CHAPTER TWELVE

DEVELOPING AND IMPLEMENTING MARKET-FOCUSED INNOVATIONS

AS HE STOOD ON THE surface of the Moon after taking his “one small step,” Neil Armstrong must have looked at the Earth and thought about the distance in time and space from the place where he had learned he had been accepted to be an astronaut. His training had been long, arduous, and not without risk. That risk had been reduced somewhat by a series of graduated steps in space exploration that had begun with the first suborbital flight and culminated in this first manned space flight to the Moon. And the actual flights were only a small part of the total effort that had been poured into the space program since President John F. Kennedy had issued the challenge in 1961. Here it was, eight years later, and the leadership in the Soviet Union and the Doubting Thomases at home had their answer. The might of the Soviet machine had been bettered, and the United States at last had clear and unambiguous leadership in space for the first time.

Neil Armstrong was one of a handful of visible figures among the supporting cast of hundreds of thousands of people who had all played their part in the most spectacular innovation in the history of humanity: the safe journey of people to the Moon and back. Feats in space still excite us, but nothing grabbed the collective imagination of the world like the first manned lunar landing in 1969. And this was certainly a market-focused innovation, aimed at several markets at home and abroad.

Although few innovations take as long to be realized as the first moon landing, the successful launch of any innovation starts a long time before a product reaches the market for which it is intended. In this chapter, we follow the path of development from idea to physical movement of a product or service to a customer. On the way, we look at some of the issues surrounding development at various stages of the process, always intent on ensuring we give the market what it wants and needs, and what we have promised.

These two clusters of activities in the innovation process—creating/developing and implementing/commercializing—require the greatest amount of time, resources, and management of all four activity clusters in the Innovation Management Model. The risks of omission or commission are also greatest here, so good management of the process is important. Attention to management of the projects—in essence, System I activities—and management of project portfolios—System III activities—is essential if System IV goals are to be met.

The basic lessons apply to market-pull or technology-push innovations, and to product, process, managerial, and/or organizational technologies. And they apply to commercial or noncommercial innovations as well. The race for the moon was not a commercial innovation, even though it was market-focused. Instead, it was designed to energize a nation and a scientific and engineering community stunned by the achievements of the Soviet space program. And it was designed to show the rest of the world that the United States was capable of responding to any challenge quickly, creatively, and effectively.

MARKET-FOCUSED INNOVATIONS

MARKET-FOCUSED INNOVATIONS aim to give customers in the target market greater value than the customers currently realize, at prices customers are prepared to pay. If customers find no value in the innovation or its effects, the innovation will fail. And if the entrepreneurial company cannot realize a fair return for the investment, the innovation will fail. Engineers at Bombardier were ecstatic when they were able to redesign the Global Express corporate jet to provide 11 cubic feet more cabin space—a real and expensive engineering feat. However, when the engineers were asked how much customers might be prepared to pay for the innovation, they were unable to answer. To the engineers, it had been strictly an engineering challenge, and they had given no thought to the economic consequences. As the marketers knew, the answer to the question of how much customers would be willing to pay was “nothing at all.” An engineering success was a stillborn innovation.

And innovations need not be embedded in the product or service that the buying public embraces. The buying public may not even be aware of the innovation. For example, thin-strip casting of steel, developed by Nucor, is a process innovation. The just-in-time (JIT) philosophy at the heart of the Toyota Production System is a managerial innovation. “Efficient Consumer Response,” developed in part by Procter & Gamble, is an organizational innovation involving all players in the value chain. Changes in the way in which dentists and family doctors organize their practices and interact with their patients are organizational innovations. The paying customer need not be aware of these innovations, yet each of these innovations markedly increased the value to the customer of the actual product purchased or the service sought. In all the cases recounted here, the innovations reduced the price paid by the customer and often improved the product in some observable and appreciated way.

FROM IDEA TO LAUNCH

AS FIGURE 12-1 indicates, the process of launching a market-focused innovation moves through the stages of visualizing the innovation, developing the design envelope, designing the innovation, producing the innovation, and launching the innovation. Not all innovations are launched into a consumer market. Process innovations, for instance, are launched internally, and organizational innovations might only be launched into some members of the value chain.

FIGURE 12-1.THE INNOVATION LAUNCH SEQUENCE.

In mapping innovations in various industries by innovation category and year, the Chicago-based Doblin Group uses ten innovation categories. These categories can be placed in one of two groups:

CUSTOMER-TRANSPARENT	CUSTOMER-OBVIOUS
•Business models	•Product performance
•Networking	•Product systems
•Enabling processes	•Service
•Core processes	•Channel
	•Brand
	•Customer experience

The ultimate consumer using the product or service is likely to be aware only of the customer-obvious categories, such things as how the product performs and the service is provided. She is usually not aware of the customer-transparent categories, such things as the processes the company uses.

DEVELOPMENT PROJECTS ARE PROJECTS

EVERY INNOVATION THAT passes from concept to market reality and beyond is a project and should be managed as such. We don’t want to dwell on the technical aspects of project management (although our experience suggests that training everybody who will be a project manager in project management practices is very valuable). What is important is to think about the organizational implications of projects.

THE PROJECT PROPOSAL

Time spent in preparing the project proposal is seldom if ever wasted. The more exhaustive the proposal (sometimes called the design brief), the better positioned the senior executive team will be to review the proposal and make a decision. This doesn’t mean that every i can be dotted and every t crossed. In fact, at the outset of many commissioned architectural and engineering design projects, neither the flow of the development process nor its outcome can be closely defined. The onus is still on those preparing the proposal to be as detailed as possible, though, even if the detail is only for the first few steps of the development process.

Project timetables and financial projections are important. So, too, are the social implications of the development process and the proposed development system. This involves discussion of how other parties (customers, suppliers, special interest groups) will be involved in the process. Monsanto’s development strategy for genetically modified food required the company to move very cautiously. The plan was to encourage regulators from the U.S. Food and Drug Administration and the Department of Agriculture to impose conditions on testing and approval of genetically modified foods, and to work with environmental groups, farmers, and food processors to relieve anxiety about such foods and their effect on humans in the short and longer term. This strategy worked well for several years. Unfortunately, a change in leadership at Monsanto led to a strategy of confrontation rather than one of cooperation. As a result, opposition solidified against Monsanto and set back public acceptance of genetically modified foods at least ten years.

PROJECT ROLLOUT

Few innovating organizations have only one project in progress. Projects therefore need to be managed by the project team, but project timetables must be coordinated with other projects competing for resources. Most organizations therefore need to appoint a senior manager to be in overall supervision of the project portfolio, and they may need other managers and specialists to coordinate the allocation of shared resources across the project portfolio. Projects will therefore be part of System I, with project portfolio managers operating at System III and coordinators of shared resources operating at System II.

It is critically important that the allocation of both dedicated and shared resources to a project be made as early and as logically as possible. This requires the project team to develop timetables and resource needs for each project element as tightly as possible. Given high technical uncertainty, this won’t be very tight. However, all projects are designed from the “outside in”; that is, the large elements are defined according to customer priority, and successively smaller elements can then be worked on. Under these circumstances, project resources can be allocated only when needed, as the project focuses on an increasing number of smaller components. Incidentally, this approach to project conduct requires increasing amounts of resources, principally people, but also tends to reduce considerably the total project completion time.

Project managers need to keep in mind at all times the primacy of the customer. Customers should therefore be involved with the project as much and as frequently as appropriate. It is never appropriate to exclude customers from the project completely. After all, we can never be absolutely sure that we have precisely captured the customers’ needs, expectations, and priorities. Experience with the product or a prototype may change a customer’s requirements, and over the duration of a project, customers’ needs may change anyway. And the more likely these changes are to occur, the more frequently should customers be involved in the development project. In the extreme, this means the actual presence of customers on the development team. More likely, it means including customers in determining the detailed product concept, then in looking at and testing prototypes.

GETTING IDEAS FROM THE MARKET

IT IS POSSIBLE to use the marketplace to help define the innovation, but only if the innovation is to be product-based. As 3M has discovered, drawing upon what have been called “lead users”—customers themselves working at the leading edge of technologies, and often innovating in the product area themselves—can dramatically improve the effectiveness of a new product launch.¹ 3M’s approach has four phases:

1.Laying the foundation for the innovation by identifying the target market segment

2.Determining the trends in the target market by asking experts in various technologies

3.Identifying the lead users in the target market by networking with market members and, in the process, developing product ideas from discussions with the lead users

4.Developing the breakthroughs by working with lead users, which may involve hosting one or a series of workshops with groups of lead users to determine what breakthroughs are required, and the potential market size for each breakthrough

3M’s approach is therefore very focused. It is focused, first, on products used by customers; second, in an attractive market segment; third, by expressed customer need; and fourth, by potential return to 3M. Companies of any size can use this approach but must realize that focus and painstaking research are critical to success.

Almost as an aside, it is ironic in a world where many customers have many alternative products available to them that even large companies have only one buyer of the source of tomorrow’s successful products. The board or a subordinate committee vets ideas that bubble up from within the company, and then makes decisions about which ideas will likely win. 3M has been very successful identifying products this way, but the experience of one of Shell’s groups suggests that there is at least one alternative. Shell’s Exploration and Product Group trained people throughout the group to be innovative. Individuals were asked to submit ideas for innovations to a committee, and a small number of those who submitted ideas were asked to take part in computer-based training in innovation. On completing the training, the group brainstormed about the ideas each had brought forward, and then selected a small number of ideas for further development. The group then developed business plans for each innovation, and the plans were implemented.

The most intriguing aspect of this approach is that the role of the senior executives or the board changes from one of allocating financial resources to one of attracting knowledge resources to the process. Now the process is one of allocating knowledge resources to develop a larger innovation portfolio, and not one of apportioning scarce financial resources in a zero-sum game.

DESIGNING THE INNOVATION

UNLIKE INVENTIONS, MOST innovations are extensions or a next generation of an existing product or process. Even with incremental innovations, though, it is best to gain input from those who will purchase, work with, or influence the purchase and use of the innovation. This becomes more imperative when the innovation is more radical, and is most critical when the buy-in has to come from internal groups who are being subject to change which they have had little say in initiating. Krug Furniture installed a new automated cut-off saw in its components plant in Stratford, Canada. To make the change more effective, Krug rearranged the layout of the shop, but without involving the shop workers in the decision. Although the change made sense from an engineering point of view, from a management perspective it was not totally appropriate and was handled in the wrong way. The long-run result was a process change that did not achieve the goals set—and a more militant workforce.

An interesting example of both ineffective and effective process innovation comes from General Motors’ Baltimore assembly plant, where, in the early 1980s, robots were to be introduced on the frame assembly line. The robots were placed in the area where they were to be installed—alongside the workers they were to replace—and remained draped in plastic for several weeks. The morale of the workers whose replacements sat complacently alongside them every day dropped, to nobody’s great surprise.

GM decided to move the robots to another plant—a sign that the Baltimore plant had fallen out of favor. In fact, the plant went to a single-shift operation on the car that was being produced, and then went on temporary furlough when nationwide inventory for the vehicle was considered excessive. During the furlough, a group of workers from the front-end assembly area approached management with a request to change the process of assembling the front-end metal components of the vehicle—in other words, to initiate their own innovation. Plant management agreed to this, and the workers radically changed the layout of the process. When assembly of the car started up again, the change was immediately apparent. Before the innovation there was at least one major assembly disaster per shift in front-end assembly, but after the change there were no major assembly disasters over the first eighteen months of operation. The lesson here? Challenging those in the process to design the innovation often results in better innovations than those designed by managers and engineers—and results always in smoother implementation.

Resistance to process and organizational innovation is legendarily strong in government and not-for-profit organizations, where power and influence are often only applied inside the organization. But for-profit corporations have their share of managers who see everything to lose, and nothing to gain, from jumping onto the innovation bandwagon. Northern Telecom (now Nortel Networks) introduced targets for waste and inventory reduction in the late 1980s. At one plant, managers were shown how to reduce inventory quickly through some simple but effective techniques. There was little enthusiasm for the ideas from the logistics managers, who pointed out that they had already met their inventory reduction targets for 1987, and that doing more would gain them no benefits that year and would make it more difficult to make their 1988 targets (which were already known). In this case, changing behaviors and attitudes would have been relatively simple. By making changes to the management evaluation and compensation scheme, Northern Telecom could have achieved its inventory reductions in a much shorter period, possibly even in the first year of the program.

TEAMS: THE DESIGN CONUNDRUM

IT IS NOW almost axiomatic to involve most players in the supply and distribution chains in the design of any new innovation, particularly a large and/or radical innovation. And it makes a great deal of sense to use the best brains and experience around in order to achieve an effective design for the new innovation, no matter what type and form the innovation takes. We certainly endorse the use of teams and a team-based approach to systems design and operation. However, there are a number of issues that the organizers of the design function and the design process must consider before unleashing the teams.

HOW BIG?

The team managing the overall project must be as small as possible, but it must also contain the mix of skills, understanding, and experience necessary to manage the design process. Experts can be co-opted for short periods, but if some attribute is required reasonably frequently, it should be on the team.

HOW WIDE?

The “width” of the design team—the extent of the value chain represented on the senior design team—depends on the critical nature of upstream and downstream chain members in understanding and designing the critical customer value-adding aspects of the innovation. Magna International, the automotive parts manufacturer, has been chosen by BMW to assemble BMW’s new sports utility vehicle. Magna will be part of the design team, and will play a leading role in the vehicle’s development.

HOW DEEP?

The “depth” of the overall design team depends entirely on the complexity of the innovation and the time available for development. Where time is short, more people will need to be involved with smaller pieces of the design puzzle, and the design team will be several layers deep. This is true also of innovation complexity: The more complex the design, measured in terms of the number of designed components, the deeper the design team. One rule of thumb is to look at an exploded parts list for the potential product and allocate design teams for each of the lowest assemblies, with more design teams at each higher point on the build diagram.

WHAT TRAINING?

Most organizations try to train people to be team players. This, however, is not enough, particularly where a mix of personalities exists. For effective teams, a mix of personalities and perspectives is important, for having a whole group of people of the same personality and communication style leads quickly to groupthink and relatively shallow results. In order for teams to function effectively, therefore, it is important for team members to be able to work with each other.

One step in this direction is to test every team member to determine his or her personality type (using the Myers-Briggs Type Indicator or equivalent) or his or her communication style. Knowing your own style or type is not enough, however. The strength in this process is learning how to work with other styles to ensure more effective communication among the team members. The most appropriate means of learning how to communicate effectively is to work at it through a series of exercises designed to reinforce the lessons. Nissan’s Design Institute in California has used this process to improve the effectiveness of teamwork.

In doing this, of course, we are not trying to create a placid environment. Creativity requires challenge and conflict; there is a fine line to be walked between purposive and productive personality tension (with personality types grating on each other), and destructive tension. The personality or communications-style testing helps to ensure that the tension helps with creativity. For team leaders, and those entrusted with managing the creative process, finding a team of diverse personalities and integrating them is critical. After all, innovation is unlikely to occur in a team whose members are clones of the leader.

HOW MANY TEAMS?

Many companies seem to think that the best chance for effective innovation comes from having the greatest number of projects as possible going on at once. No matter what size the organization might be, this is not good policy. A study involving twelve companies found that innovation and development projects were each completed more quickly if there were fewer projects.² This was because less strain was placed on critical shared resources. And few teams work truly independently of other teams or other organizational resources.

In fact, judicious investment to relieve pressure on these shared resources is another key to reducing innovation project lead time. In the study, this form of investment reduced disproportionately average time-to-market. Eliminating unnecessary variation in workloads (the duration of each project) at critical points also eliminated distractions and delays, thus freeing up the organizations to focus on the strategically important part of the innovation task: the creative element. The study reported that the average development time was reduced by 30–50 percent when a more process development approach was taken in the innovation projects.

Every manufacturing manager understands the concept of the bottleneck operation—the operation that limits the output of the process. When it is a shared resource that is the bottleneck, queues develop in front of the bottleneck, and all the products in the queue are delayed. Queue length increases, and the completion time of projects becomes less predictable when planned utilization of the resource exceeds approximately 75 percent of its capacity, when the work required to be performed on each task or project is variable, and when the processing capability is itself variable. Innovative companies therefore need to ensure that, as much as possible, the quality of shared knowledge resources is uniform, and the amount of work required of a shared resource by any project at any time is also uniform. This may require one or more projects to divide the work they require of a particular shared resource into two or more uniform “packets.” Although the total elapsed time through the bottleneck will increase for a project whose work requirement is bundled into packets (assuming that the packets are interspersed with work required by other projects), the total time required to perform the work on all projects remains the same. And the time at which a project’s work is completed by the bottleneck resource becomes more predictable.

All projects will be completed more quickly, of course, if the bottleneck resources are not overloaded. Managers responsible for managing the portfolio of development projects need to closely monitor this threshold level of resource utilization and make senior managers aware of impending critical usage levels. And the senior executive team needs to be aware of the impact of approving more development projects in addition to projects currently in development, especially if one or more are given a “rush” priority.

In some organizations, rush priorities may be common. Where this occurs for good strategic reason, it makes sense to load shared resources well below the 75 percent threshold with normal priority projects, to 60 percent, for example. This will allow rush projects to be scheduled into the bottleneck without creating a capacity crisis. It may also be possible to bring in other resources to handle peaks, in much the same way that temporary workers or subcontracting is used in manufacturing.

One means of increasing the processing capacity of bottlenecks is to reduce the setup time—the time required to change from one task to another. For development projects, the setup time can be reduced appreciably by improving the project documentation. As mentioned in Chapter 11, we manage what we measure, and measuring the time it takes to set up for a project will highlight difficulties created by poor documentation—and create pressure to improve this aspect of project administration. And, as we know, the shorter the time required for development and rollout, the less likely it will be that market needs and expectations have moved appreciably from where they were at the beginning of the development process.

INVOLVING EXTERNAL
DEVELOPMENT RESOURCES

IT IS RARE for organizations involved with large development projects to own all the resources they need, or as much of a resource as they require at any time. Under these circumstances—the need for new capabilities or the need for increased capacity—companies have to consider outsourcing or collaboration on a project. The need for external development resources brings with it risks for the project and the company itself. In general, the greater the risks and uncertainties involved with the project, the less able managers are to settle conflicts and coordinate activities. Where these conflicts involve external resources, deciding how to organize the project becomes more critical than usual.

Many organizations are now actively engaged in cross-boundary Internet-based development projects. The question is, when is this appropriate? A recent study suggests the circumstances under which a “virtual” organization may be appropriate, with portions of the project being given over completely to outside groups.³ Two factors help determine the organizational relationship with external resources: (1) whether the project is independent or systemic, and (2) whether the capabilities needed exist or must be developed.

Independent innovations are innovations or developments that do not rely on other projects for technical or resource inputs, nor do other projects rely on the independent project. Systemic projects are interdependent with other projects, requiring the same technology developments to enhance the innovation, for example, or developing capabilities that can be used on other projects. The second factor is the set of capabilities the organization needs to gain access to, in order to complete the project. These capabilities either exist now or need to be developed.

The study on when a virtual organization is appropriate suggests that such an organization should be considered only when the project is autonomous and the capabilities already exist. Also, the greater the degree of uncertainty with either factor, the more appropriate it is to bring the innovation in-house. We will come back to this point in Chapter 14, but note now that the rush to outsource innovation should be slowed to a deliberate dawdle. Otherwise, it might be a panic sprint to the courthouse.

COST: THE FINAL FRONTIER

IF TARGETED CUSTOMER research is done, it indicates what price range the market will accept, and the proposal will have been based around cost and price assumptions. The project team will therefore have to focus constantly on product cost over the life of the product. Probably the most appropriate tool for this task is target costing. The philosophy behind target costing is simple: Costs are designed into a product, process, or service—they are not built in.

The target-costing process starts with understanding the prioritized needs of customers and purchase decision influencers, and also understanding how current offerings satisfy customer needs and expectations. Until we understand all this, we cannot decide what product to make, what it should do, and where it should be positioned in the market space.

Having decided the market positioning, the development team needs then to develop specifications for the product offering. Two sets of specifications need to be established: technical and strategic specifications. The technical specifications should focus on quality and functionality/performance issues, and the strategic specifications should focus on price, production volume, and timing/time line issues.

The technical specifications will generate an idea of what product cost is likely to be. This is not surprising, as the developers will assume a production process and its attendant economics for producing a product with the required specifications. The technical path will, therefore, produce expected costs and expected product performance. The strategic specifications will produce targets for costs, volumes, and timings, based on competitive considerations. The target costs will be influenced by corporate financial requirements, as well as what the market will pay.

It is unlikely that the initial sets of specifications will generate expected and target costs that are identical, or where expected are lower than target. So the project team will need to revisit the technical specifications, working to challenge assumptions about the process and the product until the expected costs are acceptable. If the target costs cannot be met, the product cannot be launched.

One place to start when thinking about how to reduce costs is to look at the major components of the product and assess the relative value of the component to the market performance of the product. Target costs can then be allocated to components. This is admittedly arbitrary, but it does highlight where cost reductions might be targeted in the future. It is also useful as a check during the development process as costs begin to escalate.

The then–Northern Telecom used target costing at the component level when the Harmony telephone was designed. Armed with the knowledge that costs in the telephone had to be reduced by 50 percent from expected, the development team looked for 50 percent reductions in expected costs from each component in the telephone—without compromising any of the quality or functionality specifications. The team was able to achieve the savings. In order to reduce costs in the transmitter assembly, housed in the telephone’s handset, the transmitter team chose a lower-cost microphone than that originally specified, but with greater performance variability among the microphones. To meet specifications, the team had to redesign the transmitter assembly process and include a performance test on each microphone. Including this step, and two more steps as a consequence of the test, increased assembly costs minimally, without changing the transmitter specifications. Without target costing, the challenge would probably not have been made.

BROADENING THE
INNOVATION TARGET AREA

IT IS INEVITABLE that development teams will try to limit their focus, and it is generally appropriate. However, as we know, it is not generally possible to launch an effective innovation without innovations being made in other areas. And even if the innovation could be launched and be successful, often innovations in other areas might improve market success. Innovations that reduce roadblocks, and make it easier and more pleasant for customers to do business with you, improve the chances of success of the innovation. So thinking through considerations around the product are as important as thinking through considerations about the product. This is true whether the customer is a consumer or an organization.

By expanding the innovation target area, we might discover new ways of differentiating ourselves from competitors and new sources of competitive advantage. Doing this constantly may give us a source of sustainable competitive advantage—the ability to rapidly develop successful differentiation strategies.⁴ Ian MacMillan and Rita McGrath suggest a two-part process for the analysis: (1) mapping the customer chain, and (2) analyzing customers’ experiences.

The customer chain is the complete social process of the customers’ involvement with the product, process, or service. The stages of the customer experience chain are as follows:

1.Awareness of the product

2.Finding the product

3.Product
selection

4.Ordering or purchasing the product

5.Product distribution

6.Product delivery

7.Product installation

8.Paying for the product

9.Storing the product

10.Moving the product

11.Actual product uses and usage

12.Customer queries

13.Product returns and exchanges

14.Product repair and service

15.Product disposal

The social process thus begins with awareness of the product and ends with disposing of the product. Each question needs to be addressed in as much detail as is practicable, given constraints on time, resources, and costs. The richer the detail, the better the information.

Internet retailers have begun to focus on some of these service aspects. Internet furniture retailers, for example, have begun to focus on physical delivery of their products, particularly where assembly of the furniture is required. Apologies and damage control do not generally make an irate customer into a repeat purchaser.

Some of the information may come only from observation. This is particularly true in organizations, where managers may not understand the variety of useful purposes to which a product is put. The ability of people to be creative in making life more pleasant and less arduous cannot be overestimated.

The real key is analysis of the customers’ experiences, particularly where it is possible to allocate customers to particular clusters or segments. As with any data, what might be meaningless or misleading at the highest level may be very revealing when segmented. Whether we segment or not, though, the only way we can begin to think about how to change or adapt the services that go with the product is by understanding not only what customers do but why they do what they do with our product, and what else would make it easier for them to deal with us.

EXPERIMENTATION AND PROTOTYPING

MAKING GOOD DECISIONS about experimentation and prototyping can lead to a more successful innovation and get it launched more quickly and at less cost than might otherwise happen.

The greater the uncertainty surrounding the innovation, the more necessary it will be to look at alternatives and to experiment. This should never be haphazard. Experiments should be conducted only on important issues, which means they should address strategic issues—cost, value, and/or timing. Experiments are internally focused. Their results provide information and an understanding of how we should do something. Experiments invariably involve thinking about process options, such as how to integrate new research discoveries into products using current processes, and what new processes to develop to make new products. Prototype development and testing invariably involves thinking about the product, how customers interact with the product, and what features the product ought to have. Prototypes ought to be built early and often, so that we can guarantee building what the customer wants. All of us who have been involved with building a house know that what looks good on paper or as a sketch looks very different during construction or when in use.

There are interactions between experiments and prototypes, of course. Accepted prototypes constrain the process options and often require experiments to be conducted to determine which manufacturing approach is most appropriate. The outcome of an experiment is invariably a new prototype, ready to be assessed for market acceptance and conformance with the cost, value, and timing parameters already established.

Experiments should be conducted in parallel, not sequentially. Time is likely to be a more critical resource than the availability of experimenters and equipment. If you have to, start work on the experiments with skeleton staffs, and start switching resources from less to more attractive approaches as the results come in. Products that launch late but on cost are not as profitable as products that launch on time but over cost. This is particularly true when a competitor gets wind of the product and rushes to follow rapidly.

PREPARING FOR THE PHYSICAL LAUNCH

AFTER ALL THE experimentation and prototyping, after all the market research, focus groups, and observations, after all the processes have been built and all the training carried out, it would be a pity for the product to be a damp squib in a world of firecrackers. So it is incumbent on us to make it impossible for the target customer to do business with us any other way than easily and professionally. If we’ve thought through all the social issues involving customers and our product, we are well on the way. But that isn’t enough.

We have to ensure that we have thought through the logistics issue, particularly for the launch period. Think of the innovation launch in the same way that the planners of D Day thought about the Normandy landings—as a mission that had to succeed, for there was no way of recovering quickly from operational failure. Make sure all the links in the chain understand their roles and are capable of fulfilling them.

Make sure you develop a risk management plan and emergency management plans for likely alternative scenarios. As McDonald’s and Martin-Brower knew before the launch of their pizza in Canada (discussed in Chapter 11), what happens on average never happens at the average restaurant, so plan on average but manage the particular. The flexibility required to do this will be determined by the plan you develop to manage the risks.

It is generally more appropriate to err on the side of too much rather than too little in strategic reserves, particularly of product inventory. Probably the worst unplanned outcome is a wild success that cannot be exploited because inventories have been exhausted and resupply is not possible, at least quickly. Enthusiasm quickly turns to anger, as some toy maker discovers every year. If the shortage is planned, of course, that is a different story.

Remember, too, that failed innovations have one saving grace: They require no further investment. Successful innovations always require further investment, and investment immediately after launch will generally need to be much greater than the income generated from sales. If you cannot reinforce success quickly, the innovation may have a short life. That is the topic of the next chapter.

SUMMARY

•Market-focused innovations should give customers greater value at prices the market will bear. If customers won’t buy, the innovation is a failure. Any major innovation, whether product or not, must have a clear market-based rationale.

•The process of launching a market-focused innovation moves through the stages of visualizing the innovation, developing the design envelope, designing the innovation, producing the innovation, and launching the innovation.

•Development projects are first and foremost projects and should be managed as such.

•The better the proposal or design brief, the better the chances of a successful innovation.

•Using lead users can be a very effective means of identifying new innovation possibilities.

•Obtaining buy-in from those with vested interests is important, even with incremental innovation.

•Organizing for development means organizing teams. Having the appropriate number of teams with the right mix of skills, and the appropriate mandate, is essential.

•External resources will most likely be necessary. Outsourcing should be contemplated only when the skills required are available and the innovation is independent.

•Expanding the innovation target area allows us to discover new ways of differentiating ourselves from our competitors. Increasingly, the target area should be expanded to think about service offerings.

•Experimentation and prototyping are powerful processes for producing appropriate innovations. Early and often are the watchwords.

•Approach launches as though failure would be catastrophic. It is.

NOTES

1. Gary Hamel, “Bringing Silicon Valley Inside,” Harvard Business Review, September–October 1999.

2. Paul S. Adler, Avi Mendelbaum, Vien Nguyen, and Elizabeth Schwerer, “Getting the Most out of Your Product Development Process,” Harvard Business Review, March–April 1996.

3. Henry W. Chesborough and David J. Teece, “When Is Virtual Virtuous?” Harvard Business Review, January–February 1996.

4. Ian C. MacMillan and Rita Gunther McGrath, “Discovering New Points of Differentiation,” Harvard Business Review, July–August 1997.