Front End Innovation - Peter Koen

1. Understanding the Front End: A Common Language and Structured Picture Idea Genesis and Enrichment Idea Selection Opportunity ENGINE Analysis Concept Definition C Opportunity Se onc le ep NP Identification ct t io D n Te c h SG Peter A. Koen, Ph.D Stevens Institute of Technology E-mail: pkoen@stevens.edu www.frontendinnovation.com An & Co-Sponsored Best Practice Event May 25, 2004

2. Agenda T What is the Front End? T NCD Model S What it is? T Most Effective Practices S Most important part of Front End – macro perspective S Elements of Best Projects 2

3. What is the “Front End of Innovation?” T “Front End of Innovation” is defined by: S Activities that come before the “formal and well structured” New Product Development (NPD) Portion Structured with a New Product formalized and Development prescribed set of Front End of Portion Innovation activities and questions Commercialization FEI activities are less structured and New product less predictable development portion includes BOTH new product and process We prefer NOT use the term “Fuzzy Front End” since it implies that the FEI is mysterious, uncontrollable and cannot be managed. 3

4. What is the “Front End of Innovation?” Front End of Innovation New Product Development Highly Innovative and Stage Profitable Platform Strategies Leveraging Core Competencies/Capabilities Commercial- ization Size of Bubble is related to Profit Potential Platform Strategies Leveraging Existing Traditional Stage Gate Customer Value Chain Idea Selection Process for Incremental Products 4

5. Breakthrough Definition Breakthrough products* (i.e. new to the company or new the world) offer a 5-10 times or greater improvement in performance combined with a 30-50% or greater reduction in costs *Leifer, R., McDermott, C.M., O’Connor, G.C., Peters, L.S., Rice, M. and R. W. Veryzer. Radical Innovation. Massachusetts: Harvard Business Press, (2000) 5

6. Platform Definition Platform products* establish a basic architecture for a next generation product or process and are substantially larger in scope and resources than incremental projects. Incremental Extension: Underwater version Incremental Extension: Addition of flash New Platform: Kodak’s development of disposable single use 35 mm camera **Meyer, M.H. and Lehnerd, L., The Power of Product Platforms, New York: The Free Press, 1997 6

7. Why Focus on the Front End? T Differences Front End Innovation New Product Development Stage Experimental, often chaotic. Disciplined and goal oriented with a Work “Eureka” moments. Can project plan schedule work – but not invention Commercialization Unpredictable High degree of certainty Date Depends. In the beginning Funding stages many projects may be Budgeted “bootlegged” Revenue Often uncertain with a great deal Believable with increasing certainty as Expectation of speculation the release date gets closer Activity Individual or team emphasis in Multi-function product/process areas to minimize risk development team Measure of Strengthened Concept Milestone Achievement 7 Progress

8. Agenda What is the Front End? T NCD Model S What it is? T Most Effective Practices S Most important part of Front End – macro perspective S Elements of Best Projects 8

9. New Concept Development Model (NCD) Provides a common language and terminology necessary to optimize the “Front End of Innovation” Engine Idea “Controllable” Generation and Influencing Enrichment Factors “Uncontrollable” Idea Selection Opportunity Analysis ENGINE Concept Definition C Se onc Core Front End Opportunity le ep ct t NP D Identification io “Activity” Elements n Te ch SG Koen, et. al., “Providing Clarity and a Common Language to the “Fuzzy Front End,” , Research-Technology Management, (March-April 2001): pp 46-55. Koen, et. al., ““Fuzzy-Front End: Effective Methods, Tools and Techniques,” In P. Belliveau, A Griffen and S. Sorermeyer, eds. PDMA Toolbook for New Product Development. New York: John Wiley and Sons, 2 -35, 2002. 9

10. Definitions T Opportunity S A business or technical need that the company or individual realizes by design or default they might want to pursue to capture competitive advantage, respond to a threat or solve a problem T Idea S Most embryonic form of a new product, service or envisioned solution T Concept S Has a defined form (i.e. written and visual) with features and customer benefits combined with a broad understanding of the technology needed 10

11. Agenda What is the Front End? NCD Model What it is? T Most Effective Practices S Most important part of Front End – macro perspective S Elements of Best Projects 11

12. Quiz What elements of the NCD Model are highly innovative (i.e. lots of new products every year) companies very proficient in? 20 Idea Generation and Enrichment 38 Idea Selection 30 Opportunity Analysis 68 ENGINE 36 Concept Definition Yesterday’s class Opportunity 73 Identification Te ch 8 SG 12

13. 1st Front End of Innovation Conference 13

14. Agenda What is the Front End? NCD Model What it is? T Most Effective Practices Most important part of Front End – macro perspective S Elements of Best Projects 14

15. Elements of Effective Projects T Early senior management involvement and commitment Idea Genesis and Enrichment Idea Selection Opportunity ENGINE Analysis Concept Definition C Se onc NP Opportunity le ep D Identification ct t io n Te ch SG Front End Maturity Model The prime imperative for Adopted from PRTM’s model for breakthrough projects in the Front the entire innovation process End is NOT picking the winners, but killing the losers early. 15

16. Elements of Effective Projects T Early involvement of business executive champion T Collaborative culture which Idea Genesis encourages knowledge and Enrichment creation Idea S Communities of Practice Selection S IT Tools which enable people- Opportunity ENGINE Analysis to-people contacts Concept Definition S Collaborative Work Space C Opportunity Se onc T Constancy of purpose Identification le ep ct t NP D io n T Aggressive Goals Te ch SG 16

17. Elements of Effective Projects Collaborative Environment T What is a collaborative culture? S Mutual Trust R Trust in the individual that you share tacit knowledge with S Active Empathy R To be able to share pain and frailties S Access to help R Experts in the organization are will to provide help S Lenience in Judgment R Harsh judgment, laughter and criticism will Collaborative culture prevent the sharing of ones own true beliefs means that the S Courage organization cares R Individuals should not be afraid of exposing their concepts to fierce judgment 17

18. Elements of Effective Practices Communities of Practice Diversity T Creates new knowledge within the community T Connects, acquires, exchanges and builds new knowledge T New science occurs through the process of building upon internal and external knowledge communities Breakthrough Knowledge Usually Occurs at the Boundaries of the Old” McDermott, 1999 18

19. Elements of Effective Practices Communities of Practice - an example T Production and Reservoir Engineering Community at Schlumberger S Goal is to better optimize the value of each well S Consists of 536 members around the world S Focused on Schlumberger’s core competence in production and reservoir engineering S Developed a series of web based case histories S Catalog industry practices into “good idea,” “Local Best Practice” and “Schlumberger Best Practice” Community creates a support network for Schlumberger’s technical experts 19

20. Elements of Effective Practices Communities of Practice T Best Practices: S Focus of on the core competencies of the corporation S Leader should be well respected member of the community and be able to commit at least 25% time R Experts need not apply S Initially the thought leaders need to be part of the community S Community of Practice should NOT become another project S Create passion and real dialogue since the COP is voluntary S Make connections between community members seamless McDermott, R., “Knowing in Community: Ten Critical Factors for Community Success,” IHRIM Journal, March, 2000. Koen, P.A. McDermott, R., Olsen, R. and Prather, C. , “Enhancing Knowledge Creation for Breakthrough Innovation: Tools and Techniques,” to be published in PDMA Toolbook for New Product Development. 2nd edition, John Wiley and Sons, New York: 2004. 20

21. Elements of Effective Projects T Projects get started based on: Idea Genesis S Customer Trend Analysis (Clear and Enrichment Opportunity) Idea S Technology Trend Analysis Selection S Technology Road Mapping Opportunity ENGINE Analysis S Competitive Intelligence Concept Analysis Definition C S Scenario Planning Opportunity Identification Se onc le ep ct t NP D io T These efforts create many n Te triggers ch SG T Need to envision the future 21

22. Market Attack Team A process for rapidly developing actionable plans for large market opportunities 3 months Experts Meeting Phase 1 Effort ideally (Charter) Phase 2 Phase 3 Phase 4 includes 3 -5 (Market and Technology (Business Concept (Business Case Generation) full time people Analysis) Generation) Challenge TR1 Select Select broad Workshop Business best concepts to Plan Project Scope concepts focus on Preparing 1st Deep 2nd Deep Race to the 22 to Dive Dive Dive Finish

23. Why Attack Team? Attack Team approach enables World Class Innovation - Wisdom of the “Sages” T Business-Technology Interspersing T Based on Market and Technology Trend Analysis S Where the future opportunities come from T Science Based Core Competencies T Aggressive Goals T (External) Scientific Peer Review T Focusing (in contrast to spreading too thin) S Constancy of Purpose T Process Optimization which include: S Complete Business Case, Management Oversight and involvement and fact based fast kills and metrics T Full time project team populated with members with demonstrated track record and company credibility 23

24. Elements of Effective Projects T Customer S Ethnography approaches S Lead User Methodology Idea Genesis S Early involvement of customer and Enrichment champion Idea S Discovering the Archetype of your Selection customer Opportunity ENGINE Analysis T Business-Technology Interspersing Concept Definition T Technology C Opportunity Se onc S Increasing linkages both internal Identification le ep ct t io NP D and external (Technology Flow) n Te ch S Partnering SG T Diversity of cognitive styles on idea enrichment team 24

25. Elements of Effective Projects T Portfolio methodologies based on multiple factors of: S Technical Success Probability S Commercial Success Probability Idea S Reward Genesis and S Strategic Fit Enrichment S Strategic Leverage Idea R Using Anchored Scales Selection T NOT just financial justification Opportunity ENGINE Analysis T Use of “Options Theory” to Concept evaluate projects Definition T Screening methodologies are not Opportunity C Se onc used on “breakthrough” projects NP Identification le ep ct t io n D S “Holy Grail” Te S Obvious ch SG T RIGOROUS use of the Technology Stage Gate for high risk projects 25

26. Technology Stage Gate Technology Stage Gate is an effective technology development process with management overview, business and scientific rigor which creates an environment of fast failures. T Traditional Project Management S Assumes that there is little uncertainty associated with the technologies T Starting product development before technology is known S Results in canceled or delayed projects, and wasted product development effort Ajamian, G. and Koen, P.A., “Technology Stage Gate: A Structured Process for Managing High Risk, New Technology Projects,” In P. Belliveau, A Griffen and S. Sorermeyer, eds. PDMA Toolbook for New Product Development. New York: John Wiley and Sons, 267 - 295, 2002. 26

27. Where it fits Front End of Innovation New Product Development Stage Commercialization Traditional Project Management Technology Stage Gate 27

28. Traditional Project Management T Repeatable Process S 85% repeatable V S Leverage from past experiences IV T Predictable procedures III S Detailed project plan of what to do and when II S Can estimate cycle time I T Structure and discipline are critical S Creativity is less important T Project management skills are required 28

29. Technology Stage Gate Technology Milestones T Difficult to capture and leverage are “opaque” past experiences for future efforts S Cycle time difficult to estimate T Range of experimental outcomes TRN is vast TRN-1 S Detailed overall project plan is impractical T Do not know how many gates TR1 S Can’t schedule invention TR0 T Too much structure can inhibit creativity T Project leaders need ability to manage uncertainty while focusing on project goals 29

30. Technology Feasibility Point Technology Feasibility Point Technology Feasibility Point Technology Feasibility Point A Confidence Level B Confidence Level Confidence Level D F D E F B C E C D B E C A F A Technology Factor Technology Factor Technology Factor Some may be difficult Usually MULTIPLE Need to to move technologies concentrate on the are involved “ problem child “ Some may even FALL back ! 30

31. Conclusions T Front End of Innovation can be studied, evaluated and managed – BUT only if there exists a common language S Is NOT “Fuzzy” S Should be thought of in a holistic manner S Different for incremental, platform and breakthrough T NCD Model Created S Engine S Five Front End Elements S Influencing Factors 31

32. Conclusions T Greatest weakness of FEI S Engine S Opportunity Identification S Technology Stage Gate T “Effective” Practices for FEI are being better understood S Technology and Market Trend Analysis S Providing a collaborative environment for enhancing Knowledge Creation S Really understanding unmet customer needs S Managing high risk projects 32

33. Conclusions T Breakthrough Projects S Require senior management involvement, commitment and stomach S Expect only 20-25% to be winners R The key issue is NOT picking the winners – but killing the losers early S Discuss option cost to the next risk reduction milestone – rather than total valuation S Expect that the project will morph into something else T Disruptive Businesses S Sustaining Businesses need to embrace the disruptive Business Model S Set up as a separate business unit S Aggressively look for acquisition targets that are potentially disruptive 33

Front End Innovation - Peter Koen

Front End Innovation - Peter Koen

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Front End Innovation - Peter Koen