by David Nichols, John Wiley & Sons Ltd, 2007
You can get a much better return (“more bang from your bucks”) from your innovation process. The “innovation funnel”, the preferred methodology for innovation in large companies, is stifling new ideas. A new methodology called “Rocketing” produces more, higher quality ideas for less and enables you to get more from all the resources and effort you put into generating innovation.
(Reviewed by Kevin Barham in September 2007)
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Return on Ideas is a practical guide to getting “more bang for your bucks” from your innovation process. As the author David Nichols argues, innovation is the growth engine of our age, identified by CEOs all over the world as the route to success in the marketplace. But the process of innovation is taking longer and costing more than ever before.
David Nichols is a marketing coach and managing partner of brandgym, a consultancy that ”coaches teams to create a clear brand vision and the action plan to turn this into growth”. He reveals why the “innovation funnel”, the preferred methodology in large branded companies, is stifling new ideas and proposes a new methodology, which he calls “Rocketing”. This shows how managers can get more from all the resources and effort they put into generating innovation and how to get more, higher quality ideas for less.
More and more resources are being funnelled into the quest for tomorrow’s big innovation but it just isn’t happening, says the author. It’s costing more and more to develop each innovation and they are no more successful. CEOs say innovation is a critical core competence (“innovate or die”) but the innovation task seems to be getting harder and the results are usually “less than sparkling”.
The problem, according to the author, is the key innovation process used in many major businesses today: the "innovation funnel". This is the formal, admin intensive process of developing ideas in stages, at the end of which an evaluation whittles the ideas down to a smaller number so that resources can be focused on fewer “winners” in the next stage. The author believes that the funnel is in fact inspiring low-quality ideas, making the whole process longer and more resource intensive, and ultimately producing poor-quality output.
One suggested solution, noted by the author, is to break the rules and spearhead a drive to “put yourself out of business” before your competitors do by innovating entirely new markets. He argues, however, that attempts at such radical innovation can divert attention away from the core challenge which is to create growth in core markets with current brands – that, he says, is the real challenge for innovators.
Instead of focusing all efforts and resources on whittling down many ideas to a “winner”, Rocketing takes the analogy of a rocket motor and focuses on building ideas up to a maximum impact at launch. It is not intended as a total replacement for the Funnel, but as a reallocation of resources and an upgrading of the principles and methods used within it.
There are four stages to Rocketing:
The author says he has not written the book in a conventional, linear fashion. He avoids a long preamble and dives straight in, explaining the main principles of the idea, before going back and dealing with all the niceties and detail. Believing that readers can get more out of the book by taking a non-conventional route into it, he sets out a process for segmenting users, based on the time they have available (an “elevator trip” versus a “long haul flight”) and the main need they have in picking up the book (to be diverted versus a genuine desire to be challenged and to learn and develop). The four “needstates” he identifies are:
Different routes through the book are suggested for each of these needs. Very early on, for those who want a quick illustration of the main ideas, the author provides a case study of Calippo Shots. This presents the story of a “great innovation that took an impossible innovation brief and delivered in spades” to produce a multi-million dollar global success. The case shows how the marketing team working on Unilever’s water ice brand Calippo followed an unusual innovation process for a large company and came up with a product that changed the market into which it was launched. The case encapsulates the key themes and ideas from the book and explains the key success factors – adopting a mindset of problem solving rather than flaw spotting; repeated prototyping until the product is right; using a real test market, not a simulated one; and never giving up. It puts these within practical structures that readers can apply to their own innovation process.
The book does not deal with radical innovation (for that, the author recommends Blue ocean strategy by W Chan Kim and Renée Mauborgne). Core innovation, he says, is harder to do than radical innovation. The latter faces fewer constraints (business systems, distribution, etc are all new), it enjoys real autonomy (it doesn’t impact others until near the launch), and aims for fuzzy targets (just getting it off the ground will be good).
Core innovation, on the other hand, faces massive constraints (existing systems are all built around the current offer), has no autonomy (everyone has a valid opinion so nothing happens without a big debate), and has to meet the toughest targets (all current sales are at risk so a sales dip is not tolerated).
The author describes innovation as the “magic” that all businesses urgently need to thrive in today’s ultra-competitive markets. It has never been more central but success rates are dismal and not improving, despite the scrutiny being devoted to the idea development process by business process engineers and others. It is taking too long in big companies and nimbler, smaller competitors are often getting there first.
The culprit, according to the author, is the Innovation Funnel. The very process put in to make innovation more of a certainty is undermining it. It is stifling it with bureaucracy, poor decision making and a focus on picking faults rather than building competence. The alternative promoted by books on innovation is to reinvent your business from the ground up but that won’t do for core brands in core markets that need to achieve growth day in and day out.
Innovation Funnels were introduced to improve the innovation process and make it more efficient. The aim was to introduce a best practice method that would raise the quality of every project, to split innovation into clear steps that could be measured, and to channel resources into fewer more successful ideas. The funnel methodology is used by many branded businesses across many markets. The idea is to progress only those ideas that meet all the criteria (feasibility, big potential, etc) so that resources are only used where they will most likely produce results. But the funnel is constricting and squeezing out creativity and inspiration.
The author lists ten ways that the funnel stifles innovation:
As a result, the funnel produces a self-perpetuating spiral of decline. As innovation projects fail, the requirements for accountability rise and the cycle repeats itself, destroying value and wasting resources. We need to reverse the spiral so it becomes easier to make innovation pay and can then become a cycle of return.
The author provides a “Stifle-Meter”, a checklist for you to assess whether your funnel is stifling innovation.
The author proposes a much better way for branded businesses to develop their ideas; a “powerful” new paradigm for innovation based on the way a real rocket motor works. The four components consist of:
Rocket motors use simple but potent fuel to generate vast amounts of energy to lift themselves, and the heavy rockets they are attached to, up and out of the Earth’s atmosphere. In other words, “simple inputs produce an outsized effect that lifts the entire parent structure up and out of the gravitational field that holds it down”. This is precisely the job that innovation is intended to do for brands and businesses.
Rather than a funnel shape that starts empty, attracts random inputs and attempts to squeeze out a few drops of innovation at the end, we have a rocket with a clear destination, creating ideas as it goes and focused on producing maximum impact from the resources we put in.
Being clear on your goal is the first crucial step. The six key elements are:
The author suggests we think about the idea generation process as a continuous combustion process. Combustion tackles the key issue of not having enough high-quality ideas and has three components:
3M’s insistence that staff give 15% of their time to “free” innovation is one way to keep ideas continually bubbling up throughout the year. Two other techniques that can create a continuous flow of ideas in your team are impromptu brainstorming “quickies” to generate ideas for Bucket 1, and a once or twice-yearly “ideas amnesty” asking people to turn in their “hidden treasures” – unspoken ideas or “the ones that got away”.
As the author makes clear, getting lots of good ideas down to a few great ideas is one of the toughest parts of innovation. The two main reasons why the whittling down process takes so long and is so uncertain are poor internal screening (“death by PowerPoint”) and poor external screening – consumers killing good ideas in concept tests. Performing rather than presenting ideas, together with prototyping (e.g. making a mock-up) and visualisation, brings them to life and gives the best chance of showing their true potential. Key principles here include:
This is where ideas are turned into launch-ready products and services. This shortcuts the standard go-to-market process by building the idea into a mix much earlier. You need a positive attitude throughout the business so everybody is adding value and not just spotting flaws.
In the final stages of evaluation, the author recommends you put the innovation in a real test market, not a simulated one, to get real feedback. Maximising impact is the aim, not just making something “fit” the market. An idea will have maximum impact on launch when it has been expanded and developed in all dimensions of the mix to such an extent that it fits perfectly well into the market space it was intended for and “retailers grab it with both hands”.
The innovation work is not over at launch, however. Monitoring and making adjustments in the first year is critical for long-term success (i.e. “launch then tweak”).
The book is illustrated throughout with examples from companies as varied as Yo! Sushi, Apple, Vodafone, P&G, and Ben & Jerry’s. In addition, the author describes ten innovations that he says have taken on the challenge of “turning innovation into rocket science” and have succeeded. He suggests you can use these as an inspiration when brainstorming.
In today’s fast-moving markets, carrying out innovation projects faster brings big benefits. The author suggests five key factors that can increase speed without affecting quality and that, he claims, could complete a typical 12-month process in 8 weeks:
The author sets out nine “deadly” innovation pitfalls and how to avoid them. These include:
Where the last pitfall is concerned, the author says “Do a Dyson” (of vacuum cleaner fame) – have faith, persevere and never give up. The great innovators believe that “failure is but fuel on the fire of their eventual success”.
This is clearly a book written by someone who has “been there and done it” and is bound to be a hit with big company marketers seeking to sustain and renew their brands. The author’s notion of radical innovation as a diversion from the core challenge needs some comment, however. It’s a debate that runs through many recent business books. As Clayton Christensen argues, for example, in The innovator’s dilemma, continuous, incremental innovation may not be enough by itself. Trying to grow mainly by finding better ways of providing goods and services in existing markets runs the danger of not spotting the opportunity in disruptive technologies. It allows disruptive innovators, who may one day threaten the firm’s core operations, to incubate their businesses undisturbed. Even James Collins and Jerry Porras in Built to last, while pointing to the virtues of steady improvement as opposed to permanent revolution, believe that all firms need occasional BHAGs (“big, hairy, audacious goals”).