A new study of innovation best practices shows that companies excelling at ideation and product development have significantly higher commercialization success rates for new-product projects. It found the proportion of projects entering development that become commercial successes was 32% higher for best-in-class innovators than for average performers. The study was conducted by the American Productivity & Quality Center (APQC) in partnership with the Product Development Institute Inc. (PDI). The research was based on input from 257 respondents, about half of whom came from the manufacturing sector.
Key Areas of Innovation Performance
The study identifies three key areas of innovation performance. The first is how companies are measuring their new product development performance, including both business-level and project-level metrics. Another is the mechanisms that enable top performing companies to drive success. Finally, the research focuses on best practices in innovation governance and gatekeeping.
In a recent interview about the study, Dr. Scott Edgett of PDI remarked
“[w]hat we’ve seen from the data is that the best performers are getting better and the worst performers are getting worse, and the average companies are stuck in the middle. The gap between the best and worst is getting bigger, not smaller. What’s happened is that the best performers are executing best practices in a repeatable manner – in particular, best practice approaches in gatekeeping and governance.”
Many companies are concentrating on pipeline management to provide the innovation and growth necessary to meet sales, profit and market share objectives, according to Edgett. With resources becoming increasingly scarce, the study determined that being able to make go/kill decisions earlier in the innovation process has become much more critical to maximizing the return on new product investments, as have speed to market, and remaining on time and on budget.
According to the study, the weakest innovation performers focus primarily on producing only incremental product improvements. Rather than creating new or disruptive products, these companies fall into an iterative innovation cycle producing only small improvements for existing products. The best performers tend to balance project types better and favor new-to-the-world product projects that drive top-line growth.
The Ultimate Question
The ultimate question, according to the study, is whether companies have a defined innovation management process in place and, if so, is that process working? Particular challenges include the fuzzy front end of the innovation pipeline and maximizing the success of key activities, such as initial screening of innovation ideas and assessing the value a customer places on a proposed product. Knowing what to measure and ensuring a process is in place are both important to innovation success, but the study suggests that it is even more vital to understand which key activities drive the majority of the organization’s success.
Other attributes of best-in-class performers, according to the study, are that they clearly designate gatekeepers, establish clear go/kill decision criteria, and articulate predefined gate meeting deliverables. Further to successful governance and gatekeeping, meetings actually occur with the correct people in attendance, the discussions and decisions are of high-quality, and decisions are made. After the meetings, it is critical that the decisions continue to be supported by decision makers.
Based on the research, companies are well-advised to strive for effective and truly innovative product development, regularly review projects, learn from mistakes as they arise, and share knowledge within their organization.
Complete findings from the research are available in a report, titled “New Product Development: Process Benchmarks and Performance Metrics”. The report includes benchmarking results that allow the reader to compare his/her innovation process performance to that of top, average and worst performers. It covers over 60 innovation performance indicators, offers new research into the impact of governance and people on new-product success, and provides detailed case studies on five top performers’ innovation programs complete with graphic illustrations of process and innovation management tools.
About the Author
Tina Cassler is a marketing communications specialist for Sopheon. She is the editor of inKNOWvations, Sopheon's monthly e-newsletter containing the latest information on business trends, benchmark data, events, and other resources to help you improve your organization's return on its investments in product innovation. You can follow Tina on Twitter @TinaCassler or @Sopheon