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Actually Doing Technology amp Product
Strategy
Course Outline
First Day Why have a strategy The Evolution of Technologies and Markets Making Money from Innovation Understanding Competition
Second Day Managing Organizational Competence Actually Doing Strategy
Outline
Why making choices is so important
Why it is so hard
What can be done
The PreQuip Story Requirements vs Resources
Project proliferation destroys productivity
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Course Outline
First Day Why have a strategy The Evolution of Technologies and Markets Making Money from Innovation Understanding Competition
Second Day Managing Organizational Competence Actually Doing Strategy
Outline
Why making choices is so important
Why it is so hard
What can be done
The PreQuip Story Requirements vs Resources
Project proliferation destroys productivity
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Outline
Why making choices is so important
Why it is so hard
What can be done
The PreQuip Story Requirements vs Resources
Project proliferation destroys productivity
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The PreQuip Story Requirements vs Resources
Project proliferation destroys productivity
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Project proliferation destroys productivity
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Timing and Impact of Management Attention
High
Index of Attention and
Influence
Low
ACTUAL MANAGEMENT ACTIVITY PROFILE
Phases
Knowledge Acquisition
Concept Investigation
PrototypeBuilding
PilotProduction
Manufacturing
Ramp-Up
BasicDesign
ABILITY
TO
INFLUENCE
OUTCOME
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Why is it so hard to kill Project 26
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Why is it so hard to kill project 26
It s a good project It meets NPV ROI goals An important customer wants it The CEOmy boss wants it It s Frank s project It might be the project that saves my bacon Good managers can meet stretch goals (and I m a good manager) Making difficult decisions takes time and eats energy
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
What can be done
Measure capacity track resources
Use decision tools that allow you to view initiatives in comparison to each other
Make real decisions with real data Sustain a high conflict high respect discussion Tell (all) the truth
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Measure capacity track resources
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Track Resources Over Time
HOURS PER MONTH
Exploratory projects Innovation projects Product Support Administration
CAPACITY
CAPACITY
trade6000
trade4500
trade3000
trade1500
trade0
11
-Se
p
1-J
an
23
-Ap
r
13
-Au
g
3-D
ec
24
-Ma
r
14
-Ju
l
3-N
ov
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Build an understanding of the typical project
FTEs
Planned Resource Allocation Project X
Process Engineering RampD Supply Chain Marketing
Actual Resource Consumption Project X
Process EngineeringRampD
Supply Chain
MarketingJan Feb Mar Apr May Jun
FTEs
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Use decision tools that allow you to compare initiatives
against each other
(Making choices in theory)
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Analytical Tools for Making Choices
Financial Tools - IRR amp NPV
- Risk vs Return
- Options
Portfolio Concepts - The Aggregate Project Plan
Scenario Analysis
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
IRR and NPV
A great place to begin but a terrible place to finish
Strengths
A focus on the quantifiable costs and benefits of the project
Allows for easy ranking and comparison
Weaknesses
Forces a focus on the numbers
Neglects the role of uncertainty
Neglects strategic cconsiderations Ignores interdependency between projects
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Risk vs Return Matrix
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Decision Tree analysis
3000
25000 -1000
-2000
3000
5050
3000
5050 -500
0
-500 5050
5050
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Why is an option valuable
Thinking of investments as options values uncertainty more appropriately
Delaying investment until there is more information can be very valuable
V1
V2
C1
C2
C0 p
1-p
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
When is thinking of a project as an option likely to be fruitful
When the future is very uncertain
When investing now will create unique opportunities for the firm
When failing to invest now means that it will be very expensive to invest later
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
How much is an option worth
See Investment Opportunities as Real Options Getting Started on the Numbers (and references therein) - by Timothy Luerhrman
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
A Range of Tools
Risk adjusted NPV Decision Trees Simulations Closed Formulas Differential eg Monte Carlo eg Black-Scholes Equations
Pros bull Established methodology widely accepted and understood bull Relatively easy and quick to implement bull A building block for more complicated valuation methods
bull Incorporates decision making and uncertainty bull Determines optimal decisions bull Transparent and easy to understand bull Building block for other more complicated valuation methods
bull Allows for complicated and multiple uncertainties spanning both discrete and continuous outcomes bull Easier to model non-standard uncertainties
bull Elegant easy to implement with formula in hand
bull A numerical solution incorporating optimal decisions and (possibly) both continuous and discrete uncertainties
Cons bull Does not allow for contingent decisions bull Collapses many decisions and outcomes down to a single scenario bull Does not account for managerial ability to react to information
bull Trees can become complicated with many decisions and uncertainties bull Essentially limited to discrete decisions and discrete characterization of uncertainties
bull Methods do not determine optimal policies bull Programming becomes complicated with many decisions and uncertainties bull Less transparent than trees
bull Limited to relatively simple decisions and uncertainties bull Many simplifying assumptions usually have to be made to obtain closed form solutions
bull Extremely difficult if not impossible to implement in realistic situations bull Time Consumingbull Does not allow for many different uncertainties
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Portfolio Concepts Aggregate Planning Tools
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Aggregate Project Plan (1)
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Platform projects lay the groundwork for later extensions
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Example Consumer Value Perception
Enabling Technology
New Core Product
New Benefits
Improvement Variant No Change
Low Resource
Moderate Resource
High Resource
Breakthrough
Platform
Derivative
Product Support
Radical
Next Generation
Incremental
Base
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Example
Radical
Technology Reach
Off the shelf
Marketing Impact Entirely new benefit Improvement No change
Breakthrough
Platform
Derivative
Product Support
Low Resource
Moderate Resource
High Resource
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An ExampleConsumer Value Perception
EnablingTechnology
New CoreProduct
NewBenefits
Improvement Variant No Change
LowResource
ModerateResource
HighResource
Breakthrough
Platform
Derivative
ProductSupport
Radical
NextGeneration
Incremental
Base
Sxxxx
Fruit Cxxx
xFruit
Natural
LxxxxExport
Txxxx
Fxxxx Face
RxxxxFruit
Cxxxx Langnese
Super CxxxxBxxxx
Extension
Cxxxx 2000
VxxxxxImprovement
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Aggregate Project Plan (2)
Radical
ProductReach
Off the shelf
Process ImpactEntirely newbenefit Improvement No change
Breakthrough
Platform
Derivative
ProductSupport
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Less Is More
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Project Reach Across Growth Areas
Growth Area
Core Target l Target 2 Target 3 Target 4
Platform
LineExtension
MaintenanceEnhancement
Growth
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Degree of Internal Difficulty
Residentcapabilities
Generallyaccessible
Significant
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
MarketingSales Capability Challenge
Existing Brand AND No New Existing Brand AND New Brand AND No New New Brand AND Capabilities Required New Capabilities Required Capabilities Required New Capabilities Required
Significant Challenge
Stretch
Support
Peak-Year Project GSV
Lessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
Between$xM and$xM
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Degree of internal difficultyMarketingSales Capability Challenge
Builds on existing skills Requires entirely New skills
Significant
Generallyaccessible
Residentcapabilities
Tec
hn
ical
Op
erat
ion
al C
hal
len
ge
Significant Challenge
Stretch
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
External impact amp internal skills
Low
StrengthOfEntrenchedCompetition
High
Low HighLeverages Current Advantage
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Degree of External ImpactConsumer Value Perception
Somewhat Important Very Important Critical
Improvement
New Usage Occasion New Benefit
Leapfrog
Jump
Advance
Me-Too
Only WeCan Do It
HighBarrier
SomeBarrier
NoBarrier
Peak-Year Project GSVLessthan$xM
Greaterthan $xM
Between$xM and$xM
Note Cross hatching indicates non-resourced concept exploration projects
High risk
Medium risk
Low risk
Between$xM and$xM
Co
mp
etit
ive
Insu
lati
on
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Benefits of an Aggregate Project Plan Plan
Explicit choice of projects balances the long and short term allows for the explicitdiscussion of the match to strategy
Match between project type and organizationalform allows for a focus on the generation of competence
Focus builds speed and productivity for theindividual and the organization
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
What is a Project
An organized activity with a finite time span which consumes Development Marketingandor Research resources and yields either ndash A new or revised product that meets the businessrsquos strategic needs or strategic needs or ndash A new capability applicable to current or future products or processes which will support future business needs
A project is not ndash Ongoing cost savings programs with no end point ndash Promotional packaging ndash Administrative programs
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Consumer Value Perception -- Definitions Consumer Value Perception
New CoreProduct
NewBenefits Improvement Variant No Change
Fills previouslyunknown unmetneeds
Firstintroduction ofa revolutionarynew product inthe marketStimulates newconsumer usageand purchasinghabits
Fills known but as yet unmet needs
Delivers new concepts and benefits that fulfill consumer needs that are otherwise unmet by any products in the market
Better meetsneeds or meetsmore needs
Significantconsumerdiscernibleimprovementamplificationor enhancementrelative toexisting productbenefits in themarket
Meets sameneedsdifferently
Minorrevisionsadjustmentsand alterationswith relativeparity toexisting productperformanceclaimsfeatures ormarketpositioning
Meets sameneeds with nochange
No consumer-perceivedmarketactivity butinvolvingimprovedprocesses thatresult in costreductions ormeetlegislativemandate withno change inproduct qualityor otherbenefits
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Enabling Technology -- Definitions
First use of a Technology that is new to the industry
Pushes existing Technologies into a completely different operating window
Extends existing Technologies beyond the normaloperating window
Exploits current standard Technology without extendingthe operating window
EnablingTechnology
Radical
NextGeneration
Incremental
Base
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Improvement
Strategic Intent-- Project DefinitionsConsumer Value Perception
New CoreProduct
Revolutionary first-to-market introduction that creates or extends a category or creates a segment Creates significant competitive advantage but sustainability of advantage lower at periphery
Business impactCreates new market segment
Line extension of a platformproduct currently on market
Business impact
Grows market share
Sustains the business and brandidentity (correct quality contemporaries image maintain market share etc)
Business impact
Maintains market share
Supply Chain ProjectsProjects with benefits internally but withoutperceived consumer benefits
Brand
Support
First introduction of a new product line Enables future line extensions and derivatives
Business impactExtends market segment Growsthe market
BreakthroughRadical
EnablingTechnology
Platform
Derivative
Base
NewB Variant
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Risk TopographyConsumer
ValuePerception
EnablingTechnology
New CoreProduct
Very High risk strategy focused on winning share through meeting or predicting new Consumer needs supported by technologicalstrength
High risk process improvement andor
regulation support requiring highly innovative technology
offering little Consumer benefit
High risk brand image projection vulnerable to fast-follower imitation
Very Low risk strategyfocused on maintaining share through technological stability
Moderate risk through balancedtechnology and brand strengths
Low risk throughbalanced
technology andbrand strengths
NewBenefits Improvement Variant
Radical
Base
NextGeneration
Incremental
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
CT Matrix ndashGlobal vs Local Portfolios
Or The local portfolio might position projects differently due to different local conditions
The local portfolio might reflectonly those projects which havelocal significance
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Creating the Aggregate Project Plan1 State and understand the business strategy
2 Characterize projects types and plot them on the CT matrix
3 Provide a utilization plan for innovation efforts - resource consumption
4 Identify existing capacity to do innovation - resource availability
5 Define the set of future innovation projects and allocate resources to them
6 Align portfolio to the business strategy iteratively around the tools and rationalize conflicts in resource allocation and strategic portfolio balance
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Strategy and Scenario Analysis
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Strategy and Scenario Analysis
Formulating a strategy requires judgmentabout the future
But the future is complex hard to predict
Scenarios provide a way to manage this complexity
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Why use scenario analysis
Oil
Pric
e
Tim
e
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Basics of Scenario Analysis
What it is ndash A way of mapping the future of focusing attention on
critical uncertainties
ndash A way of building ldquorobustrdquo strategies
ndash A means of generating a common language
How it is done ndash Generate a list of critical uncertainties ndash Choose the two most critical ndash Draw a ldquomaprdquo ndash Iterate and explore
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example Predicting the future of 3G
List Key Uncertainties
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slowndash will there be a ldquokiller aprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example Predicting the future of 3G
Choose two
ndash What do customers want 3G capabilities for
ndash Will adoption be fast or slow ndash will there be a ldquokiller apprdquo
ndash Will key 3G standards be open or closed
ndash Will there be multiple devices or only one
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Mapping the future of 3GStandards are open
Adoption is slow
Adoption is rapid
ldquowireless data
explosionrdquo
Standards are closed
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Is RampD spend appropriately alignedagainst possible futures
New retail channels develop
Multi player channel
Simple Distribution Channel
Existing retail channels dominate
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example Intel in the family room
List Key Uncertainties ndash Is this about entertainment Or about access to data
ndash Will consumers pay to buy a single device
ndash Will standards be open or closed
ndash Is online gaming really going to take off
ndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example Intel in the family room
Choose twondash Is this about entertainment Or about access to datandash Will consumers pay to buy a single devicendash Will standards be open or closedndash Is online gaming really going to take offndash Will the ldquolast milerdquo problem be solved in the foreseeable future
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Intel in the family room
ldquoLast milerdquo problem is solved
ldquoGaming Plusrdquo ldquoThe Official Futurerdquo
Itrsquos all about entertainment
Customers value data
ldquoCommodity hardwarerdquo ldquoNiche high end
playrdquo Last mile problem not solved
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Is RampD spend appropriately aligned against possible futures
New retail channels develop
Simple Distribution Channel
Multi player channel
Existing retail channels dominate
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Why may scenario analysis be useful
It focuses attention away from ldquothe officialfuturerdquo and allows the robustness of a strategy to be evaluated
It focuses attention on critical uncertaintiesallowing the organization to track them over time
It may spark creativity imagination and a rethinking of core strategy
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Making choices in theory Summary
Financial tools are critically important butshould not substitute for strategic thinking
Technology development may create options --so that paradoxically the more uncertainty there is the more valuable they may be there is the more valuable they may be
Choices must be made as a portfolio so thatdifferent projects are explicitly traded off against each other
It may be important to consider the robustness of a strategy what will happen if the world looks very very different
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Making Choices inPractice
or
Making real decisions with real data
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
What can be done
Measure capacity track resources
Use decision tools that allow you to view
initiatives in comparison to each other
Make real decisions with real data ndash Sustain a high conflict high respect discussion ndash Tell (all) the truth
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
ldquoThis stuff would only workif we told each other the
truth wouldnrsquot itrdquo
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Making real decisions with real data
Tolerate high conflict high respect debate
Tell (all) the truth
Why should this be so hard
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Building high conflicthigh respect discussion
Rewrite the rules ndash What will you choose to notice and reward
Model the behavior
Be consistent
Demonstrate that making decisions this way makes a difference
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Building the Occasions for Decision Making StageGate Processes
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Assignment Given to SmallGroups of Managers at XYZ Co
1 Identify the salient characteristics of your organizationrsquos ldquoinnovation funnelrdquo
1 Where do new ideas come from
2 When are decisions made
3 Who is involved in these decisions
2 Draw a diagram of the innovation funnel that
captures these characteristics
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Group AQualityControl
OEM
Marketing
StrategicPlanning
Customer
Research
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Group BSenior Management Injector
Marketing Inputs
Screen 1
Department Changes
Screen 2
Final Evaluation
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
10-minute exercise Funnels YouHave Known
What does the innovation funnelat your company look like
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Technology Strategy in Practice
Strategies are worthless unless they are linkedto real resource allocation decisions Decide ndash Who will make the decisions ndash How often ndash By what criteria
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The ideal innovation funnel
Phase I Phase II Phase III Launch
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Ideal Innovation Funnel
Defined separation between stages Clearly defined criteria a way to kill ldquoliving deadrdquo projects 10486981048698Senior managers engaged at the right timeCapture ideas from everywhere manage ideas in anorganized way so that they turn into products A continuous process Does this fit with our strategyA picture of the business an overview of the shape of the pipelineGive teams the freedom they need between gates
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
An Innovation Funnel Example
Gatekeeper Gatekeepe
r Gatekeeper Gatekeepe
r
Charter
One page description of proposed project including objective rationale and development routes Early Commercial Assessment
Contract
Cross-functional development plan including project plan as contract between team and Gatekeeper
LaunchProposal
Launch Plan including CEP approval request
Post Launch Review
Tracks success of and key learnings from launched products
Idea Generation Feasibilit
y Capability
Initial marketing and technical concepts
Concept refinement
and prototype creation
Product optimizatio
n
Commercialization Production amp Distribution
Launchamp Rollout
KEY
= GATE
= DOCUMENT
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Gates
are major milestones
are intended to allow passage of the projects more likely to succeed by sacrificing projects more likely to fail asearly as possible
focus decision-making At a gate a decision is made toeither ndash Continue working on the project moving it along to the next stage in the funnel or ndash Stop working on the project shelving it or canceling it or ndash Get additional information and reconsider the project for passage through the same gate once that information becomes available
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example The Key Questions Answered By Each Phase
PortfolioReview Phase
Review 1 Phase
Review 2 Phase
Review 3Phase
Review 4
IdeaGeneration
E N T E R
Phase 1Concept
Investigation
Phase 2 Feasibility
Phase 3
Development
Phase 4Post
Release
Current Product Support
E X I T
bullDoes the idea fit roughly with our strategy and resource availability
If yes thenconcept
documentapproved
amp sub-teamallocated
bullDoes the product make sense from marketing technical amp financial perspectives
If yes thenconcept
approvedamp full teamallocated
bullWhat is the product specbullCan we develop it within budget and schedulebullCan we produce it at the required cost amp volume If yes then prototype approved
amp full teamallocated
bullHas the product been fully verified and validatedbullHave production objectives been met
If yes thenfull manufacturing
approvedamp sub-teamAllocated
bullIs the product meeting safety efficacy and business targets in the market
If yes then closeoutapproved
amp handoff toproduct support
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Example Pipeline View by Stage and Project Focus
Launch
Pre-Segment ReviewBut Resourced
Recurrent activities
Non-Resourced
ConceptExploration Gate
I
ConceptDevelopment Gate 2
Business CaseDevelopment
Gate 3
Execution
Post- launch review
Peak-Year Project GSVLess than$xM
Between$xM and$xM
Between$xM and$xM
Greater than $xM
Note Cross hatching indicates non-resourced concept exploration projects
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The Reality
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Redesigning the stagegate process
Organic Flexible
Organic Flexible
Phase-Gate
High
loose process informal mechanisms
tight process formal
mechanismsDynamic process paced by experiments
Low Lo
wDegree of program complexity
Static process paced by tasks
Deg
ree
of
mar
ket
dy
nam
ics
and
tec
hn
olo
gy
un
cert
ain
ty
High
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
A More Flexible Process
Customer Needs amp Deadlines
Phase 0
Concept
Phase I
Charter
Design and Development
Phase III
Market ReleaseRamp Up amp Manufacturing
Distribution
CustomerEvents
Market Interest
Lead Customer
Enrollment
(multiple) Customer Confirmations
Market Release
Market Feedback
Phase II
(multiple) Design and Functional Planning Reviews
Internal Reviews
InternalReviews
ConceptReview
CharterReview
Market ReleaseReview
ClosureReview
Phase 0 1-2 weeks low investment concepts sourced from ongoing marketing amp engineering activityPhase 1 short time-bounded low investment significant of concepts will be discardedPhase 2 process flexes to accommodate different customer needsPhase 3 team hands off product only after receiving sufficiently positive market amp internal feedback
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Making a funnel work
Formally ndash Pacing the funnel to the needs of the business not the other way around ndash Involving key decision makers early
Informally ndash Leadership tolerating ldquohigh respect high conflictrdquo
debate ndash Trust ldquobut this would only work if we told the truthhelliprdquo ndash Consistency
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Summary
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Effective strategies rest on three foundations
Markets
Value Creation
Technologies
ValueDelivery
ValueCapture
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Or Answer 3 Key Questions
How will weCreate value
How will weDeliver value
How will weCapture value
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Technology Markets
Competition Organization
Maturity
Takeoff
Ferment
Understanding the life cycle is critical critical
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Value Creation
How will weCreate value
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Value Capture
How will weCapture value
Complementary Assets
Uniq
Suppliers Buyers
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Value Delivery
How will we
Deliver value
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Actually doing TechnologyStrategy
Create
Deliver
Capture
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Technology strategy on one slide
Deliver
Capture
Create
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
What happens on Monday morning
Or Getting there from here
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Two case studies
MedtronicsKirkham Instruments
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Common expectations
Average
Performance
Anticipated performance
Historical performance
Change
Time
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
The reality of change
AveragePerformance
Anticipated performance
Historical performance
Chang
e
Time
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Successful Implementation Common Lessons
Senior management commitment amp involvement ndash Senior steering committee ndash Empowered champion
Diagnostic phase ndash Aligned with the market ndash As well as with the existing culture and organization
A designed implementation plan ndash Up front ndash With appropriate expectations
Allocating resources to match the design
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Typical Execution TimesOrganization Wide Roll-out amp Implementation
Diagnosis Design and Pilot
Phase Duration
05-3 months
4-6 months 6-12 months
Core Project Team 2-6 4-8 4-8
Whorsquos Involved
Key Activities
bull Key stakeholder
bull Senior management
sponsor
bull Interviews wkey stakeholders
bull Process mappingbull Assessment of key issues
bull Create steering team
bull Dedicated project team
bull Access to pilot teams
bull Key stakeholders bull Senior management sponsor
bull Customize and create process and tools
bull Pilot and test tools process in ldquoreal timerdquo
bull Refine and enhance tools bull On-going review and assessment with senior management
bull Dedicated project team shifts members
bull Whole organization
bull Key stakeholders bull Senior management sponsor
bull Training of new tools processes bull Documentation of process bull Automation of process bull Organizational change and cultural alignment
(FTEs)
Good Luck
Good Luck
