Product innovation has been described as the way out of today’s difficult business environment. However, the rate of success of development projects, in particular white space or disruptive innovation projects remains too low. We believe that a reason for the low success rate is the erroneous application of methods designed for incremental innovation like Stage Gate to projects with high levels of uncertainty. In this presentation we will discuss the different types of development projects based on degree of uncertainty, and the creation of different project tracks. Projects are managed using different tool sets based on the best fit between information available and decision making needs.

1. A New Approach For The
Management Of Innovation
Processes
Jose A. Briones, Ph.D.
SpyroTek Performance Solutions
@Brioneja
June 9, 2014

2. 2
• Introduction to the problem
• Review of conventional Stage-Gate
• Classification of Innovation Projects
• The Spiro-Level approach
• Summary

3. 3
• Stage-Gate® is a registered trademark from Stage-Gate International’s Product
Development Institute Inc.
• “The fair use of a copyrighted work, including such use by reproduction in copies or
phonorecords or by any other means specified by that section, for purposes such as
criticism, comment, news reporting, teaching (including multiple copies for classroom
use), scholarship, or research, is not an infringement of copyright” - Copyright Act of
1976, 17 U.S.C. 107
Legalese

4. • Product innovation has been described as the way out of
today’s difficult business environment.
• The rate of success of development projects, in particular
disruptive innovation projects remains too low.
• We believe that a reason for the low success rate is the
erroneous application of analysis methods designed for
incremental innovation like NPV and DCF to projects with
high levels of uncertainty
Twitter: @Brioneja
www.Brioneja.com

5. 5
• Ratio of R&D needed per unit of GDP output has gone
from 1:1 in the early 90’s to ~3:1 in 2009 (Source: Dr.
William Strauss, FutureMetrics)
• Success rates of innovation projects can be as low as
2.5% but rarely exceed 20% depending on when we
define a project launch
• Effectiveness of product development process is broken
• We can no longer throw Ph.D.’s at a problem
Problem

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One of the biggest problems that a
product manager encounters when
starting an innovation program is to
reach consensus on the definition
of innovation.
This is more than a semantics
issue. Without agreement on
exactly what the goal is the team is
unlikely to achieve it.
Many companies suffering from
innovation fatigue, driven by
confusion between innovation &
invention

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• The traditional definition of innovation has been simply “a
new method, idea or product”.
• We believe that this definition of innovation is obsolete,
and that being new is not enough for something to be
called innovative.

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• “An invention is a new (previously undiscovered)
method, device, process, algorithm, or tangible
material that can be used for a specific purpose”

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• Classical definitions of innovation and invention overlap
each other!!
• We must establish the difference between innovation and
invention.

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• “Big new ideas more often
result from recycling and
combining old ideas than
from eureka moments”
@stevenbjohnson

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13. • Incremental or sustaining
• Occurs in linear fashion
• Radical or disruptive
• Occurs in non-linear, discontinuous or
iterative fashion
Product
1
Product
2
Product
3
Projects Product
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A measure of
• The magnitude an unmet
need is met
• Desirability
The degree by which a product
or service meets a need either
functional, pragmatic or
psychological
Magnitude of value in
marketplace tied to segment –
essential

15. • We propose a definition of innovation as the intersection
of invention and value.
• The magnitude of increasing value that the invention
brings to the user or market subsequently defines the
innovation further as incremental, radical or disruptive.
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Incremental or
Sustaining
innovation
• Marginal
improvements
along current
feature set.
• Product line
extensions: Bigger,
better, faster.
Radical or
Breakthrough
innovation
• Order of magnitude
improvement or
increase in benefits
along the same
features
• Digital vs. Analog
technology:
Plasma vs. CRT
TV’s
Disruptive
Innovation
• Delivers value
along a different
feature set not
prioritized by the
existing offering
and user base
• Results in an order
of magnitude
increase in rate of
adoption or change
in user behavior
• Features vs.
Design - iPhone

17. 17
•Projects at different levels of uncertainty
must be managed differently
•Expectations must be different
•Tools to manage them must be different

18. 18
• Where do they all fit?
• When do I use each tool?
• What is a reasonable expectation?
Proliferation of Solutions

19. 19
• Create a unified framework for innovation projects/product
development that
1. Provides the flexibility needed for innovation to work
2. Still has the metrics needed for proper measurement of progress
and resource allocation.
Challenge

20. Process
People
Culture
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21. • Idea Generation
• Idea Selection
• Project Management
Projects
Idea
3
Idea
1
Idea
2
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22. • Standard processes for innovation management reflect the linearity
of incremental innovation
• Stage Gate
• Waterfall
• Do not work well in disruptive or radical innovation
Stage 1 • Discovery
Stage 2 • Business
Case
Stage 3 •Development
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23. 23
"I am going to come to you with a contrarian view of
innovation, deeply researched, with more than $7-million
worth of data behind the assertion that the Stage-Gate model
as we know it today is…going to guarantee total performance
mediocrity for your businesses.
Larry Keeley, president of Doblin, Inc
April 2006

24. 24
“The Stage-Gate system is not suited to the task of
assessing innovations whose purpose is to build new
growth businesses, but most companies continue to
follow it simply because they see no alternative”
Clayton M. Christensen

25. 25
Project is managed in a linear fashion
“The Stage-Gate system assumes that the proposed strategy is the right
strategy, the problem is that except in the case of incremental
innovations, the right strategy cannot be completely known in advance”
– Clayton M. Christensen
Source: Product Development Institute, Inc.

26. 26
Xpress and Lite Variations of Stage-Gate
Source: R.G. Cooper, Stage-Gate International
These modifications still use a linear approach to
innovation project management.

27. 27
• Iterations occur within a stage, with no mechanism to
start over
Source: R.G. Cooper, Stage-Gate International

28. 28
•
• “Simultaneous Execution” and “Stage Overlapping” can also
be used to address some of the Stage-Gate deficiencies, but
are not enough to overcome the restrictions of the linear
approach.

29. Disruptive Innovation
• Iterative
• Estimates
• Flexibility
• Virtual teams
Classical
Business Management
• Efficiency
• Forecast
• Progress Measurement
• Resource allocation
Twitter: @Brioneja
www.Brioneja.com

30. 30
• For Disruptive innovations, 1 round of VOC’s is not
enough to be the cornerstone of a project
• Customers cannot say that they want what they do not know
• Customers can only provide feedback on incremental
modifications on what they do know
• Iterations are needed where customers evaluate a prototype and a
new cycle starts, complete with a new VOC, market and business
analysis

31. 31
• Incorporate classification via level of
uncertainty in your project portfolio
management
• Modify innovation management into a
real spiral approach
• Manage different types of projects
using levels on the Spiral

32. Project Portfolio Classification
By Uncertainty
Spiral Approach to Innovation
Management
Use Of Different Tools At Each
Level Of The Spiral
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3
2
1

33. 33
Market
Product
NewExisting
New
Existing
Conventional product development categorization fails to
acknowledge the differences in available information within
each space
Adjacent Markets
vs.
Blue Ocean

34. • Projects are classified by how much
we do NOT know
• Degree of uncertainty defines the track
they take
TechnicalUncertainty
High
Medium
Low
Market Uncertainty
Low Medium High
Positioning Options
Stepping
Stones
Platform Launches
Enhancement
Launches
Scouting
Options
Source: The Entrepreneurial Mindset
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35. • Spiral has 3 levels
• Axis = Resources and Time
• High uncertainty projects
start at level 1
• Move from
learning/discovery to
definition/forecast
1
2
3
Time
Resources
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36. Level 1
Level 2
Level 3
• Project analysis
repeated
• Different Tools
Selected
• Level 1 tools feed
subsequent levels
• WHEN Vs. WHICH
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37. Resources
Resources
TimeTime
Level
1
2
3
VOC
Idea
Generation
Technology
Assessment
Prototype
Development
Customer
Testing
Business
CaseValue in Use
Analysis Regulatory
IP Strategy
Supply Chain
Analysis
Roadmap/Timeline
Risk Analysis
The Spiral Approach to Innovation Management
Launch
Quadrant I
Quadrant IIQuadrant III
Quadrant IV
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38. 38
• Must reduce the projects’ level of uncertainty
• Transform options and stepping stones into platforms
• Generate products/opportunities from the platforms that
can be managed with conventional financial and project
management tools

39. 39
Level 1
•Positioning and Scouting Options
•Stepping Stones
Level 2
•Platform Launches and Projects
Level 3
•Enhancements and individual product launches

40. 40
• Time and resources start small, increase as the levels go
up
• The analysis is repeated at each level, but the tools used
for each level are different.
• Level 1 uses tools more suitable for high levels of uncertainty, i.e.
Discovery Driven Planning, Probabilistic Decision Analysis
• Level 3 uses more conventional management tools, i.e. Linear
Stage-Gate, NPV

41. 41
•Management and Project teams define number and type
of reviews
• Agreed upon timeline and level of resources defines the number of
reviews
• By Quadrant
• By Level
• Level 1 does not need as many reviews as Level 3

42. 42
Level 1
•Discovery Driven Planning
•Knowledge to Assumption Management
Level 2
•Product/Technology Roadmaps
•Multigenerational Product Planning
Level 3
•Linear Stage-Gate
•Agile Development

43. 43
Level 1
•Market Perceived Quality Profile
Level 2
•Kano Analysis
Level 3
•Conjoint Analysis

44. 44
Level 1
•Unmet Needs – KJ Analysis
Level 2
•Job to be Done
Level 3
•Product Features
VOC Level 1: Broad and shallow
VOC Level 3: Deep and detailed

45. 45
Level 1
•Reverse Income Statement
•Real Options
Level 2
•Probabilistic Decision Analysis
Level 3
•NPV
•DCF

46. 46
•A modified Spiral approach to innovation project
management can be used to:
• Integrate project portfolio management by level of uncertainty
• Manage different types of projects using the appropriate tools
• Maintain the right framework to track progress and resources but
provide the flexibility that innovation projects need for success
•This approach has already been successfully used to
create a disruptive innovation product for the construction
industry

47. 47
“We keep rediscovering that the root reason for established
companies’ failure to innovate is that managers don’t have
good tools to help them understand markets, build brands, find
customers, select employees, organize teams, and develop
strategy”
“Some of the tools typically used for financial analysis, and
decision making about investments, distort the value,
importance, and likelihood of success of investments in
innovation”
“There’s a better way for management teams to grow their
companies. But they will need the courage to challenge some
of the paradigms of financial analysis and the willingness to
develop alternative methodologies”

48. • This framework for
innovation projects
provides
• The flexibility needed for
successful innovation
projects in any industry
• The metrics needed for
proper measurement of
progress and resource
allocation.
Twitter: @Brioneja
www.Brioneja.com

49. 49
• Jose A. Briones, Ph.D. (Brioneja)
• Twitter: @Brioneja
• Brioneja@spyrotek.com
• www.Brioneja.com