this step is ultimately to deliver evidence based on hard data that will hopefully make an executive’s decision-making duties easier.
Incubation: This step is a sort of intermediary phase during which more evidence about the innovation’s application may need to be collected before moving on.
Integration and refactoring: The final phase in the innovation pipeline is integration into an existing department for Horizon 1 and 2 ideas, and into a new division or entity for Horizon 3 ideas. The innovation is then refactored, which essentially involves fixing the inevitable problems that will occur during and after rollout. An example of refactoring new technology could involve software engineers doing a simple coding fix to make a new software solution more stable.
To succeed, the innovation pipeline needs careful management along the way. Companies interested in implementing innovative ideas and following Blank and Newell’s step-by-step innovation process management recommendations need an operational roadmap that can help facilitate the innovation pipeline.
The innovation process company Wellspring provides an example of such a roadmap, which it terms the Stage-Gate Framework. It consists of four elements:
• The project team: This cross-functional team is responsible for walking an innovative idea through each stage of the process.
• The stages: Each stage consists of a set of activities designed to carry an idea efficiently through the innovation pipeline.
• The gates: Between each stage is a decision point where a decision-maker will review deliverables and the project’s progress.
• The gatekeepers: Key stakeholders from various departments and business areas stand at each gate. Approval from the gatekeepers is necessary for a project to move on to the next stage.
The stages in the Stage-Gate Framework include the initial idea; a preliminary investigation; a detailed, continuing investigation; development; testing and validation; and product/market launch.
The gates consist of the initial screen, second screen, business case, post-development review, business review, and post-implementation review.
Incremental Investing
Companies have begun using innovation process management to determine funding and approve new ideas. This step-by-step approach has led many firms, especially in the tech sector, to develop a related practice — incremental investing.
Incremental investing limits the amount of initial funding an innovative idea will receive, saving companies money on projects that aren’t well-developed enough to pass on to the next phase.
“The small initial investments allow an investor to learn if the product idea has potential before they make further investments,” explains innovation consultant Tendayi Viki in Forbes. “This is quite different from making one large investment based on a business plan.
“[Incremental investing] is based on different expectations depending on the innovation team’s progress. ...Such incremental investing provides companies with a chance to invest in testing product ideas before they are taken to scale.”
Well-defined investment practices such as incremental investing key to successful innovation. Executives and top-level decision-makers in different areas of a business need to be aware of the machinery behind the innovation pipeline to keep up with the steadily accelerating pace of innovation in the business world.
Washington State University’s EMBA Degree Program
Online Executive MBA students can master the key elements of innovation process management and understand the value of incremental investing. They prepare for top-level management and C-suite positions where they can harness the full potential of their company’s innovation team.
Washington State University’s Carson College of Business offers an online Executive MBA program that provides students the knowledge, skills, and training to rise to the top of innovative industries as strong, influential business leaders and effective decision-makers.
To support future innovation leaders, Washington State University’s Executive MBA curriculum includes managerial leadership and productivity, organizational design, and management of innovation. Contact Washington State for more information.
Sources:
Two Years After Launching, Amazon Dash Shows Promise – http://fortune.com/2017/04/25/amazon-dash-button-growth/
What Your Innovation Process Should Look Like – https://hbr.org/2017/09/what-your-innovation-process-should-look-like
How to Manage your Innovation Process: The Stage-Gate® Framework – http://www.wellspring.com/blog/how-to-manage-your-innovation-process-the-stage-gate-framework
Innovation Is Management – https://www.forbes.com/sites/tendayiviki/2017/01/08/innovation-is-management/#2e27a6923e65