Innovation Sucks!

Time to Think Differently

Alan Watkins, Simon May

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000326093
• Edition: 1
• Topic: Business
• Subtopic: R&D
• Index: Business

Businesses spend billions on innovation with very little to show for their investment or effort. This book challenges some of the 'ingrained truths' of innovation and suggests a different approach.

Innovation is not the creation of a novel idea. It is the successful commercialisation of that novel idea. Rather than starting with a costly, time-consuming problem assessment that seeks to push potential solutions through an innovation funnel, an 'impeller approach' starts with possible solutions and gets the market to pull the best ones forward so they can fail fast or flourish fast. This approach is made possible by the addition of a 'bee' – a new type of integrative thinker who can harvest the existing knowledge from the 'meadow of experts'. Completely reversing the innovation process means organisations are much better placed to win in the market rather than focusing on finding theoretical solutions or clearing innovation stage gates. In addition, this approach also recognises that the people who shepherd the solution through the ideation and testing stage are not the same people who must then take that solution to market for successful commercialisation.

Given the current innovation failure rate, coupled with the fact that society is beset with multiple wicked problems, it's time to think differently and innovate innovation itself. This book is essential reading for Heads of Innovation and Commercialisation, Directors of Marketing, Heads of New Product Development and New Service Development, Strategy Directors, Chief Technology Officers, Government advisers and policy makers.

Part I
The current approach to innovation

1
Traditional ‘innovation’ & why it fails

In large businesses or organisations, there is usually an in-house innovation team. It usually consists of a dedicated group of people who are charged with coming up with new ideas that could make or save the business money, explore new business models or innovate around the existing products or services. This group may be a collection of individuals scattered across many departments reporting up the line or a dedicated unit reporting to the strategy or marketing director. The innovation group considers various problems or opportunities and tries to come up with novel ideas that could solve those problems or exploit opportunities. There are usually a lot of whiteboards and mountains of multi-coloured Post-Its in these innovation units. In smaller businesses, there may not always be a dedicated in-house innovation team. Smaller organisations more frequently borrow people from several departments to help with specific challenges or bring in innovation expertise from outside the business. The assembled innovation team may therefore include some employees and some consultants. Alternatively, a business, large or small may choose to outsource the innovation entirely to external innovation experts.

The composition of the innovation team may change depending on the business but what rarely changes is the way the group then thinks about and embarks upon innovation.

The innovation funnel and its origins

The way most businesses currently conduct ‘innovation’ is through some iteration of the innovation funnel. When people talk about the process of innovation, they are usually referring to this funnel. Typically, the funnel is a definition of ‘need’. That need can be anything from an answer to a particular problem that aims to increase revenue, increase market share or deliver more value to customers. Without this need or challenge, the funnel wouldn’t be relevant. The imagery of a funnel has been in use for several decades as a visual depiction of the new product development (NPD) process.

Thanks to the effort of the Executive Vice President of Applied Marketing Science, Gerry Katz, we have a better understanding of where the funnel came from.¹ One of the earliest attempts to create a flowchart within the innovation process appeared in Design and Marketing of New Products, a textbook written in 1980 by Glen Urban and John R Hauser.² Most of the real-world examples used as evidence for the efficacy of the flowchart came from the world of Fast-Moving-Consumer-Goods (FMCG). In this market, ideas may be plentiful and usually don’t require any particular insight to imagine – a new biscuit variety, different toothpaste or washing powder with a new fragrance.

There is no problem to solve per se other than increasing revenue through new products. Their success is largely dependent on marketing, product positioning, advertising, etc. Sample products could usually be made alongside existing products with existing materials and resources and were therefore not prohibitively expensive or technically challenging. Small geographic launches could test customer interest relatively inexpensively before major investment. This environment is a world away from the environment we operate in today; even those in the FMCG space usually face stiffer regulation and testing protocols than in the 1980s.

In 1986, Robert Cooper published Winning at New Products.³ In it, the author presented a diagram of the product development process broken down into five stages preceded by a process he called ‘discovery’, which included idea screening. Two years later, Cooper gave his process the name of Stage Gates – another term that has entered the innovation vernacular. Cooper’s approach advocated a formal management review process in which innovation teams were required to come before high-level management committees to present their project so that the management could then make an informed decision about whether to green light the next stage or kill it.

The earliest use of the term ‘innovation funnel’ appeared in Steven C Wheel-wright and Kim B Clark’s 1992 textbook Revolutionizing Product Development.⁴ Their diagram consists of three major stages, which they label ‘Investigations’, ‘Development’ and ‘Shipping Products’ which illustrates that the innovation process business usually follows to identify ideas for assessment, development and getting the successful ideas to market (Figure 1.1).

Figure 1.1 Wheelwright & Clark’s Early Funnel

Adapted from Source: Wheelwright & Clark “Revolutionizing Product Development” (1992)

It’s highly likely that the take up of the name ‘innovation funnel’ is largely down to the subsequent reputation of Kim B Clark. Clark was the dean of Harvard Business School from 1995–2005. Before he passed away in January 2020 innovation authority Clayton Christensen was Kim B Clark Professor at Harvard Business School.

In 1996, consultant Michael McGrath published his book Setting the PACE in Product Development.⁵ Similar to the work of Cooper, McGrath’s process advocated a periodic management review but also included the development of a formal ‘business case’ as a major phase before the project moves onto formal development. A similar diagram was put forward in 2005 by the Massachusetts Institute of Technology’s (MIT’s) Center for Innovation in Product Development (CIPD).⁶ It has many of the characteristics of all of the preceding diagrams. It is a funnel which assumes multiple projects proceeding in parallel. As with all the others, the ‘discovery’ process falls outside the funnel in a stage called ‘Opportunity Identification and Idea Generation’. What’s particularly interesting is that none of the models or theories that have so completely shaped our thinking about innovation offer any advice about how to go about that ideation process. There are, of course, countless books, journal articles and seminar hours dedicated to it but the models themselves say little.

What seems to have happened is the widespread adoption of the term ‘innovation funnel’ along with an amalgamation of the various ‘stage gates’ within that funnel. Tweaks have been made along the way by various high-profile individuals in high-profile institutions, therefore cementing the validity of this approach. And, this approach is almost always the same regardless of the source of the model (see Figure 1.2).

Figure 1.2 The Innovation Funnel

The innovation funnel itself starts at Gate 0 – after idea generation. The idea generation usually comes from traditional R&D, but R&D is not innovation. R&D is the invention, the ideas, the science and experimentation to see what’s possible. An idea or invention that looks promising is therefore pushed out of R&D into the innovation funnel for greater scrutiny.

Gate 0 marks the start of some sort of ‘discovery’ or insight gathering. The innovation team goes off and talks or workshops with various stakeholder groups from suppliers to customers to industry experts – whoever they believe will be able to shed some light on whatever issue they are looking at. Insight gathering might take three months, maybe longer. Once the insights have been gathered, the innovation team comes back together and uses those insights to scope out a potential solution. That will take a few more months. A business case is then created for the most promising ideas, which will help decision makers determine which to take forwards and which to ignore.

Concepts will be developed and their respective business cases are then represented to the decision makers who send the team back to test the viability of the best concepts. That might take another six months, often longer. At this point, at least ten months have lapsed. Money has already been spent, often a substantial amount of money, and yet there is nothing much to show for the effort.

The concepts considered most interesting are then sent off for testing and validation. This may involve the creation of prototyping or system changes. They are then put to the market to get some test feedback. By this time, the process is probably 12 to 15 months down the line. More time, more money with no concrete results and the market has already moved on. Based on the response to the tests, the business might then decide to roll out one or two ‘innovations’ or reject them and go back to the drawing board.

What’s ironic is that for all the attachment to the visual of a funnel, the innovation funnel is not a funnel; it’s a filter. If it were a funnel, everything that we put in at the start would come out the other end, but that doesn’t happen. Instead, ideas are systematically filtered out so that maybe one or two of the ideas that went in come out… eventually. This may seem like unimportant semantics but it’s not because it alters our thinking and behaviour around innovation.

By calling it a ‘funnel’, we try to keep ideas and projects in the funnel far longer than they should be. If it were called the innovation filter, we’d probably try to get things out as soon as possible. The world is littered with examples of ‘innovation’ that limped through the innovation funnel or stuttered into the marketplace when it should have been cancelled years earlier.

One such innovation was Motorola’s Iridium – a constellation of 66 low earth-orbiting satellites that would allow subscribers to make phone calls from anywhere on the planet (see break out box). Knowing when to stop innovation is every bit as important as knowing when to start. Failing fast and cutting your losses so you can divert scarce recourses to the projects that show real promise, as opposed to stubbornly backing doomed projects, is crucial to successful innovation.

Motorola’s Iridium

Communication satellites, in use since the 1960s, were typically geostationary satellites that orbited at altitudes of more than 22,000 miles. That meant chunky phones and an irritating voice delay while making calls. Iridium’s innovation was to use a large constellation of satellites orbiting at approximately 400–450 miles. The result would be a phone similar in size to any other mobile phone at the time with imperceptible voice delay. The engineer who came up with the idea shared his idea with his manager who wasn’t enthusiastic. But then Chairman Robert Galvin and later his son Chris Galvin were convinced that Iridium was going to transform Motorola’s fortunes and gave the project the green light.

The problem was need – it solved a problem very few people actually had. To access the solution subscribers would need to buy a $3000 hand-set and pay up to $8 a minute to make a call. Despite this Iridium was launched in 1998, with then Vice President Al Gore making the first phone call. To reach that launch stage, Motorola had invested over $5 billion, $180 million of which was spent on an advertising campaign to attract the 52,000 subscribers it needed just to cover the interest on its project debt. Only 10,000 people subscribed.

Iridium was pushed through the innovation funnel out to market even though all the evidence suggested it should have been killed off years earlier. The idea behind Iridium was that there were still large parts of the world that did not offer mobile coverage – making those areas accessible was the perceived opportunity. But, in the 11 years it took from concept to development, cellular networks had spanned the globe, effectively solving the problem and eradicating the apparent opportunity. What’s almost unfathomable, is that Iridium was developed in two stages: 1987–96 (development of the technology) and 1996–99 (construction and launch of the satellites). This later stage was, by far, the most expensive and yet by the time it was initiated in 1996 Motorola executives knew that the cellular network had effectively destroyed their market. On top of which they also knew they had still not solved design, cost and operational problems, and yet they continued anyway.⁷

Innovation corrupted!

We believe that our pre-occupation with ‘innovation funnel-type thinking has had a detrimental impact on innovation. For the most part, the consequences of this thinking have been unintentional but they have converged to muddy the innovation waters and obfuscate results.

It’s not working. Or, at the very least, it’s not working as well as we need it to if we are to lift productivity and embrace a rapidly changing commercial environment. If you already agree with that sentiment and don’t need convincing further then feel free to jump to Chapter 2 or even part two where we dive into the new approach.

There are six big problems caused by this old-fashioned type of innovation thinking that prevent us from making real progress. They are:

1. The ‘why’ is missing
2. Poor support for innovation within the organisation
   • From the top
   • By the system
3. A pre-occupation with process over outcome
4. Defensive thinking bias
5. Thinking/doing is out of balance
6. Insufficient focus on the ‘valley of death’

The ‘why’ is missing

The funnel approach to innovation fails to consider the ‘why’. It may propose a systematic ‘how’ but it ignores the ‘why’.

In truth, it’s not just, “Why is innovation important”? that is typically met with a blank stare. “Why do we innovate”? or “Why do we spend all that money on innovation”? usually elicits the same confusion and bewilderment. Eventually, we might hear responses such as, “we innovate because that’s what we do” (it’s one of our values) or “we innovate because it is important”. Often what people want to say but rarely do is, “we innovate because everyone around us is doing it and we don’t want to look out of step or be left behind”. This may not seem important but we believe that this lack of ‘why’ or lack of clarity around the motivation driving innovation is instrumental in its eventual failure.

Traditionally in business, there are plans – bus...