The Innovation Journey for technology-rich product businesses · Innovation Journey Study –February 2011 5 of 53 ©2011 Codexx Associates Ltd 2. The Landscape for product innovation

Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd1 of 53

The Innovation Journey for technology-rich product businesses

Final study report

February 2011

Alastair RossSimon Bramwell

Codexx Associates Ltd3-4 Eastwood CourtBroadwater RoadRomsey, SO51 8JJUnited Kingdom

Company Registration No. 04481932

Tel +44-(0)[email protected]

value

ideas


Contents

1. Introduction

2. The landscape for product innovation

3. Study objectives, approach and participants

4. Taking the Innovation Journey – what did we find?

- Initiation

- Implementation

- Into Market

- Intellectual Property Management

5. Learning points for businesses in making their innovation journey

APPENDIX• Study methodology

• Further information

ACKNOWLEDGEMENTS

Thanks to the following, without whose support this study would not have been completed:

Professor John Bessant, Director of Research, University of Exeter Business School, UK

David Stead, Marketing Director, Gill, Jennings & Every

Professor Frank Gertsen, Center for Industrial Production, Aalborg University, Denmark

Poul Henrik Kyvsgaard Hansen, Center for Industrial Production, Aalborg University, Denmark

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1. Introduction

There has rarely been a time when innovation has been more important for businesses. Today’s challenging economic conditions allied withglobal competition provide a business landscape that is hostile to companies that stand still. The dramatic and seemingly incessant developmentof technologies – particularly those allied to the internet – provide opportunities for new products, new services and indeed new ways of doingbusiness. And lastly, today’s market is truly global, offering an unparalleled opportunity for businesses.

For businesses to survive, let alone grow, they must be effective at innovation – at converting ideas to products and services in the market thatdeliver value to users and income to their creators. The journey from ideas to value is not a simple one. There are many steps along the way andmany opportunities for good ideas to be lost, poor ideas to reach the market or for the journey itself to take longer than it really should.

We decided to examine the innovation journey to understand which aspects were of most importance to eventual market success; and also tounderstand how well businesses typically make this journey today. Codexx, together with its academic partners, has a long and rich experience instudying innovation and in helping organisations improve their ability to innovate. We saw that whilst much research had been performed invarious elements of the journey (in idea generation, in development, in selection for example) little research had been performed across theentire ‘end-to-end’ journey. We decided to study this journey for new products and in sectors where time to market is a critical requirement. Wedeveloped a model and questionnaire to examine innovation practices and performance across this innovation journey. We examined a total of25 companies based in the UK or Denmark, to determine if there were significant differences in practices and performance.

Our study showed that some stages of the innovation journey appear to be significantly more important than others in determining ultimateinnovation performance. Intellectual Property Management was also identified as a critical area. We have identified key learning points from thisstudy and made recommendations for businesses who are seeking to improve their effectiveness in their own ‘innovation journeys’.

We propose to extend this work by growing the sample of companies assessed against this model, through use of the model in consulting workand in research to help businesses improve their innovation performance.

The following report details our approach the study findings. We have written this report for a broad audience of business practitioners as wellas academic researchers and have especially sought to provide clarity and application for business readers.

Alastair Ross, DirectorSimon Bramwell, Principal Technology Sector

Codexx Associates LtdFebruary 2011


2. The landscape for product innovation

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2. The Landscape for product innovation

The seeds of failure for all too many products lie in the 'fuzzy front end' of the innovation process when

the ideas selected are weak in some way. This can result in effort expended on poor quality ideas with more innovative ideas rejected at too early a stage.

Developing an effective and feasible value proposition around the original idea for new technology or

new products, together with partners to provide complementing software, accessories and services, is core to successful innovation.

But of course even strong value propositions can fall on rocky ground if the company has a poorly managed

'back end' when the product is manufactured, delivered and supported in the market.

Having a good NPI process is important but increasingly it is not enough. The importance and challenges of

achieving appropriate IP protection is also growing. Effective IP management can provide strategic

advantages in the market, protect revenue sources and also generate revenue through licensing and sale.

There is increasing opportunity for learning from other sectors in the innovation journey. With the

internet and global communication, business practices are much more visible and transferable.

The growth of Open Innovation thinking means that there are new opportunities for getting new ideas

from outside the business. This can help leverage customer knowledge and other external innovators.

All the time companies face the threat – and have the opportunity – for market change through disruptive or radical innovation.


3. Study objectives and Approach

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Study Timetable

Develop goals and questionnaire October – December 2009

Data collection in UK January – May 2010

Data collection in Denmark August – October 2010

Analysis & reporting October 2010 – January 2011

Report Publication February 2011

This study aimed to answer the following question:

What are the key practices applied in the journey from ideas to innovative products that determine success?

This study does not look at the culture or general approach for innovation within an organisation – which wealready know to be critical - instead it examines the innovation journey itself.

Study objectives and Approach

Study Partners

Study lead

Academic lead - UK

IP Practices advice

Academic lead - Denmark


This study focused on the key processes enabling the Innovation Journey

External LinkagesExternal Linkages

Successful innovation requires an holistic system

The Innovation System

LeadershipLeadership

ClimateClimate

StrategyStrategy

ResourcesResources

Ideas Select Implement

Process

& Controls

Ideas Select Implement

Process

& Controls

©2006 Codexx Associates Ltd

Key innovation practices need to be effectively managed

new productsnew productsnew servicesnew services

business modelsbusiness models

process improvementprocess improvement

new marketsnew markets

market positioningmarket positioning

Learnin

g

Learning

Learnin

g

Learning

Commentary

Research by Professor John Bessant at Exeter University has shown that effective innovation requires a number of factors to be in placeto enable an innovation ‘system’. Codexx developed the ‘Foundations for Innovation’ (F4i) model together with Professor Bessant toassess organisations’ innovation systems and this showed strong correlation of these innovation practices with overall innovationperformance. Our study on the ‘Innovation Journey’ focuses on one key part of this total innovation system - the design andeffectiveness of the key processes used by businesses to make their ‘innovation journey’ for new products.

Our focus for this study

Foundations for Innovation (F4i)


Implementation

4. Prototype

5. Develop 6. G

o/N

o-g

o

Initiation

2. Idea

Exploration

1. Idea

Generation

Into Market

7. Prepare

8. Launch

& Support

Source: ‘Innovation Journey for Hi-Tech, Hi-Speed Organisations’ (unpublished paper) by Simon Bramwell and Alastair Ross. 2009

The Innovation Journey for technology products

The study examined business innovation practices and challenges throughout the innovation journey from idea to market – using an end-to-end model

We believe that this study is unique; other studies of product innovation focus on some elements of the innovation journey, this study considers the complete ‘end-to-end’ journey. This journey starts with ideas and ends with products in the marketplace that deliver value to the product stakeholders – that is: users, customers, the business that developed it, together with its partners .

Commentary

ideas

value


The ‘Innovation Journey’ Model covers the 9 key steps from ideas to value

Implementation

4. Prototype

5. Develop 6.

Go

/No

-go

Initiation

2. Idea

Exploration

1. Idea

Generation

3. Select

Into Market

7. Prepare

8. Launch

& Support

9. Learn

Phase 1 - INITIATION• Idea Generation

Creating or capturing new ideas for innovative products• Idea Exploration

Evaluating and testing the potential and feasibility of new ideas• Selection

Deciding which ideas to take further and which to shelf

Phase 2 - IMPLEMENTATION4. Prototype

Creating prototypes to further evaluate the concept5. Develop

Development of the concept into a product6. Go/No Go

Decision on whether to proceed to market, delay or cancel

Phase 3 – INTO MARKET7. Prepare for Market

Engaging internal functions and partners to prepare for launch8. Launch & Support

Launching the new product and supporting it in market9. Learn

Learning from customer use of the product – to enhance current and future offerings


On this journey we have reviewed the challenges that businesses face in managing the four key elements of a successful innovation journey

Technology

Users

Business Value

Execution

Development or application of the technology, components, design and aesthetics to create the product or technology offering.

How the user desires, wishes and needs are embedded in the innovation journey.How will we delight them?

The development and management of the strategy and goals for achieving value for the business stakeholders from the idea.*

The management of the strategy for delivering the solution (e.g. product ) to the market to achieve the defined business value goals.

* Value realisation models include product design, build and sell; design only, licensing, technology licensing, IP sale etc. Business benefits may not always be financial

Source: ‘Innovation Journey for Hi-Tech, Hi-Speed Organisations’ (unpublished paper) by Simon Bramwell and Alastair Ross. 2009

Our model of the innovation journey defines these four elements as the critical workstreams that require ongoing focus and management tohelp ensure a successful conclusion to the journey – i.e. a commercially successful product in the market place. The natural focus of most ‘NewProduct Development’ processes is on technology application, with lesser focus on the other areas. We believe that all four workstreams needhigh and ongoing focus throughout the innovation journey to secure success. We emphasise ‘User Focus’ rather than ‘Customer Focus’ becauseultimately user satisfaction will determine long term success for a product.

Commentary


The study participants were medium to large companies applying significant technology in their products – we identified innovation leaders for comparison

Companies were invited to participate in the study by Codexx, Exeter and Aalborg Universities and GJE.

13 UK-based companies and 12 Denmark-based companies took part in the study. Participating company sectors included medical systems, semiconductors, business & consumer electronics, telecommunication systems, adventure clothing, engineering products, and high-value toys.

Participants – who were typically the Engineering, Development or Innovation Director/Manager - completed a questionnaire and follow-up email interview. To enable companies to be open and frank in their response, participation was anonymous.

The Innovation Leaders•We selected the top 1/3 of the participants (a total of 8) based

on their innovation performance* and contrasted those against the total sample.

•This enabled us to look for correlation between innovation practices and performance.

•Of the innovation leaders, 6 were B2B (‘Business to Business’) and 2 were B2C (‘Business to Consumer’) compared to 21 B2B and 4 B2C overall.

•6 of the innovation leaders were based in the UK and 2 in Denmark.

•Given the study sample size, in making comparisons between the Leaders and others and between UK and Danish groups we only considered an absolute difference of >15% in a practice to be significant.

•The innovation leaders were well spread across the sample as measured by revenue (see adjacent diagram).

*Innovation performance was based on the following factors: Organic growth, time tomarket, revenue from products launched within last 3 years, quality of products andNPI performance to plan. This information was gathered from the study participants.

Revenue £m


4. Taking the Innovation Journey – what did we find?

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We found correlation between innovation practices and performance

This shows that those companies that applied the highest level of innovation practices were more likely to show the highest innovation performance. This supports academic findings.

We believe that the reason the correlation is not stronger, is that the innovation journey practices alone are not responsible for high innovation performance. The other aspects of the innovation ‘system’ in place within a business –covering key attributes such as culture, leadership and strategy –are also critical but are not covered in this study.

Commentary

Note: The alphabetic codes represent the companies that participated in the study. Each participant knows their code, but not the identify of other participants to enable them to determine their performance, but retain anonymity.


We found little correlation between company size (revenue) and innovation performance

Commentary

Highest outlier removed

Complete study sample Study sample minus one outlier

Our comparison of overall innovation performance against company revenue showed a small amount of correlation. However this wassignificantly reduced with the removal of one ‘outlier’ company that scored highest in innovation performance and was large (due to therelatively small size of our sample). Our identification of the ‘innovation leaders’ showed that they were fairly well spread across the revenuebands (see page 12). We would not be surprised by a small amount of correlation as larger companies, with higher resources, are able toapply more of the innovation practices (than smaller companies) – and this could lead to higher performance.

It’s important to remember that the innovation journey practices alone do not result in high innovation performance – the broader innovationsystem (including the culture and leadership) is also important. And this is often the reason for the success of smaller ‘innovative’ businesses.

turnover £m turnover £m


We found little correlation between company size (employees) and innovation performance

Commentary

Comparison of innovation performance against company size measured by employees showed even less correlation than did theprevious performance comparison with revenue (particularly with the same outlier removed as in the analysis of performanceagainst revenue). This should not be a surprise as business aspects such as leadership, culture and innovation processes are of moreinfluence on innovation than number of employees.

Highest outlier removed

Complete study sample Study sample minus one outlier

10 100 1000 10000 100000 10 100 1000 10000 100000

number of employees number of employees


Idea Exploration, Market Preparation and Intellectual Property (IP) management were key to innovation performance

Note: Performance Leaders were the top 1/3 of companies from the study sample with highest overall innovation performance. This produced 8 companies – 6 UK-based and 2 Denmark-based

Commentary

When we assessed the practices applied by participating companies across the innovation journey, we found that leaders were significantlyahead of the others in Idea Exploration, Market/Launch Preparation and in Intellectual Property Management. This points to these areas beingcritical to the success of an overall innovation journey – rather than those areas typically focused on such as Idea Generation and ProductDevelopment – which actually show little difference in our study.


Practices across the innovation journey varied significantly by companyP

ract

ice

sco

re %

Note: The alphabetic codes represent the companies that participated in the study. Each participant knows their code, but not the identify of other participants to enable them to determine their performance, but retain anonymity..

Commentary

The above charts show how participating companies scored by innovation journey practice area. The top chart shows range and mean of scoring, and the bottom table shows the 4 quartiles (i.e. each band contains 25% of companies by score) for each of the journey practice areas.

Journey Stage Idea

GenerationIdea

ExplorationIdea

SelectionPrototype

Product Devt

Go/NoGoto market

Prepare for Launch

Manuf& Sell

Learn IP

Quartile

Top EJKLOU BDEGHL BEHPSY BDLNOS DGHPTY DLRSUY BERSUY BDELPS BDOPRS DEJNSY

Upper ADGPVY CKOPUY DJKLNR AHKMPR ABCERU ABCHNP ACGMNP KMORTY AENTUX BHKLOT

Lower CHQRSX AJNRSV AIOQTX EFQTUW IJLOQS EJKQTV DHJOQV ACJQVW GHJKLW CGMPQU

Bottom BFIMNTW FIMQTWX CFGMUVW CGIJVXY FKMNVWX FGIMOWX FIKLTWX FGHINUX CFIMQVY AFIRVWX

Companies practices scores arranged by quartiles


Overall Danish & UK innovation practices were broadly similar other than in Idea Exploration and IP

Due to the small sample size, we have only reported on significant differences between the UK and Danish groups in this report – anythingless than a 15% relative difference in scoring we have ignored for this reason. On this basis, the only significant difference was in in IdeaExploration and IP Strategy & Management where the UK participants scored somewhat better. This showed that UK companies were using amore sophisticated approach to the exploration of new ideas and a higher focus on IP Strategy. These differences resulted in the UKcompanies scoring somewhat better in overall innovation practices and also higher in innovation performance in this study as is shown in thetable.

Commentary

Comparative Scoring

Innovation Practice (Average)

Innovation Performance (Average)

UK 60% 48%

Denmark 58% 42%


Detailed findings: Phase 1 - Initiation

Implementation

4. Prototype

5. Develop 6.

Go

/No

-go

Initiation

2. Idea

Exploration

1. Idea

Generation

3. Select

Into Market

7. Prepare

8. Launch

& Support

9. Learn

Effective Initiation creates concepts for new

products with highest potential value.

Excellence in this phase requires a broad and diverse approach to idea generation, a rigorous approach to idea exploration and a systematic approach for selection.


Step 1. Idea Generation – where do new ideas come from?

Today almost 2/3 of new product ideas come from employees in the participating companies. However Leaders relatively get 50% more of their

ideas from customers than do other companies. This shows that Leaders today are embracing ‘Open Innovation’ thinking more than othercompanies. However this average covers a very broad spread with some performance leaders getting 90% of their ideas from customers.

Overall the participants expected that there will be a significant growth in the use external sources for new ideas (e.g. customers and suppliers)

over the next five years, using open innovation techniques such as “Crowd-Sourcing”. However the Innovation Leaders do not see a growthin their use of external ideas – this is already comparatively high today and some of the leaders for example see the % of ideas generatedfrom customers decreasing from 90% to 80%.

Commentary

Now

Future

All Leaders


Step 1. Idea Generation – what is the difference between UK and Danish companies?

There is a significant difference in the sources of new ideas today for UK and Danish companies.

Today the UK companies generate significantly more of their new ideas from outside the company than do Danish companies. But this gap is expected to narrow significantly over the next 5 years.

Commentary

Now

Future

UK Denmark


Step 2. Idea Exploration – how do companies explore new ideas?

Leaders used a wider set of methods to explore new ideas. Thisprovides increased insight into both opportunities and challenges for newtechnologies and product concepts and so an increased likelihood ofimproving the likelihood of successful products.

Prototyping was the most popular way of exploring new ideas,

with more analytical Market Study and User Involvementapproaches having less emphasis. Each of these three approaches hasspecific strengths for idea exploration:

– Market Study enables quantitative judgment to be made regarding thesize of the opportunity for a product based on the idea.

– User Involvement is more qualitative but ensures that the idea istested and refined for user value.

– Prototyping can help bring the idea to live for user review and also testagainst manufacturability requirements.

The Danish companies scored significantly lower in the level of effortapplied to Exploring Markets and Exploring User needs than did the UKcompanies, resulting in a lower overall score in Idea Exploration.

Note: Exploration techniques defined were: Market study, User Involvement, Prototyping, Other

Commentary

Average number of techniques regularly used for Idea Exploration

UK 2.3

Denmark 1.8


Step 3. Selection – how do companies select which ideas to take forward?

We scored companies on the range of selection techniques used and the degree of use they made of each technique. Multiple methods usedeffectively provide most flexibility in dealing with different idea types and risk. The average score for selection methods shown in the lefttable focuses on relative performance of methods for Leaders v Others.

Stage-gate methods were the most popular way for companies to select ideas. Traditional new product development processes arebased on stage-gate methods which comprise defined work stages, separated by formalised review criteria.

Leaders used marginally more techniques for selection – to provide a richer set of methods which could be used as appropriatedepending on the nature and ‘riskiness’ of the new idea.

Danish companies used marginally more techniques for selection than UK companies. This potentially helps them in making abetter selection of ideas for development.

It’s important to recognise that academic evidence and business experience suggests that radical ideas are not managed well with astage-gate approach, a Dragons’ Den type approach, with more flexible selection criteria would be more suitable for providing the ‘space’needed to progress such ideas.

Commentary


Key challenges across the journey – Phase 1 (Initiation) – participant feedback

Getting technical staff to

think outside the box

Getting innovative ideas

Deciding which ideas to pursue and fund

them

A fear of shelving an idea that has

had a lot of time and effort put to it

Prioritisationbetween ideas (‘statement’ or safe bet)

A general pressure to

narrow in on an idea before its fully explored

Making technology and design meet

Involvement across the

organization

Technology

Meeting cost/time/ feature targets

Building a credible business case at the

expense of other ideas for funding

Return on Investment

Building a reliable business case for the

idea

Identification of a Product that will be

sufficiently market leading; can be

delivered in a competitive timescale; and at manageable risk.

Scoping the work involved

Business Value

Need to find a key customer to work with who is

committed to making it work in partnership

Availability of

market information

See beyond customers’ short sighted wants - reframing

value proposition

Users too often

describe the problem by describing the

their perceived solution

Obtaining proper

input from marketing/sales

Users

Customer acceptanceof ideas

NOTE: The above information was provided by the participating companies when asked for the key challenges encountered in this phase. We have grouped these comments around our four identified critical journey activities.

Execution

Technology

Users

Business Value

Execution


Key challenges across the journey – Phase 1 (Initiation) – analysis

In analysing the feedback from participants as to their main challenges in the Initiation phase, we groupedthe challenges against our four key themes of Technology, Users, Business Value, and Execution.

Technology: Compared with the other themes, there were less challenges identified in this area. The few barriers identified in the technology areawere mostly about the difficulty of getting truly innovative ideas that would deliver potentially market-leading solutions and getting technical staff tothink more creatively.

Users: Many of the challenges here were in the challenge of understanding potential value for users which the users could not themselves define.This is because the majority of users will consider new products as extrapolations from existing ones. Generating innovative new product ideasrequires deep understanding of customer/user needs – beyond their immediate perceived needs. This is why focus groups alone will not generateradical new ideas – it is difficult for users to look beyond their current paradigm and they will typically be looking for today’s product but ‘better,cheaper, faster’. Techniques for exploring user needs through empathic observation (‘user anthropology’), or through following ‘Lead users’ - who arepushing the envelope of existing products and may well point the way to new innovations, or use of early prototypes to enable user visualisation -typically will prove more fruitful.

Business Value: Determining how best to realise value from an idea is critical to maximising the commercial benefits from an idea. This can beachieved in a number of ways, including: Developing, manufacturing and selling a new product; partnering to complement the new product withaccessories or services; licensing the underlying technology; designing the product and outsourcing the manufacture; patenting the IP and using it tolimit rivals freedom for movement. However the challenges identified by participants were in developing a business case. It is difficult enough todetermine the likely costs of development – particularly if the proposed new product idea is radically different from today’s offerings. However it issignificantly more difficult to generate robust revenue and profit figures for a radical new product. This is typically why radical new products arerejected by conventional stage-gate selection methods and a different approach is needed. Progressive businesses use a different exploration andselection process for new radical ideas that provide more time and resources to explore and evaluate their potential prior to the selection stage.

Execution: In this area challenges were identified in Idea Generation, Exploration and Selection. Good practice in this phase is to assemble aportfolio of explored ideas with a good balance of high and low risk ideas. This ensures that the business is not ‘betting its future’ on a few high risk‘do different’ new product ideas which may well have a great potential upside through major innovation, but if they don’t deliver on their perceivedpotential could damage the business through heavy investment with little return. Equally, this portfolio approach ensures that too conservative anapproach is not applied with just low risk ‘do better’ ideas selected. Close or co-development of a new idea with an existing customer is a good wayof proving a new idea, although care needs to be taken over the issues of Intellectual Property Management (i.e. who owns what).

Commentary

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Detailed findings: Phase 2 - Implementation

Implementation

4. Prototype

5. Develop 6.

Go

/No

-go

Initiation

2. Idea

Exploration

1. Idea

Generation

3. Select

Into Market

7. Prepare

8. Launch

& Support

9. Learn

Effective Implementation produces

products ready for market.

Excellence in this phase requires an effective use of prototyping to test new product concepts against market opportunities and technical and supply capabilities; it requires an effective development process and a robust decision pointprior to release for market preparation.


Step 4. Innovation Prototyping – what is it used for?

Overall prototyping was primarily used for functional testing and user experience.

Leaders actually score lower than the other companies in the number of prototype uses. This would indicate that the breadth of use ofprototypes is not critical to overall innovation success; instead what is key is how appropriately they are used. However there is a risk thatunexpected insights that would be gained from a less focused approach to prototyping could be lost.

There was little difference between UK and Danish companies in their total use of prototyping.

Commentary


Step 5. Product development – what methods are companies using?

The overall score in the Innovation Journey for Development was a combination of the methods used and the effective use of Informationtechnology (shown on next page).

Leaders were not ahead in their use of product development techniques in most areas. Indeed Leaders were significantlyless likely to be applying Agile techniques than other companies. Agile development methods are particularly prevalent in softwarecompanies with a focus on speed. Leaders use of formal Project Management techniques such as Prince2 was a little less than othercompanies, possibly indicating that lighter project management methods are more effective for those companies.

But Leaders are significantly ahead in their application of end-user involvement and in separating out technology and productdevelopment. This makes sense in that user involvement in development will help ensure that there is more user value in the endproduct – and thus a greater likelihood of market success. Separating out technology and product development reduces risk of the new

product being late to market or suffering from functional and quality problems – again increasing likely market success.

Danish companies were significantly more active than UK companies in applying project management, Lean and Agile methodsin their product development.

Commentary

** NPI Team decision

NPI stage-gate review


Step 5. Product development – how are companies applying Information Technology?

Information Technology can provide major benefits in new product innovation – enabling internal and external collaboration,simulation, CAD/CAM for example. We asked companies how effective they believed their use of IT was in their end-to-end innovation

process. Overall the UK companies scored significantly higher than the Danish companies and this was a key reason why the UKcompanies scored slightly higher overall in Product Development practices. Leaders assessment of their IT effectiveness is on average 30%higher than the other companies, indicating that this is an important area of practice differentiation – however only 6 of the 8 leadersanswered this question, so the sample size is low.

Whilst IT does not replace the value of face-to-face contact, it has a powerful role to play in enabling effective collaboration with users,suppliers and partners, and in enabling fast time-to-market through computer-aided design and simulation. The role of online collaborationtools such as web forums, virtual worlds (such as Second Life) and Facebook is increasing the ease by which companies can interact with their

users and through which user communities can bring enhanced value to a product offering.

Commentary


Step 6. Go to market selection – how do companies decide to go/no go to market?

Leaders place a higher focus on sales & marketing signoff for go-to-market decisions than the other companies. Again this

emphasises the higher user/market focus that the Leaders have shown across the journey compared to other companies.

This user focus ensures that an over-focus on technology or sunk investment will not necessarily ensure that market launch goes ahead if

the original user value proposition has not been met in development or market conditions have changed (for example a new market

entrant). Instead re-development may be required or possibly even cancellation. However we cannot ignore the ‘head of steam’ that can

build up behind a new product which simply pushes it through to launch as management take the view that too much investment has been

made. Of course this approach to innovation does not make a leader…

Note: ‘Other’ included Senior Management

Commentary


Key challenges across the journey – Phase 2 (Implementation) – participant feedback

Final subjective tests

Competitor product offerings coming to market

with new features during our development phase

Technical challenges

Ensuring firm cost-benefits visible

Getting production time

for test production

Customer collaboration during

implementation

Ensuring design is frozen

Price and quality approval

Ensuring

manufacturing & supply processes are

robust and dependable

Ensuring sufficient resourcesto ensure fast time to market

Feature creeping and

avoiding up-stream activities and work with non-matured technologies

Specifications will need amending and the key issue is changing the right ones and not the easy

ones - avoiding the risk of having a complete product that doesn't deliver

Implementing change at

the same time as the existing product goes through the factory. We don't have an automated engineering change system.

Inappropriate project management

Balancing resourcesbetween product maintenance and new product development

Selecting the right new products

Buy in from all areas is

the most difficult as we have so many people and markets to satisfy

To get attention and focus on product launching from

sales/marketing

Availability of the key

technical resources

Keeping to schedule

Taking an end to end view (e.g.

including testing and maintenance)

Product sign off to

meet the launch timings

Customer acceptance of

products. Typically a product is customised for a specific customer.

Technology Business Value

ExecutionUsers

NOTE: The above information was provided by the participating companies when asked for the key challenges encountered in this phase. We have grouped these comments around our four identified critical journey activities.

Technology

Users

Business Value

Execution


Key challenges across the journey – Phase 2 (Implementation) – analysis

In analysing the feedback from participants as to their main challenges in the Initiation phase, we groupedthe challenges against our four key themes of Technology, User. Business Value and Execution.

Technology: This is a key focus area is in the development of the new product through application of existing and new technologies. Manycompanies would argue that this is the key focus area and some might even admit it is their only focus area (resulting in technology-drivenproducts that fail in the market as they do not meet user requirements in a competitive way).

Users: Identified challenges relating to Users is comparatively low here. Ensuring that the end product will satisfy the wants and needs ofcustomers/users is critical to commercial success of any innovation. There is a very real danger of insufficient customer/user involvementthroughout the innovation journey. If this occurs, the end product may well not meet user requirements even if they were consulted at thestart of the journey. Businesses can help fix any user requirement gaps closer to product launch through late engineering changes, thoughthis does introduce potential risk and cost issues.

Business Value: There were only a few challenges identified in this area – this is primarily a focus area in Phase 1 – Initiation, where thevalue proposition is developed. In the Implementation phase the focus is on developing the product to realise the value propositiondetermined in the Initiation phase. During the development process and finally at the Go/No Go stage the product value proposition needsto be reviewed to determine if it still meets the original value goals. Project management methodologies such as Prince2 encourages acontinual focus on business case, which is important when changes are made in development which could impact the product or technologyvalue proposition.

Execution: There is an understandably strong focus on this area, judged by the share of the total challenges identified by participants.Project management and collaboration with other internal functions (such as manufacturing) and external partners (such as software oraccessory developers, distributors and retailers) are critical areas that must be managed effectively.

Commentary

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Detailed findings: Phase 3 – Into Market

Implementation

4. Prototype

5. Develop 6.

Go

/No

-go

Initiation

2. Idea

Exploration

1. Idea

Generation

3. Select

Into Market

7. Prepare

8. Launch

& Support

9. Learn

Effective ‘Into Market’creates

commercial and user value through the

sale, support and enhacement of new products.

Excellence in this phase requires an integrated approach to market preparation involving the key development, sales & marketing and supply functions together with partners; it requires an effective launch to drive awareness and demand and ongoing support for users and the generation of additional revenue and user value through accessories and complementary offerings. Finally a Learning stage enables the organisation to capture experience and improve both its own methods and the value provided to users.


Step 7. Prepare – how do companies prepare for market introduction?

Commentary

The Leaders were again most user focused, with a high rating for how well they prepared user support for new products and in marking

changes in the product to cope with market changes – but also with high focus on making engineering changes to address product

issues – this is a surprising weakness, perhaps explained by the leaders’ lower scoring in some key product development practices compared

to the other companies. Another reason may be a philosophy of launching products quickly to the market and then fixing issues (an ’80:20’

approach) – this is common and acceptable where much of the functionality is software based. However this can be a risky approach for a

smaller business whose market position is not strong. Indeed enhancing products in market through software enhancements or fixes enables

companies to increase the number of positive ‘touch points’ with users - this can actually improve the user perception of value. This approach is

common for software-based products such as Smartphones, mp3 players and Personal Computers.


Step 8. Launch and Support – how do companies best ensure success in the market?

This stage explores the key activities that companies perform as part of their manufacturing and selling. We asked companies the activitiesthey actively performed, but we could not assess how well a company performed these activities (this would have required a moreconsultative study approach).

Leaders prioritise maximising user value and in providing accessories (though not value-added services) than do other companies.This continues the increased user focus that leader have shown in our study. It is however surprising that Leaders place a little less focus ondeveloping value-added services than do the others – given that there is plentiful evidence for complementary services providing enhancedproduct profitability. This finding may reflect the more Open Innovation focus of the leaders’ leaving other partners to develop complementaryservices. Alternatively, since the difference between the leaders and others is small, it may simply reflect small differences in a relatively smallsample.

However Leaders have a lower focus on providing lifetime support for products – this may reflect their product portfolio, a highturnover of new products or quality attributes that require less support than do other companies.

Commentary


Step 9. Learn – how well do companies capture & use their journey experience?

Innovation leaders were more likely to use structured approaches to learning from their users by monitoring of user experience(for example using web forums) or in running focus groups.

The Danish companies showed better practices in all areas of user-focused learning than did UK companies. This is reflected intheir higher score for Learning in the overall innovation journey (note that for the overall score on Learning the ‘Informal’ method wasgiven only 50% weighting compared to the others, as it is not a defined methods).

We also examined companies’ re-use of technology and whether they applied post-development debriefs. 100% of UK companies claimed

to seek and achieve re-use of technology in future products, 92% of Danish companies did the same. All UK companies and 70% of

Danish companies did post-development debriefs with their development teams. This shows that Danish companies put more focuson external learning than on internal learning.

Commentary


Key challenges across the journey – Phase 3 (Into Market) – participant feedback

Getting full sign off of product specification for

marketing as it can change due to final tests

Transfer from R&D to Manufacturing and

keeping build costs under control

To transfer knowledgeabout the product to

sales/marketing

Ramping production to

meet customer demand, volume / mix changes, product failures with customer

Market promotion needs

support from key partners; market is

conservative, prepared to wait

Ensuring tight connection with end-users (Product

is/was sold as OEM product)Getting feedback from

users

Our lead products are usually developed with the customer.

Launch is therefore a 2-phase process: one with the Lead Partner, and one for the rest of the world

Collecting market experience in first phase

of roll-out and react fast to problems

The real challenge is to

forecast the volumes

Get the sales force aligned and motivated

To fully utilize the cost-out potential of the products

Product would go to market unless there was a safety or reliability implication. We

basically have to 'get through' any issues and deal with them.

Marketing & Sales

Users

Manufacturing & Supply

Execution –Demand & Supply

Business Value

Learning - Degree of

formalizing learning Gathering and sharing

knowledge and information in a useable form and ensuring that the

learning is used in other products or projects

Technology

Communicationbetween departments NOTE: The above information was provided by the

participating companies when asked for the key challenges encountered in this phase. We have grouped these comments around our four identified critical journey activities.

Technology

Users

Business Value

Execution


Key challenges across the journey – Phase 3 (Into Market) – analysis

In analysing the feedback from participants as to their main challenges in the Initiation phase, we groupedthe challenges against our four key themes of Technology, User. Business Value and Execution.

Technology: By this phase the core technology application work has been completed and the focus will be on engineering changes andalso learning. There was some recognition of the need and challenge of performing structured learning – rather than simply ad hoc designteam ‘wash-ups’.

Users: There were challenges identified in working with early users, particularly to identify issues and quickly respond to them. This is acritical requirement for ensuring customer/user satisfaction and using the early adopters in an effective way – both for the benefit of theusers themselves and for the company in fast learning. Past research1 and industry experience has shown that a very responsive and highquality resolution of a user problem with a product can result in the user having higher satisfaction than if the product had not had aproblem in the first place. Such customers are likely to become advocates for the product and the company. A good recent examples of thisare Apple in dealing with the reception problems of its recent iPhone 4 – a fundamental technical problem resulted in high press coveragefor the new product, but Apple’s quick response in recognising the issue meant that the product’s sales success was hardly impacted.Conversely poor resolution of early product defects will result in a poor image for the new product which will harm potential sales.

Business Value: There were few challenges identified in this area, other than in exploiting cost-down opportunities as the productmatures in the market. This is expected as there is little that can done in the business value proposition at this stage other than in salesincrease and in product cost reduction.

Execution: The vast majority of identified challenges were in the area of Execution, specifically covering the ‘Demand Generation’ areas ofSales and marketing and the ‘Demand Fulfilment’ areas of Manufacturing and Supply.

Commentary

1Kano, Noriaki; Nobuhiku Seraku, Fumio Takahashi, Shinichi Tsuji (April 1984). "Attractive quality and must-be quality" Journal of the Japanese Society for Quality Control 14 (2): 39–48. ISSN 0386-8230.

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Detailed findings: Intellectual Property Management

Implementation

4. Prototype

5. Develop 6.

Go

/No

-go

Initiation

2. Idea

Exploration

1. Idea

Generation

3. Select

Into Market

7. Prepare

8. Launch

& Support

9. Learn

Effective management of Intellectual Property (IP) is key to

maximising the value of an idea.

Excellence in IP Management requires a strategy for IP - that is tailored for each business and their own business strategy –together with a structured approach to IP capture, protection and exploitation.

IP Management


IP Management – how does IP management impact innovation performance?

There is clear correlation between IP management practices and overallinnovation performance. This means that companies that are more effective atproduct innovation are more likely to have effective methods in place for theirIntellectual Capital (IP) management – covering for example an IP policy, patenting ordesign protection.

However companies identified challenges in Costs & Complexity of the IP process andweaknesses in their own IP Management methods. The cost of effective IPmanagement is a particular challenge for smaller companies, with the cost ofdefending patent infringements perceived as a major particular barrier to patentingin the first place. The plain fact is that an undefendable patent is tantamount to abusiness giving away its ‘crown jewels’.

Key IP challenges identified by participating companies

Costs & Complexity of IP process•Costs, knowledge•The cost of the process•Price and value of patents•Length of process, legalistic (so avoided by employees) - needs to be driven

•Nothing is patented due to lack of knowledge/competences

Effectiveness of IP management methods•Currently we do not actively protect our IP. •Only have one product under patent.•Bringing new innovation to market it is important to protect the

idea that we can commercially exploit it and recoup investmentand research costs.

•That we have probable operability (non-infringement) and thatkey ideas can get the earliest priority date

•How to be more proactive•Applying too late and losing opportunities/protection

Other•Chinese copies•International Contract Law. Most of our IP is Know-How which is

not protectable by Patent, but is protectable by Contract. •No concern, we file about 100 patents per year•Due to the fact that our new products are based on very old

ideas it is hard to find features that can be legally protected.•Potential copy from competitors•How to make the biggest problems for our competitors•Protecting innovative ideas

Commentary

NOTE: IP Management Practice score was the average of the 9 IP practice questions on both IP Strategy and IP management that study participants answered.


IP Management – what’s the strategic role of IP?

The innovation Leaders have a significantly higher view of the strategic benefits of IP than the other companies. This should help

them justify the reason for investing in IP management – alternatively this view could be the result of their accepted investment in IP

management. Less than half of the other companies saw IP as increasing company value. The UK companies have a better strategic

view of the importance of IP than the Danish companies in the study.

The results also highlight that IP is seen by the leading innovators as important in increasing company value, limiting new competitors and

restricting the movement of existing competitors. This looks well understood but the bigger issue highlighted is the fact that so few see the

importance or role of IP in generating income by licensing. It is more likely that companies would take a rounded strategic view if

good foundations were in place to help them manage and monitor their IP. Leaders recognise the value of IP rights for limiting competitors’

activities and accept that the “temporary monopoly rights” granted by patents do create value for the company. But what proof exists that

these measures are in fact increasing corporate value? Is it reported and required at Board level?

Commentary


IP Management – what are the key practices?

The UK and global IP system is a complex one for companies to navigate through and use effectively – this was identified as a key

challenge by the participating companies. For IP to be effectively managed a policy/strategy needs to be in place, together with a

management system.

Our study showed that the innovation Leaders have significantly better practices for the management of IP than the other

companies.

Although the Danish companies showed a lower strategic view of IP compared to UK companies, this was reversed when it came

to their management approach to IP. Whilst they were less likely to set targets (perhaps a more Anglo-Saxon business approach) or rewards

for generation of formal IP (e.g. patents) – which is consistent with their cultural focus on teams rather than individuals – Danish

companies were ahead in all other areas of IP management – significantly in having a nominated IP Coordinator.

Commentary


Key challenges across the journey – Intellectual Property Management – analysis

Excellence in IP Management requires a strategy/policy for IP - that is tailored for each business and their own business

strategy – together with a structured approach to IP capture, protection and exploitation.

When companies know why they are acquiring or building specific IP in the market context (i.e. driven by their strategy), it is more likely that they

can justify the complexity and cost. The monetisation of IP is still little understood and few companies in the study are looking to make

revenue directly from their IP position. There is obviously work still be done to help explain how companies can exploit their IP rights in other

markets or territories to those in which they can compete themselves. For example, licensing their IP to companies who can make revenues for

the owner of the IP but who are not in direct competition or are in different countries. Most global markets are too big for any one company to

dominate completely so licensing out IP can often make revenues for them in a more practical way.

The differences between the UK and Danish results may be due to the increased general awareness of IP in the UK given programmes like

the BBC ‘Dragons Den’ but also due to more venture capital led funding in the UK, possibly leading to a more strategic view of IP.

Enforcing patents can be a high cost, something that is accepted by larger companies where the stakes and competition are so high (e.g.

pharmaceutical companies with huge long term investments to defend/get a return on). However the perceived cost is a major barrier to smaller

companies seeking and then enforcing patent protection. This high potential cost is recognised in the UK as a barrier for SMEs which is why the

UK Patents County Court (PCC) changed the law on October 1st 2010 to cap fees in IP litigation. Although this primarily applies to activities in the

UK, in its role as a Community Trade Mark or Community Design Court it has extended jurisdiction in some cases to infringement in other EU

member states and can issue orders that are enforceable across the EU.

Another approach for smaller firms to take is IP litigation insurance. This is now making a comeback with new offerings from insurance

companies. One option for an SME is to take out a defence policy to cover the legal costs of taking action on any IP infringement.

Within the UK, the Government has confirmed that it will introduce ‘UK patent box legislation’ that would allow a special 10% rate of tax on

revenues from patented IP for UK companies as a defence against companies moving IP offshore. This new legislation will form part of the

government's Finance Bill for 2012*. The biggest issue with this is that it only covers Patents, not all IP protection. Whilst this proposal would be

clearly attractive to large companies it would be of limited assistance for other smaller companies. One existing mechanism supporting IP

development in the UK is the UK R&D tax credits scheme enabling companies with R&D spending over £10,000 a year to gain a tax reduction.

Commentary

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* The UK Patent Box formed a key element of David Cameron’s speech to the Davos Economic Forum on 28-1-11


5. Learning points for businesses in making their innovation journey

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We identified those innovation journey practices which were most strongly correlated with innovation performance

Commentary

We examined the correlation of individual innovation practices with overall innovation performance and ranked the innovation practices

accordingly. Four of the Top Ten ranked innovation practices related to IP Management and Three of the Top Ten related to the Preparefor Market stage. Interestingly, areas we might have expected to appear here, such as Product Development practices are absent. This tells

us that idea protection and market preparation practices are the two areas with highest correlation with innovationperformance – based on the findings from this study.

Correlation with Innovation Performance

Correlation of innovation journey practices v Innovation Performance

Innovation Practice


Further exploration of the critical innovation practices

Commentary

Why should IP Management be so strongly correlated with innovation performance? Is effective IP Management an enabler forinnovation or does it naturally result from a company that is effective at innovation? In other words is IP Management an innovation

‘chicken or an egg’? A major argument for it being ‘the egg’ or a natural result of a company that is good at innovation, is thatsuccessful innovation produces IP and that IP needs to be protected and utilised to maximise the return from the original investment. Thusnaturally innovators would have a strong belief in the effectiveness of IP Management (thus IP Beliefs/Strategy practices scoring highly incorrelation with innovation performance).

The fact that practices such as ‘Engineering Changes for Market Changes’, ‘Establishing User Support for New Products’, ‘Marketing & SalesSignoff for new product launch’, and In-Market practices such as ‘Maximising User Value’ all score in the Top Ten reinforces the existing

finding that innovation high performers have stronger user focus in their innovation journey than other companies. Thisreinforces the need for companies to ensure that the ‘voice of the user’ is strongly represented throughout the innovation journey. For thisfinding tells us that technology or business case focused product development is less likely to result in innovation success.

We also see that companies that practice Open Innovation today – that is they generate a high percentage of new ideas from sourcesoutside their organisation (e.g. from customers or suppliers) – will be more likely to be high innovation performers.

One surprising inclusion in our ‘Top Ten’ is that companies ‘Making Engineering Changes to address product issues’ are more likely to behigh innovation performers. At first look this would seem to be a nonsense, as fixing product problems prior to launch surely smacks ofinefficiency, pointing to problems that should not have escaped from the development process. So why should it be a practice found inmany companies that are strong innovation performers? In our view there are two explanations why this might be consistent with highinnovation performance: 1. It is a natural result of a strong focus on reducing time to market, with the trade-off being the need to addresslate engineering changes. 2. It actually reflects the need to make product changes to address updated user requirements – rather thanfixing ‘faults’ in the product.

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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd

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In conclusion, we made a number of key findings from the study

1. We are unaware of any other studies that explore the innovation practices across the complete journey from ideas to value in the market.We believe that our broad study approach provides businesses with a practical way of reviewing their methods and performance in a criticalbusiness process – that of new product Initiation, Implementation and Introduction to Market.

2. Overall our study found significant correlation between innovation journey practices and ultimate innovation performance. This showed thatimproving practices across the nine steps of the innovation journey will result in improved innovation performance. To further enhanceinnovation performance, businesses need to address the other innovation practices in areas such as Leadership and Culture.1

3. The biggest gaps between Innovation Leaders and the others, in innovation journey practices were in Idea Exploration, Market/LaunchPreparation and in IP Strategy & Management. This suggests that these three areas are the most critical in determining innovation success. It isinteresting to note that Idea Exploration and Market Preparation are at opposite ends of the innovation journey – one determining the quality ofthe new ideas that go into the ‘innovation pipe’ and the other preparing the market resources and partners for new product exiting the‘innovation pipe’. This is an issue for many businesses whose existing New Product Development processes rarely cover these key front and back-end activities.

4. Leaders had a noticeably higher level of user focus across the innovation journey than did other companies and we would conclude that thisis a key enabler to their higher innovation performance.

5. In contrast, practice areas that might have been expected to have high importance – such as Product Development – show little difference inpractice between Innovation Leaders and the others.

6. When we examined the individual lower level practices that together comprised the nine individual steps through the innovation journey andtheir level of individual correlation with overall innovation performance, Intellectual Property (IP) management practices had the highestcorrelation with overall innovation performance. We believe that this is as much an outcome of being an effective innovator as an enabler tobecoming an effective innovator.

7. Overall, there was generally little overall difference between the UK and Danish participants, other than in Idea Exploration and in IPStrategy and Management, where the UK companies were a little further ahead. There were more differences at the detail level with differentpriorities in areas such as Learning and IP Management.

8. The study also confirmed that those companies practicing significant Open Innovation today were more likely to have higher innovation performance than those who were not.

9. The study sample was too small to enable valid comparisons between individual business attributes such as sectors and size.

1. As defined in the F4i innovation model on page 8


We make the following recommendations for businesses, based on the findings from the study

1. Increase user focus throughout the innovation journey with the ‘voice of the user’ represented throughout the end-to-end innovation process. This can be accomplished in the Initiation phase with more effort dedicated to ‘user observation’ and ‘collaborative idea generation and exploration’; in the Implementation phase with regular user reviews and prototyping; and in the ‘Into Market’ phase with more use of ‘user groups’.

2. Keep flexible to enable late changes from users - a key practice of innovation leaders. To enable this, ensure there is sufficient flexibility in the product architecture to enable changes and enhancements with minimal impacts on time-to-market and cost.

3. Focus on users not customers. They may well be the same, but in a B2B (business to business) relationship they are not. Certainly customer needs for purchase and support are important and these processes can be innovated. But when it comes to product innovation, it is the users who are key.

4. Examine your current NPI/NPD (New Product Introduction/Development) process – to ensure it is covering the front end Idea Generation, Exploration and Selection steps and the back end Market Preparation, Launch, Support & Learn steps. All too often these areas are not covered – and a key learning point from this study is that it is in these front and back-end areas that are critical to innovation success.

5. Give more emphasis to the management of IP (Intellectual Property) in your innovation processes. IP can offer key strategic benefits if managed effectively. A key starting point is to develop a strategy for IP within the business, identifying the potential IP value that is being generated and how best to exploit it for competitive benefit.

6. Review your overall innovation system. Whilst the innovation processes as reviewed in this study are a key enabler to innovation success, there are other key factors such as Leadership, Culture and Strategy within the business that are major determining factors in innovation success. Businesses that wish to become successful at innovation need to improve their overall innovation practices. To do this they should assess their overall innovation system to identify improvement needs and take action to address these needs.

Next steps

We are seeking to further develop the learning from this study by growing the sample size. In addition, we see the proven questionnaire allied to the existing database to be potentially a useful assessment tool for businesses seeking to improve their innovation performance. If you would be interested in takingpart in this work either as a business user or as a collaborator, then do contact us.

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APPENDIX

Study methodology

Further information

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Study methodology

The study was based on participating company responses to our questionnaire which provided explanation of the model and the individual question areas. Companies were invited to participate in the study by Codexx, Exeter and Aalborg Universities and GJE. Completed questionnaires were reviewed and email or phone follow-ups used if clarification or additional information needed.

Questionnaire details

There were 68 quantitative questions and an additional 12 qualitative questions covering the following practice areas:

Phase 1 - INITIATION•Idea Generation•Idea Exploration•Selection

Phase 2 - IMPLEMENTATION•Prototype•Product Development•Go/No Go

Phase 3 – INTO MARKET•Prepare for Market•Launch & Support•Learn

Five innovation performance areas were explored: Organic growth, time to market, revenue from products launched within last 3 years, quality of products and NPI performance to plan. This information was used to determine overall innovation performance.

In addition there were questions to profile the participating companies for size and sector.


Further information

For further information on this report or related information on managing innovation, contact:

Alastair RossDirector Codexx Associates Ltd

Web: www.codexx.comEmail: [email protected]: +44-1794-324167


END OF DOCUMENT

Documents

The Innovation Journey for technology-rich product businesses · Innovation Journey Study –February 2011 5 of 53 ©2011 Codexx Associates Ltd 2. The Landscape for product innovation