9 steps to power innovation with cross-functional best practices

Stage-Gate®, a process created by Stage-Gate International, is a cross-functional innovation best practice framework. For many B2B companies, their pain points focus on front-end processes to understand market needs. Companies that eliminate business risk in the early stages of new product development can better focus on technical risk.

Nine actions can help companies improve innovation.

R&D work on buckets. Innovation projects should be categorized by type of investment, and the three most common are technology development, new product development, and process development projects. Each requires a different Stage-Gate path to align R&D with business strategy. It also makes it possible to quantify the allocation of resources.

We see companies mixing technology and product development, and sometimes attempting technology projects as part of product development. It’s risky. Companies that combine these elements typically see failure rates of 80% to 90%.

Focus early product development on market needs. In a five-step process, steps one and two are front-end innovation, where ideas are delineated and design thinking is applied. It is essential to focus on market needs. This is where you focus on the segment you will need to research and the customers you will want to interview to get the information you need.

Imagine that a manufacturer of specialty chemical ingredients targets producers of semi-gloss paint. What is their job to do? They produce and sell semi-gloss paint. Simple, but it defines the scope of the interviews.

But there are subtleties involved. What results does the customer expect from the chemical manufacturer’s product? They may want to reduce factory mixing time, minimize waste, minimize fading, and ensure the paint will cover underlying surfaces with a single coat.

Our chemical manufacturers can uncover and rank the significance of these results through quantitative interviews. This leads to a product value proposition: a polymer that enables the efficient production of a single-coat, semi-gloss, sunlight-resistant paint.

Conducte on commercial risk with quantitative interviews. Simply guessing what customers want is risky. To reduce risk, you can base quantitative interviews (where you can apply metrics) on feedback you received in previous qualitative interviews. For example, if ‘abrasion resistance’ is identified in qualitative interviews, the quantitative question is: ‘How important is abrasion resistance on a scale of one to 10?’ and “How satisfied are you with the friction resistance you have today on a scale of 1 to 10?” Look for results that score high in importance and low in satisfaction.

Build teams to succeed. The best teams use formalized training in Stage-Gate® innovation processes. They are more likely to embrace team empowerment and responsibility. The composition, skills and leadership of teams are drivers of innovation.

Timing and quality of execution separated. If a company has a project with a high quality of opportunity, it perfectly matches the existing skills. The market is large and growing rapidly. There are several customer needs or outcomes that score high importance and low satisfaction, which means the market is hungry for improvement.

The quality of execution is different. It is a measure of the extent to which the project team has gained an understanding of customer needs. You can only achieve good quality execution if you not only know what customers want, but Why they want it.

Step on the accelerator. Our research shows that being first or second in the market often means a 30% increase in the likelihood of success for that product, giving companies a strategic advantage.

Speed ​​is important and requires adaptive, agile and automated approaches. Adaptive means having different paths for different types of projects. Start with the three categories: one path for technology development, another for new products, and a third for process development. These courses are a playbook, and experienced teams adapt it by selecting the activities that offer the greatest value.

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

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

Stop pressing the brake pedal. The goal is to overcome organizational frictions, whether they be spending freezes, travel bans, hiring delays, reorganizations or changes in strategy. In many companies, the path to faster and more successful innovation and growth is simply to stop short-term, finance-focused executive actions.

Pursue bigger and bolder innovation projects. When looking at failed projects, organizations need to consider whether there have been any “landmines” that have blown budgets and schedules. What would happen if they were spotted during a pre-mortem or post-mortem analysis? You can do this by generating assumptions early in the life of a project, then aggressively investigating the most dangerous ones.

Drive with the right metrics. Innovative organizations not only measure what’s important, but they also report it to their organization.

An effective measure of innovation is the Business Confidence Index (CCI). This indicator measures the percentage of R&D expenditure that is based on quantitative and unbiased customer information. The goal is to stop wasting R&D because of business risk. B2B companies can eliminate most business risk by identifying gaps in market satisfaction for customer needs. The higher the importance of certain customer outcomes and the lower current customer satisfaction, the greater the gap.

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

How do companies manage CCI?

First, place R&D into two compartments: known need and assumed need. The only way it is a known need is if there is quantitative data derived from customers. The CCI corresponds to R&D expenditure on projects whose needs are known. Imagine an R&D budget of $10 million and four projects that each consume $1 million. The company has recorded market satisfaction gaps on these projects. This is now a total of $4 million in R&D spending for projects with known needs, divided by a total R&D spending of $10 million. This means that it is a trade confidence index of 40%.

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

About Colin Palombo

Colin Palombo is Managing Partner of Stage-Gate International and leads SGI’s digital transformation practice. Colin helps clients around the world implement and digitize innovation best practices, including strategic roadmap, portfolio management, lean Stage-Gate®, agility, and to-do.

Colin is a former Visiting Professor of Innovation at the University of Strathclyde and holds an MBA with Honors from INSEAD and an MSc in Engineering and Computer Science from the University of Cambridge.

About Dan Adams

Dan Adamsfounder of The AIM Instituteis the author of New product master planthe Embarrassing realities blog and the popular 50 video series B2B organic growth. He is a chemical engineer with numerous patents and awards, including an entry into the National Inventors Hall of Fame. Dan has taught his B2B innovation methods to tens of thousands of B2B professionals worldwide, has lectured at numerous leading universities, and is a popular industry keynote speaker.

About Perry Perrie

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