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Conversations about Innovation
April 2007 - Vol 1, Issue 10
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Welcome to the OVO innovation newsletter.

April is the start of the conference season, and there are a number of conferences on innovation in the late spring and early summer. Take advantage of the offer in our newsletter below to attend the granddaddy of them all, the Front End of Innovation Conference. OVO will be exhibiting - see us in booth 15.

This month, in a continuing series of articles featuring some of our partners, we hear from Larry Schmitt from Inovo on the idea of a concept auction for ideas within your organization. Larry will be in attendance at the Front End conference as well.

We continue our series of columns on the important roles for innovation, focusing this month on the "prototyper". Finally, we'll examine the differences between "proactive" and "reactive" innovation strategies and when to use these approaches.

As noted in our introduction, spring brings with it the need to congregate and exchange ideas. I guess this is because spring falls after winter, when we all hunker down and try to stay warm, and before summer, when everyone is on vacation and a conference is the last thing on their minds.

One of the leading conferences for innovation is the Front End of Innovation conference, which has been held for the last five years. The conference features a lot of interesting speakers and practitioners.

The Front End conference gets its name from what was once called the "Fuzzy Front End" - the name applied to the early phases of product development, when trends, customer needs and wants and capabilities are being judged to determine what new products and services to create next. Whether you create physical products or services, every firm has a "front end" challenge to address.

That's because there is "science" associated with the "back end" or executional aspects of product or service development. Product development and product management functions are reasonably well defined and have well documented approaches and metrics. On the other hand, the front end was called fuzzy because, well, that terrain was a bit uncertain. Few metrics, processes and methodologies exist even today to move quickly from concept or opportunity to physical product. Sometimes it seems innovation is based on a roll of the dice.

Why is the front end "Fuzzy?"

The Front End of innovation has been fuzzy because there is a confluence of forces and a significant amount of uncertainty when identifying new products and services. Traditionally, other than R&D, most firms don't have any structured processes for considering what's next for new products and services. Concepts like ethnography, Voice of the Customer and trend spotting have all become much more important lately as firms seek to identify inputs that will help manage the front end and move ideas more quickly to new products and services. Additionally, it can be difficult to identify what customers actually want and need. Studies show that many consumers have a hard time defining new products or new features they want and would be willing to pay for. All of these attributes and others make the front end a challenging place for many companies.

Evolution

We understand that the only viable organic growth mechanism is to create new products and services, and given the ever shrinking product cycles and increased global competition, improving the ability to identify great ideas and move them quickly through a disciplined process means a greater chance to disrupt the market and differentiate the firm.

So the Front End is becoming less fuzzy, as new methods, tools and processes are developed. Only a few years ago it was rare to find an "Innovation Manager" within a firm that might have any number of "Product Managers". Today, most firms are building innovation teams to help harness the intellect and insights of their teams, and the consumer market as well. Innovation as a discipline is no longer a pipe dream but becoming a reality in many firms.

So the front end is becoming a very important focus area for many firms, and is losing some of its "fuzziness" - but it remains a critical business process with little definition, methodology and discipline.
In our continuing effort to reach out to other innovation leaders and understand their experiences and perspectives, we're pleased to welcome Larry Schmitt to our newsletter as a featured contributor this month. Larry is the president and co-founder of Inovo, a consulting firm focused on all aspects of innovation. Inovo and OVO are working together to create complementary software tools and service offerings.


One tool Inovo has developed is an interesting way to evaluate ideas within an organization. This allows individuals to bid on and auction the ideas from their ideation sessions and in their idea management systems. Ideas with the highest prices are more interesting to the audience. One of Inovo's clients, Yazaki, will be presenting their experience with concept auctions during a key note speech at the Front End of Innovation conference in Boston next Friday, May 12th.


Determining the value of an idea

What do you do with all the different concepts your ideation process generates? If your organization is like most, then evaluating and assessing them is a challenge. After all, they are just ideas - they can be rough, preliminary, and all very different. It's a common problem and it can be a tricky one to solve.
Typical prioritization methods range from a simple vote, to various ranking schemes (including the famous post-it note technique), to full blown market systems where ideas are traded like stocks. Voting doesn't tap the richness and depth of knowledge in the organization and can be subject to political forces if done publicly. Trading systems, while superior, bring difficulties of their own. These range from technical issues such as poor trading 'liquidity' to organizational issues such as the time required to stay involved in the market.

The Concept Auction™

An alternative to a full fledged market is an auction - a concept auction. The Concept Auction™ Decision Support Tool from Inovo is based on recent research into the 'wisdom of crowds' and the power of markets to deliver accurate assessments. Market-based mechanisms rely on the aggregate knowledge, intelligence, opinion, experience and perspective of diverse people making independent judgments. From these judgments comes the 'Wisdom of Crowds' - a phenomenon where the collective assessment is almost always more accurate than any individual's (or small group's) judgment.

An auction can also be more than just a means to prioritize. It's a way of taking the pulse of the organization. The market dynamics of an auction show:
  • Depth and breadth of support
  • Whether closely-ranked ideas are truly close alternatives
  • The distribution of different people's priorities
  • The consensus around each ranking
  • Where opinion "clusters"
  • Which people are best at spotting future value and anticipating organizational receptiveness

When making commitments in the front-end it's wise to know what the organization will support.

Auction Steps

The auction process itself follows four steps:
  1. Idea Preparation - Choosing the ideas for the auction and providing concise descriptions. In many cases these can come directly from an idea management system such as the OVO Incubator
  2. Bidding - A diverse group of participants (from tens to hundreds) are invited to participate in the auction and provide their input. Each person reviews the concepts and submits independent 'bids' weighing both risk and reward.
  3. Clearing - Auction software is used to process the bids and clear the auction
  4. Results - Graphs are generated showing value, consensus, and what the organization knows (or doesn't know! - uncertainty has a clear signature in auction results)

More information on the methods and applications of concept auctions can be found at www.conceptauction.com. During the upcoming Front End of Innovation conference in Boston (May 9th though 11th) a live auction will be available on this site. Up for bid: "The best methods of innovation"
Innovation as a cross-functional activity requires people in many different business functions to generate, manage, evaluate, prototype and launch new products and services. As a cross-functional activity, innovation requires that many people participate in ways that are not well-defined or organized by our existing organizational structures.

Innovation can create new part-time and full-time roles within your organization. Over the next few months we'll examine some of these roles and the value they can add to your innovation initiatives.

The Prototyper

This month, the innovation role we'll consider is the Prototyper. Last month we looked at the role of the Librarian in innovation initiatives. The Librarian helps the team capture and manage a portfolio of ideas, understanding what ideas have been captured and worked previously, and which teams or individuals may have experience with a particular topic. The Prototyper creates models, prototypes or simulations that provide consumers some indication of how the product or service will work, to obtain feedback from a group of likely users.

Prototyping

In most instances, the words "quick and dirty" are synonymous with poor, shoddy work. However, when it comes to quickly creating a representation of an idea as a new product or service, quick and dirty are the operative words. Most successful innovations are the outcome of frequent prototyping or simulation, building on previous concepts and identifying weaknesses to improve. Prototypers within your organization are the people who can transform an idea from a concept to a tangible product or simulation of a process.

Why Prototype?

Prototyping helps move an idea from a nebulous concept to a more tangible product or service. Prototyping and simulation help users or consumers understand the general principles and attributes of the product or service, and allow the users to provide much more specific and actionable feedback.

In some cases, a prototype of a new product can be built in under a day, to demonstrate the size, shape and most important features or attributes. A prototype can be created for services as well, usually in the form of a simulation. Building these representations of the eventual product or service helps improve the definition of the idea for the idea champion and provides much more interactivity for those who are trying to understand and evaluate the concept.

Prototypers

Clearly, no one person can fill the role as a prototyper, and prototypes in different stages of development require different skills and talents. An early prototype of a product may require nothing more than some pipe cleaners and foam core, while a later prototype may require photolithography or a machine shop. However, each prototype is valuable and defining a team or group that can help translate a concept into a physical, demonstrable object or simulation adds tremendous value to the innovation process.

Who sees the prototype?

Early prototypes or simulations are usually only provided to the team that generated the idea, for their comments and feedback. Successive iterations may be demonstrated to other internal users, business partners, vendors and consumers or consumer panels for more feedback and research. Eventually, the product or service will become a "pilot" to be sampled by a large body of consumers or customers, still with the concept that more work may be done to the product or service.

Conclusion

Just like voting in Chicago, prototyping should be done early and often. Your team will want to identify the best methods for these prototypes, and which individuals within your organization have the talents to create and demonstrate a prototype to a panel of consumers. Prototyping and customer feedback are some of the best ways to improve the odds of success of a new product, and overcomes the issue that people often can't define unmet needs and can't give specific feedback to ideas that are still in a conceptual state.

As you've probably surmised, there usually isn't a person who has the title "Prototyper", although a few companies in the consumer packaged goods market do have small teams dedicated to this capability. What's important is defining early in the evolution of the idea how to get quick, reliable feedback about the idea through some simulation or physical construct.
Debates rage in most meetings of innovators about the most appropriate tools and techniques for innovation. Some teams swear by an open suggestion box, to seek the wisdom of the team at large. Some others swear by ideation or brainstorming. Other use techniques like TRIZ to form or shape new ideas.
While all of these approaches are useful, we believe the team should consider is whether the organization has a proactive bias or a reactive bias towards innovation, and what that bias entails.

Reactive and Proactive

Reactive innovation (as defined here) is best described by a suggestion box. Many firms use a suggestion box, and many have become dissatisfied with the results. In many cases the problem is not with the tool, but with the expectation. A suggestion box allows anyone in the organization to submit any idea, and places the innovation team in a reactive mode, capturing, evaluating and managing a wide range of ideas with little consistency, some in synch with corporate direction and some far afield. This is not to say that an open suggestion box is necessarily a poor approach, just that it can place the team in a very reactive mode.

The challenge with the reactive mode is that the team doesn't seek and actively promote new ideas but waits for them to be discovered. In this approach, all ideas are equal since there are no filters or driving needs to highlight valuable ideas.

Other approaches, such as scheduled brainstorming or framed challenges to the organization, place the innovation team on a more proactive footing. In these cases the team is reaching out to try to identify the best ideas in the organization on specific topics from an identified group. Brainstorming and framed challenges also work more effectively when coupled with a "framing" document, which identifies the opportunity or challenge and sets scope constraints on the resulting ideas. These framing documents provide a lot of context for the ideation and help to ensure the generated ideas are actionable.

A proactive team works to set the stage for innovation by identifying trends, threats and opportunities and actively seeking ideas from the organization and from the environment. This active, selective bias means that it is easier to identify and evaluate ideas and easier to prioritize them as well.

Maturing as an innovative organization

Often when a firm is getting started on an innovation initiative, the first reaction is to create a suggestion box, so people can enter their ideas quickly. The suggestion box is a natural step that indicates to the organization that the firm wants their ideas. We actually discourage this approach as a team gets started, as the ideas are often so varied and so distributed that they are hard to evaluate and act on. Early in your innovation initiative, use the proactive approaches and combine them with well-identified opportunities and challenges that are framed. These proactive innovation techniques mean that your innovation team controls to some extent where the ideas originate and the opportunities or challenges that are addressed. As your organization grows and gains experience in innovation, the open suggestion box can become a valuable addition, as people within the firm begin to understand the importance of context when submitting an idea.

Context

Ideas in the abstract are interesting but difficult to categorize and prioritize. Even a small, insignificant idea in the right context can be exceptionally valuable. The reason so many firms falter initially when starting an innovation initiative is not that they fail to gather ideas or that the ideas are "bad" - the problem is that the ideas often have little context, and so cannot be effectively described, ranked or evaluated. A team will chase one idea after another, with no real regard for the problem being solved or the opportunity comtemplated. Defining the context for an idea will help establish how the idea should be evaluated, what its success factors are, how important the idea is to the organization and how it aligns to the strategic direction of the firm. Context simplifies and streamlines the selection and evaluation process.

Conclusion

Both "proactive" and "reactive" innovation is helpful and valid, but we advocate beginning your initiative by reaching out and defining the challenges, opportunities or trends and asking for ideas based on these criteria, rather than simply reacting to any and every idea presented by the organization. Starting out with a context means the ideas are easier to evaluate and probably address a strategic need or issue. Once the innovation initiative is underway, an open suggestion box approach can be added to the options, but users should be encouraged not only to add ideas but address the problem or opportunity solved and how to evaluate the idea.
In our work on innovation and idea management over the last few years, one recurring theme we've noticed is that innovation and idea management initiatives are often begun without enough forethought and planning. As we speak with individuals who have been tasked to innovate, we find:
  • Unclear goals
  • Uncertain direction
  • Poorly defined strategies
  • Little organizational support
  • Few defined processes

These factors tend to slow down an innovation initiative or keep the initiative from achieving what is possible. Innovation Readiness is a key factor to innovation success.

If Readiness is an important factor to success, how can you "Get Ready"? We at OVO suggest an innovation readiness assessment. Based on the work we've done, we've identified eight factors that are necessary for innovation success across the business. An assessment looks at each of those factors and helps determine the level of experience and support each of the factors has within the business, the level of effort necessary to improve that factor, the impact that will have to the business, and the costs and timeframes associated with improving those factors. Once the assessment is complete, it is easy to identify the "factors" that need work and a work plan to get the organization ready for successful innovation.

Got Traction?

If you have a team defined, and have started doing some innovation work but feel like you are not accomplishing much, you may need to back up and ensure your company is ready. Symptoms will include:
  • Different expectations across the organization
  • Unclear definition of your team's goals
  • Constantly evolving requirements and outcomes
  • No measurements or metrics established

If you encounter one or more of these symptoms, it's likely that your organization is not ready for the work you are doing. The executive team buy-in has not occurred, or has not been communicated, or the culture has not accepted the concept of an innovation team. Regardless of the problem, you'll need to fix these concerns before you can move ahead. Meanwhile the clock is ticking. You are expected to deliver something - but what? Unclear goals and shifting expectations mean you spend time on a number of ideas and projects, but none meet all the criteria necessary for success. Eventually the team falls into disrepute, because they've worked for quite a while and have little to show for it.

What's great about an innovation readiness assessment is that it does not take long to accomplish, provides very meaningful, actionable results and it helps ensure a much higher success rate when you start your innovation initiatives.

Use physical fitness as an analogy. If you decide to get in better shape and run a marathon, you'd probably consult a doctor to determine the areas of concern. You'd adjust your eating habits and exercise routine. You'd train to get ready for the marathon. Likewise, since innovation is such an all-encompassing activity, you need to lay the groundwork and prepare your organization for innovation. The average person won't be successful running a marathon without preparation, and most firms won't be successful creating sustainable innovation processes without similar preparation.

Back to Basics
In most cases where innovation initiatives have failed or stalled, the cause of the failure is not based on a lack of ideas within the organization, or the innovation team. Almost always, the stumbling block causing innovation to fail is a cultural or process issue that should have been addressed before the initiative was started. Before you start your innovation initiative, or before you get too far down the road, do a quick assessment of the factors we define to ensure your innovation initiative has a great chance for success.
Be sure to attend the upcoming Front End of Innovation conference, which is one of the leading conferences on innovation. OVO is proud to be a sponsor of the conference and will be an exhibitor as well.

The Conference will be held in Boston, and you can read all about it here.

Mention registration priority code: SPONM1904V and receive a 15% discount.

You can register at the IIR site.

If you'd like to discuss how OVO can work with you to improve your innovation strategies, ideation sessions, innovation processes or software, contact us today at our website or (919) 844-5644 x789. If you enjoyed this innovation newsletter, please pass it along to your friends. If you wish to unsubscribe, please see the link below.

Sincerely,
Jeffrey Phillips
OVO

phone: 919-844-5644 x789

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