Innovation
Technological innovation is a key element for many industries, especially in research-intensive segments. Depending on the strategy for future growth, different types of innovation are required. However, this relation is by no means unilateral but more reciprocal. Hence, strategy does not only shape innovation but that the underlying technologies, their state, possibilities and limitations for innovation need to shape strategy as well.
Another aspect to consider concerns company resources limiting potential growth strategic options. One of the standard instrument for visualizing key aspects of different growth strategies is the Ansoff matrix:[1]
The specifics of the corresponding innovation processes and the organizational implementation of innovation are highly relevant for businesses. Daily management of innovation projects is performed using standard project management techniques. The most famous process approach on prescriptive level is the stage-gate approach, a more recent model is the Pentathlon-framework. Both have been widely adopted in industrial product development in the last decades.
Based on the realization that a high risk of failure exists in innovation projects and that the information necessary for a sound decision can become available at different project stages, these frameworks support innovation management on a project as well as on a portfolio level.
The stage-gate approach comprises two basic elements: stages of the innovation process and gates, at which decisions have to be made to either continue or to abandon the project.
Probably all major companies involved in product development use some sort of stage-gate approach. In fact, a certain type of approach with decisions on project continuation or abandonment is legally enforced in drug development. However, not all approaches contain a gate after every step and many processes are of a recursive and iterative nature. Cooper allowed for these in more recent publications by introducing simplified processes with fewer gates like stage-gate lite or stage-gate XPress[2] as well as agile processes[3] with adaptations along the entire innovation process.
The classical stage-gate process comprises:[4]
- Discovery: Idea generation and elaboration of ideas to required level,
- Gate 1: First idea screening regarding strategic fit, market attractiveness, estimation of technical feasibility and others,
- Scoping: Preliminary estimation of technical and market benefits as well as market size,
- Gate 2: Strict review of criteria similar to gate 1, only projects fulfilling all criteria are progressed,
- Build business case: General product design, primary research on markets and technology, construction of business case, outline of development plan, product and project definitions,
- Gate 3: Review of development and marketing plans, financial analyses and estimated customer needs (from scoping),
- Development: Detailed product design/application development, provision of first prototypes, improved financial analysis based on development outcome, patent ling and outline of production and market launch plans,
- Gate 4: Review of quality of prototypes, assessment of financial, marketing and production planning,
- Testing and validation: Up-scaling of development manufacturing to full scale, quality control of manufactured samples, review of marketing and production plans, improved financial analysis based on up-scaling outcome,
- Gate 5: Review of quality of product samples and plans from testing and validation phase,
- Launch: Market launch of product, implementation of plans for roll-out.
The stage-gate approach has several implications. A personnel management effect ensures a standard minimal information base for decisions on project continuation. In connection with e.g. risk lists or obligatory market reviews expensive mistakes can be reduced.
The segmentation of innovation projects by gates reduces overall risks on single project level, especially in the early phases. This has an impact on the portfolio level, when the combined risks of all projects have to be considered.
The newer, agile versions of the stage-gate approach allow for adjustment during the course of innovation projects. These adjustments are necessary to react on e.g. changed market conditions or shift in the technological basis.
Footnotes
- Ansoff, H. I. (1957). Strategies for Diversification. Harvard Business Review, 35 (5), 113–124.
- Cooper, R. G. (2014). What’s Next? After Stage-Gate. Research-Technology Management, 157 (1), 20-31. https://doi.org/10.5437/08956308X5606963.
- Cooper, R. G. (2014). What’s Next? After Stage-Gate. Research-Technology Management, 157 (1), 20-31. https://doi.org/10.5437/08956308X5606963.
Cooper, R. G., and Sommer, A. F. (2016). From Experience: The Agile-StageGate Hybrid Model: A Promising New Approach and a New Research Opportunity. Journal of Product Innovation Management. 33 (5), 513-526. https://doi.org/10.1111/jpim.12314. - Cooper, R. G. (2011): Winning at New Products: Creating Value Through Innovation. 4th ed. Basic Books.