Innovation: Are Two Systems Better Than One?
In too many companies, the front end of development remains as fuzzy as it was decades ago. The same companies that will micro-manage IT, or spend time simplifying a portion of their manufacturing operations, show little interest in improving the early stage innovation activities that drive future top line growth. Within product development, companies spend time endlessly revising budgets, while ignoring the strategic management of the ideas that are the lifeblood of technology companies. The most striking product innovations are the result of both strategic planning and the careful nurturing of innovative product ideas. And yet companies do not have systematic processes for dealing with both of these aspects of their future product portfolio.
Two Planning Systems for Early Stage Product Innovation Companies that succeed in managing their product innovation future typically have two systems: a yearly Strategic Product Planning process that is synchronized to budgeting. This longer-term process connects the vision to budgets and product priorities. A shorter-term Front End Management process deals with the short term decision making that is required to nurture infant projects in their early stages.
Having both a formal Strategic Planning and an ongoing Front End Management process allows companies to respond to the changes that inevitably occur in fast-paced technology markets. Reviewing your product innovation future on a yearly periodicity renders your company liable to getting blindsided by changes such as new competitors, technological advances or rapidly emerging markets. Two linked processes, one long term and one short term, allows both foresight and forward motion to make sure your company’s future innovations are well in hand.
Why Two? The reason two such systems are effective is that product innovation is only one facet of your Strategic Plan. Having a lightweight Front End Management process, in addition to the yearly plan, helps to maintain focus on the tasks necessary to launch the right projects to realize your strategy, without being overwhelmed by other strategic initiatives contained in a comprehensive strategic plan (capital structure, infrastructure, M&A, marketing initiatives, etc.). Together, these two innovation systems connect the following:
- The Vision: a broad statement of where you’d like your company to be (3-5 year horizon)
- The Strategy: steps you intend to take to achieve that vision (2-3 year horizon)
- Product and technology roadmaps, priorities and budgets: These relate to the specific programs that will realize the strategy
The Strategic Product Planning process integrates the strategy, roadmaps and budgets. It is a straightforward, left to right process tied to the yearly budgeting routine. On the other hand, the Front End Management process is a lightweight, early stage activity. It occurs before projects enter the formal, product development pipeline. This is where you develop a portfolio of product concepts and where your company’s future is decided.
The Front End Management process answers two main questions:
- Should we work in this area? (i.e. Does this project align with our strategic needs?)
- Are we ready to begin development (can we ensure we have a deterministic program)?
It is important to have the right people on the decision-making committee. This is usually weighted toward Marketing, Research, Engineering and possibly Corporate Development rather than Finance or Operations. This C-Level committee needs to specify the priorities and criteria that help managers to develop the right portfolio. Often these criteria are the same as those used by Venture Capitalists. Decision-makers should thoroughly explore program and technology risks before detailed product development begins.
First Steps Toward Implementation To take steps toward securing a more predictable future for your product portfolio, first take a hard look at your yearly Strategic Planning activity insofar as it relates to product strategy. This should describe a linear ‘chain of logic’ from vision to dollars.
- Map out a yearly process that ties the vision all the way to the budget
- Does the vision align to the strategy
- Does the strategy tie explicitly to the roadmaps?
- Do the roadmaps tie explicitly to priorities and budgets?
- Create detailed swim lanes that show how the different groups feed one another
- Select the governance body and the criteria for the decision points along the way (This governance body should be the same as outlined for the Front End Management Process, with the addition of Finance)
Then develop a shorter-term Front End Management Process
- Create several (typically two) decision points that would help to:
- Manage orderly starting points for projects (based on priorities)
- Ensure that they are staffed properly with the right resources
- Ensure that the projects will address the key issues in order to lead to fast and predictable development
- Define the placement of these decision points
- Select two points in time to review projects at a high level
- First Reviews: ensures that the project is worthy of forming a cross functional team, and outlines the steps to test the hypothesis
- Second Review: ensures that the team demonstrates feasibility, reduces risk, and defines the broad parameters of the product offering. This gate should ensure that the team is ready to enter development
Many companies maintain that the fuzzy front end cannot have specific milestones and deliverables. We advocate the converse. Having a yearly Strategic Planning process that ties to an overall vision is necessary but not sufficient. Companies also need to tie the strategy to an explicit, gated pre-development Front End Management process for product innovation that allows you to select the right projects to load into your pipeline.
A fuzzy front-end tends to lead to a fuzzy future for your product innovation efforts. Best in class companies remove the fuzz from the front-end to ensure a more successful future; and they do it with two systems – one yearly, and one throughout the year.