CHAPTER 5

Escalating Ideas (Making the Most of It)

After going through the triage stage, ideas then enter the escalation stage. Many ideas will enter here, but only a few will continue to the pilot stage. In order to survive the escalation stage, there are several steps. Senior management has to endorse the idea. Then a business case has to be made. This is followed by team selection to dig further into the details of how the proposed ideas will be handled by the organization. The stage ends by identifying business, technical, and financial issues.

image

The idea escalation stage is important because it dramatically reduces the number of innovations that will make it to the pilot stage. It is often a hard step because there are so many good ideas, but it is essential not to spread the organization’s resources too thin.

The input to the idea escalation stage is a number of grouped ideas that have extensive ratings for comparison. The output from the escalation stage is a number of business cases outlining possible options on the ideas selected by a specific member of senior management.

Senior Management

The larger the project, the more departments in an organization are involved. Even in this day and age, when communication technology is better than ever, there are versions of silos in every organization. In order to make interdepartmental efforts as smooth as possible, it is imperative to have the involvement of senior management. Looking at the Venn diagram in Figure 5.1 shows the importance of senior management support in innovation leadership.

Key Ingredients to Successful Innovation Leadership

As shown in the diagram, there are three key ingredients to having successful innovation leadership: strong support from senior management, high number of ideas from employees, and a strong innovation process in place. If any of these is missing, then the full impact of any item present is not realized.

Looking at the Venn diagram below, the ideal position an organization can be in is the area marked 4. This indicates that all three key ingredients are present. The other numbered areas (1, 2, 3) indicate that two of the key ingredients are present. These three areas lead to less than optimum results, as follows.

image

Figure 5.1 Key ingredients to successful innovation leadership

Area 1—Spinning Your Wheels

In this case, there are lots of good ideas, and senior management has shown strong support to move these ideas forward. Without a strong innovation process in place, though, the ideas will never be turned into new products or services.

Area 2—Empty Funnel

Senior management is looking for ideas and there’s a good process to turn them into new products or services. But having no ideas is like having a car engine with no gas. It should be pointed out that staff members never have a lack of ideas. Rather, they are hesitant to bring ideas forward, or the idea collection system is not storing the ideas properly.

Area 3—Wasted Energy

In this scenario, there are lots of good ideas, and there’s a strong process in place to turn them into new products and services. But with no senior management support in place, efforts to transform the ideas into new products and services will go nowhere.

The process is outlined in detail in this book. As long as there are lots of ideas being submitted by employees, there needs to be senior management support to keep the innovation happening.

To be clear, senior management does not have to jump on every great idea it sees. In fact, less is more. If each quarter, one member of senior management were to support one idea, there would be four new products, services, or business processes introduced each year.

What is meant by strong management support?

There are a number of factors. First, there needs to be agreement among different divisions or departments that ideas will be given a fair chance. Once one member of senior management selects an idea that he or she is looking to support, other senior managers need to do what they can to support her. Senior managers need to provide people and technical and financial resources to help nurture an idea.

What often happens in today’s lean work environments is that new ideas are assigned such low priority that the limited amount of people and resources just don’t get around to supporting the new idea. In an organization with a strong culture of innovation, new ideas are nurtured at the same priority as ongoing business.

Business Case

In order for senior management to decide on the best idea to move forward with, one of the members of senior management should narrow the list down to three to five of the best ideas. How the best are chosen may be a result of the filtering scores, as outlined in Section 4.3, or it may be a result of personal preference. For example, if the senior manager doing the selection is familiar with certain features or services, he or she might gravitate toward those areas.

When the best three to five ideas are chosen, a business case should be written for each. In most organizations, there is a standard template for a business case document. If there is a template within your organization, follow it. If not, the business case should address the following areas: strategic context, business need, options, costs, benefits, and recommendations. The table of contents should resemble the following:

1. Executive Summary

2. Strategic Context and Business Need

3. Options Under Consideration

4. Costs

5. Benefits

6. Recommendations

Executive Summary

The executive summary is a few paragraphs explaining briefly what the rest of the document contains. The recommendation is needed at the end of the summary and should be boldfaced for maximum impact.

Strategic Context

The strategic context should outline the current situation in the organization and the strategy of the organization moving forward. This section should then outline how the new product, service, or process will enhance the current strategy.

Business Need

The business need will outline how the proposed idea will address some aspect of the business. For example, will costs be reduced by a new business process? Or will new revenue streams be added to address shareholder concerns? Or are new services being added to increase shareholder value? Perhaps it’s a combination of many needs. This is often an area where the senior manager can be of most help, since he or she is often in discussions with other senior managers about business strategy and business need.

Options

When innovation ideas are submitted by employees, they may have a lot of information or just a little. The less information in the idea, the more open to interpretation it becomes. When a business case is written about the idea, there are usually several options to move forward with the idea, and each option will have its strengths and weaknesses. The top two or three options should be explored in the business case to give more meat to the idea and to allow the selection committee different options for moving forward with an idea. The options could be split by product features or marketing campaigns or anything else relevant to the idea being considered.

In terms of options split by product features, consider, as an example, the suggestion that your organization should develop a home environment control product like Amazon’s Alexa or Google Home. Option one could be a similar product that offers much of the same features as are currently available. Option two could be a superior product that has improved features, such as better audio recognition and a faster response time. Option three could be a breakthrough product that offered features currently not available on either of the competitors.

Similarly, the options could be broken down by market segments. Option one could be developing a similar product aimed specifically at families with young children. Option two could be the development of a product aimed at seniors living in their own homes, while option three might be the development of a product aimed at home-office workers. In these cases, the product could be tailored to the specific market segment.

Regardless of how the options are selected, each option at this point would have to include many details in the business case at this stage of the innovation process.

Technology Push versus Market Pull

Having consulted for many technology companies and for many technology departments in nontechnology-driven companies, I have seen firsthand and several times over the difference between technology push and market pull.

With technology evolving at a rapid pace, there are many creative individuals that have thought about a new and exciting way to use the technology. Often, they get so excited about the technology, they start believing everyone will want to buy their idea because the technology is so cool. They develop new products and services, and try to push them onto the market just by virtue of how cool the technology is, or how ingenious the solution is. This is what is often referred to as “Technology Push.” That is, the inventor/vendor of the product is pushing the technology on the market without the market asking for it.

Usually when technology push is involved, the end game is to find a market for the technology. The inventor/vendor tries different strategies and tactics until there is traction in one or more market segments.

Market pull, on the other hand, is trying to create products and services that meet market demand. A market need is identified, and then technology is used to try to create a product that meets the need.

There are many instances of both technology push and market pull succeeding. Some of the greatest innovations have arisen from creating a technology the market didn’t know it needed. A telephone was not demanded by the public, but Alexander Graham Bell’s technology created market need for real-time communication over great distances.

In terms of market pull succeeding, there are several examples where technology exists, but people want a better solution. Google’s search engine was not the first search engine, but it came at a time when people were getting used to the Internet and were looking for a better way to find what they were looking for. There was a market pull for a better search engine, and Google provided a great response.

When considering options in your business case, it is imperative to have a firm hold on both the technical requirements and the market need. If the ideas being considered have arisen from a hackathon or similar prototyping exercise, then the technology may be easier to document since a prototype already exists.

On the other hand, there are business types that have a great understanding of market need but are unaware of what technology exists to address it. Getting business experts and technology experts together will allow the optimal success of a business case for organic innovation. The tricky part is getting them to speak the same language.

Each option in the business case should have its technology and business requirements well explained. This will aid in the costing of each option, as well as helping to monetize the benefits. Senior management loves nothing better than a great Return on Investment (ROI), and to get that requires monetary values of both costs and benefits.

Costs

The costs in the business case should be as complete as possible for each option. They should include:

Product development costs

image Human resources needed

Business analysts

Hardware engineers

Software engineers

Project managers

Finance, general, and administrative staff

Test personnel

image Technology resources needed

Software

Hardware

Materials

Building space

Equipment

Marketing Costs

image Promotion costs

image Distribution costs

image Pricing Strategy

To determine a somewhat accurate assessment of the cost, estimates should be collected from various departments, depending on the innovation under consideration. The items listed above—people, technology, and marketing—should all be considered. The people are needed in various capacities. They may be needed to design the new product, or test the new product, or manufacture the new product. Similarly, there will be people to manage the projects and to manage the money being spent.

There may also be a little amount of technology needed or a lot of technology needed. If the innovation being considered is far outside the current product range, then there may be a number of research items needed just to create a prototype. If the innovation is incremental, then there may be lots of materials available in the lab.

Marketing costs also have to be figured into the equation. To determine this, a marketing plan has to be thought out. What will be the pricing strategy? Where will the product be promoted? What is the typical buyer profile? How will the product be distributed? What will be the value proposition of the product?

An important footnote to costs is that the costs should be calculated for a full deployment. While making a prototype may be inexpensive, the costs of actually producing the product in a form that customers would buy needs to be factored in. Most of my clients separate the initial development costs from full-scale deployment costs. This is done because the initial development costs are usually fixed, while the full-scale deployment costs will vary over time. For instance, if an organization expects to sell 5,000 units, then the development costs will be calculated, and then the rollout costs will be based on selling 5,000 units. As more units are sold, there is an economy of scale. So the cost per unit goes down as the number of units increases. Meanwhile, the development costs have remained the same. If it is expected that the cost per unit is significantly different, then the cost per unit should be shown for various numbers of units.

Here is an example. I self-published my first book. The first 1,000 books were run for $10,000. Because the printer had the book set up, ready to copy, he offered me a second run of $5,000 for another 1,000 books, or $10,000 for another 5,000 books. This worked out to $5 per book if I ordered 1,000 books, or $2 per book if I ordered 5,000.

Benefits

Cash flow benefits

image Annual revenue increases for new products and services

image Annual cost reduction for new processes

Balance sheet benefits

image Assets increasing

image Liabilities decreasing

Intangible benefits

image Increased reputation

image Increased ability to attract and retain top employees

Recommendations

In the recommendations section, there should be a chart outlining how the options stack up against each other. At the end, there should be a clear recommendation on which option should be chosen and why it should be chosen. This recommendation should be outlined and boldfaced in the Executive Summary section.

Team Selection

Each quarter, one member of senior management should be looking into the filtered ideas (from Chapter 4), and select a few possible ideas to escalate. The decision on which ideas to escalate may be made on area of expertise, area of interest, or the biggest bang for the buck.

The team helping the senior manager to decide which idea(s) would make it to the pilot stage may well depend on the substance of the ideas being considered. A beverage company investigating new bottle possibilities, for example, may require several experts: an expert in plastics, an expert in chemicals, and so on.

Regardless of the ideas being investigated, there always need to be at least one financial expert and one technical expert on the selection team. This insures that both technical and financial matters are given fair consideration.

Often senior managers are too far removed from the staff level to determine appropriate team members. Many organizations with a strong innovation culture have pools of people that can be selected from, with varying subject matter expertise. A selection committee may be needed to help senior managers investigate their ideas.

If the ideas for innovation are incremental, that is, an extension of current products and services, then it is much easier to select a team than if the ideas for innovation are explosive, that is, far outside current product and service lines.

At the beginning of Chapter 4, there is mention of a video on demand service that arose from an innovation brainstorming session at a company I worked at early in my career. When the service was being considered, there was no one in the company that had experience in video technology or the sale of video products. Selecting a team to investigate came down to choosing technical and financial experts with an interest in new products and the time to devote to the project. A member of the sales and marketing team was also brought in to investigate where possible product demand lay and to determine possible promotion and pricing schemes.

Not all members of the team need to devote their entire workday to the investigation of the new product, service, or innovation. Often, the organization’s experts are the most in demand, and their time is the most precious.

In order to properly manage the selection of the team creating the business cases, there should be a project manager assigned to aid the team in defining and meeting milestones. This will help the team meet deadlines, and provide a single point of contact for the senior manager who has adopted the various ideas for investigation.

The end goal of the team is to create a business case for one or many ideas the senior manager has selected for investigation. Hence, the team should be comprised, at a minimum, of members that can contribute to various areas of the business case.

Early in Chapter 1, there is mention of three typical sections of any organization:

  i. Sales and Marketing

 ii. Operations

iii. Finance, General, and Administration

There should be at least one member from each of these areas. The sales and marketing team member can contribute to customer demand, pricing, distribution channels, and promotion techniques. The operations member can contribute to product/service development, manufacturing, and customer service. The finance, general, and administration member can contribute to budget, HR, and procurement issues.

Other help may be added as needed. For instance, there could be one sales member and one marketing member. Similarly, there could be a member each from product development and manufacturing.

The project manager should gather the team as necessary, once selected, to ensure a common goal is being targeted. Often, the project manager role is covered by a manager of one of the team members.

As with any other team, the success of this team will depend on the contributions of each team member. Younger team members cannot be dismissed by senior team members, and softer-talking team members cannot be ignored by powerfully speaking team members.

As a project leader early in my career, I was selected the leader of an innovation team that was investigating new processes for software development. There were four of us on the team, yet one of the members never contributed. He was given many opportunities to bring his ideas forward, but he just kept saying that he was in agreement with what the rest of us were saying. The other team members said that his lack of contribution was wasting time, and we should remove him. So, as team leader, I replaced him with a more active speaker, and the team moved forward quicker.

Sales and Marketing Considerations

Sales and marketing is an important factor in the success of any new product. In technology companies, there is a common misconception that great technology sells itself. So it is important to have strong representation from sales and marketing when evaluating new ideas.

The sales considerations include how the new product and service will benefit the client. There needs to be a sales process that will turn prospects into clients. The sales force needs to know what the marketing department has been promoting.

The marketing considerations include the traditional four Ps: price, promotion, product, and placement. How the new product or service will be priced is not always easy when the new product or service is a game-changer or explosive innovation. Finding comparable products is always possible, but it may take some time. Promotion and placement need to be considered. How the potential customers will hear about the new product and how they will receive the new product are of vital importance.

Financial Considerations

Financial components of the new products or services need to be considered. How will payment be collected? When will payments be made? Is funding available or will funds have to be borrowed?

For start-ups and scale-ups, there are more considerations for financing, since it is probably harder to come by. Financing innovation is always a risk, and it’s necessary for business leaders to trade off the risk versus the reward.

In 2010, I interviewed Isadore Sharp, the founder of the Four Seasons hotel chain, for a Fast Company magazine blog. At the time, financing was hard to come by due to the recent collapse of the housing market. While it was hard, it was not impossible. I asked Mr. Sharp if financing of luxury hotels during that recession would be hard to come by, and he responded:

For sure, it would be tough. Until the financial
community gets back into a mode where it can support industry, it will be tough for anyone starting out. A year from today though, there will be a “new normal.” There are always people looking to invest, and always people looking for new ideas. I don’t think innovation will go away. We’re currently in a hiatus.

Mr. Sharp was correct. The financing community did come back and investment in innovation has skyrocketed over the last few years.

Technical Considerations

Technical considerations include the technology being used for the product, as well as the manufacturing and operations components of the organization. How will the product be developed? How much time should be set aside for the product development life cycle? If it’s a new service, how will the service be developed and delivered?

In terms of the operations component, how will manufacturing, if needed, be introduced to the organization? How will customer service be handled? How will complaints be resolved?

There are often company standards and operating procedures in place to handle new product introduction. Regardless of being present or not, these considerations need to be taken into account for each new product or service being considered.

Summary

Senior Management

Why it’s necessary to involve senior management

Ingredients of a successful innovation campaign

Business Case

Putting together options

Determining costs, benefits, and ROI of each option

Team Selection

Bringing together the right people

Who’s who in the zoo

Technical Issues

Determining technical changes

Preparing for challenges

Mitigating risk

Financial Issues

Costs of materials

Costs of resources

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
18.222.168.192