9 Steps to Energize Innovation

Stage-Gate®, a process created by Dr. Robert Cooper, founder of Stage-Gate International, is a framework of cross-functional innovation best practices. For many B2B companies, their weakest areas center on the front-end processes for understanding market needs. Companies that drive out commercial risk in the early stages of new product development can better focus on technical risks.

There are nine actions that can help companies improve innovation.

Bucket R&D work. Innovation projects need to be classified by investment type, and the three most common are technology development, new product development, and process development projects. Each requires a different Stage-Gate pathway to align R&D with corporate strategy. It also helps quantify the resource allocation.

We see companies mix technology and product development together, and sometimes attempt technology projects within product development. That’s risky. Companies that combine those typically see failure rates of 80% to 90%.

Fixate early product development on market needs. In a five-stage process, stages one and two are front-end innovation, where ideas are scoped out and design thinking is applied. It’s critical to focus on market needs. This is where you zero in on the segment you’ll need to research and the customers you’ll want to interview to obtain the insight you need.

Imagine that a specialty chemical ingredients manufacturer is targeting semigloss paint producers. What is their job to be done? They produce and sell semigloss paint. Simple, but it defines the scope of the interviews.

But there are subtleties at play. What outcomes does the customer expect from the chemical manufacturer’s product? They may want to decrease factory mix time, minimize waste, minimize fading, and ensure the paint will cover underlying surfaces with one coat.

Our chemical manufacturers can uncover and rank the importance of these outcomes through quantitative interviews. This leads to the value proposition for a product: a polymer that allows efficient production of a single-coat, sunlight-resistant semigloss paint.

Drive out commercial risk with quantitative interviews. Simply guessing what customers want is risky. To lower risk, you can base quantitative interviews (where you can apply metrics) on the feedback you’ve received from earlier qualitative interviews. For example, if “scrub resistance” is identified in qualitative interviews, the quantitative question is, “How important is scrub resistance on a scale of one to 10?” And “How satisfied are you with the scrub resistance you have today on a scale of one to 10?” Look for outcomes that score high in importance and low in satisfaction.

Set up teams to succeed. The best teams employ formalized training in Stage-Gate® innovation processes. They’re more likely to embrace team empowerment and accountability. Team composition, skills, and leadership are drivers of innovation.

Separate opportunity and execution quality. If a company has a project with high opportunity quality, it’s a great fit with existing competencies. The market’s big, and it’s growing fast. There are several customer needs or outcomes that score high in importance and low in satisfaction, meaning the market is eager for improvement.

Execution quality is different. This is a measure of how well the project team has gained insight into customer needs. You can attain good execution quality only when you have insight into not just what customers want but why they want it.

Push the accelerator. Our research shows that being first or second to market often means a 30% probability increase for that product’s success, giving companies strategic advantage.

Speed is important and requires adaptive, agile, and automated approaches. Adaptive means having different pathways for different project types. Start with the three buckets: one pathway for technology development, another for new products, and a third for process development. These pathways are a playbook, and experienced teams tailor it by cherry-picking activities that offer the highest value.

Agility is key. Sprints where you deliver work in two- to four-week cycles produce useful results for setting milestones and facilitating product iteration.

Organizations that have digitally transformed their innovation processes properly —with the right process design embedded in Stage-Gate-certified software — have gained significant speed advantages. This includes consistency of process flows, information visibility and accuracy, and project team collaboration.

Stop pushing the brake pedal. The goal is getting past organizational friction, whether it’s spending freezes, travel bans, hiring delays, reorganizations, or strategy changes. In many companies, the path to more rapid and successful innovation and growth lies in simply stopping short-term, financially focused executive actions.

Pursue bigger, bolder innovation projects. When looking back at failed projects, organizations should examine whether there were “land mines” that blew up budgets and schedules. What would happen if they were spotted in premortem analysis vs. postmortem? You can do this by generating assumptions early in the life of a project and then aggressively investigating the more dangerous ones.

Steer with the right metrics. Innovative organizations not only measure what’s important — they also report it to their organizations.

An effective innovation metric is the Commercial Confidence Index (CCI). This metric measures the percent of R&D spending that is supported by quantitative, unbiased customer insight. The goal is to stop squandering R&D due to commercial risk. B2B companies can eliminate most commercial risk by pinpointing market satisfaction gaps for customer needs. The higher the importance of certain customer outcomes and the lower customers’ current satisfaction, the greater the gap.

We’ve learned that if you get a gap of 30% or more (high importance and low satisfaction), that means the market is eager for improvements. This gives companies a “known-need project” that removes confirmation bias and internal filtering.

How do companies run the CCI?

First, put R&D in two buckets: known need and assumed need. The only way it’s a known need is if there’s quantitative customer-derived data. The CCI is R&D spending on known-need projects. Imagine a $10 million R&D budget and four projects that are each burning $1 million. The company ran market satisfaction gaps on those projects. Now it’s a total of $4 million in R&D spending on known-need projects, divided by total R&D spending of $10 million. That means it is a 40% Commercial Confidence Index.

When companies measure this, they get better year after year. Instead of guessing, they know what the market needs.

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About Colin Palombo

Colin Palombo is a Managing Partner of Stage-Gate International and leads SGI’s Digital Transformation practice. Colin helps clients around the world implement and digitize innovation best practices including strategic road-mapping, portfolio management, lean Stage-Gate®, agile, and jobs to be done.

Colin is a former Visiting Professor of Innovation at Strathclyde University and holds an MBA with distinction from INSEAD and an MA in engineering and computer science from the University of Cambridge.

About Dan Adams

Dan Adams, founder of The AIM Institute, is the author of New Product Blueprinting, the Awkward Realities blog, and the popular 50-video series B2B Organic Growth. He is a chemical engineer with many patents and awards, including a listing in the National Inventors Hall of Fame. Dan has taught his B2B innovation methods to tens of thousands of B2B professionals globally, lectured at many leading universities, and is a popular industry keynote speaker.