overcoming barriers to sustainable growth through ......derald kopren, business consultant, sopheon...

Turning Great Ideas into Great Products Page

Overcoming Barriers to

Sustainable Growth through

Innovation in Consumer

Goods Markets

Part 2: Turning Great Ideas into

Great Products

Bryan Seyfarth, Director of Product Strategy, Sopheon

Derald Kopren, Business Consultant, Sopheon

Turning Great Ideas into Great Products

Table of Contents

Executive Summary ............................................................................................................................................................... 3

The State of Innovation in the Consumer Goods Industry .................................................................................... 4

About the Front End of Innovation ................................................................................................................................. 5

Impediments to Developing High-Value Ideas and Concepts .............................................................................. 6

Five Principles of Effective Idea and Concept Development ................................................................................ 7

Drive Ideation with Strategy.......................................................................................................................................... 7

Connect Innovators to Other Ideas and to One Another .................................................................................... 8

Create Communities that Encourages Ideation ....................................................................................................... 8

Design Idea Flows for Consistency and Collaboration .......................................................................................... 9

Ensure Seamless Connections to Concept Development, Screening and Execution ..................................... 9

How Sopheon Can Help ................................................................................................................................................... 10

Related Reading .............................................................................................................................................................. 12

Reference Notes............................................................................................................................................................. 12

The information in this document is subject to change without notice. No part of this document may be

reproduced, stored or transmitted in any form or by any means, electronic or mechanical, for any purpose

without the express written permission of Sopheon.

Copyright

© Copyright 2012 Sopheon plc. All Rights Reserved.

Accolade, Vision Strategist, Idea Lab and Process Manager are trademarks of Sopheon plc.

Stage-Gate is a registered trademark of the Product Development Institute.

All other trademarks are the sole property of their respective owners.

Turning Great Ideas into Great Products Page 3

Executive Summary Many consumer goods companies have an abundance of ideas. Some don‟t have

enough. Others simply generate a lot of bad ones. By “bad” we mean low-value ideas

or ideas that end up not contributing to an organization‟s strategic goals. Consider

these statistics:

A survey by Sopheon and CGT magazine found that only 18 percent of

new products released by consumer goods companies were considered

by the originators to be “highly innovative.”1

In the same survey, nearly 60 percent of consumer firms said that their

products weren‟t sufficiently differentiated from the competition.2

A recent Nielsen study discovered that only 6 percent of new

consumer products generate the level of category growth needed by

retailers to justify expanded shelf space.3

The inference is clear: not enough high-value ideas are entering the pipelines. And in

today‟s business climate, in which many consumer goods firms struggle to maintain

their margins, the difference between average ideas and great ideas can be the

difference between disappointing and delighting your shareholders.

The viability of the front end of an innovation process cannot be gauged solely on

the basis of the number of ideas entering the funnel. Rather, it should be judged by

the business value of the best ideas being brought forward, and an organization‟s

effectiveness in converting those ideas into products. Most companies would prefer

20 bad ideas and one single outstanding idea to 21 ideas that are merely good. “In

the world of innovation, the extremes are what matter, not the average or the

norm.”4

This paper is the second in a series addressing the primary barriers confronting

consumer goods firms in their efforts to achieve sustainable business growth. It

focuses on one of the most critical phases of innovation management: the front end

of innovation. It examines challenges and solutions to successfully building and

maintaining a robust pipeline of ideas and concepts, and introduces the five key

principles of an effective front-end process:

Drive ideation with strategy;

Connect innovators to other ideas and to valuable knowledge sources

to facilitate discovery;

Create communities that encourage ideation;

Design idea flows for consistency and collaboration; and

Ensure a seamless transition from ideation to concept development and

execution.

Adherence to these principles can make the difference between a portfolio of

average ideas and a portfolio of great ideas… that become great consumer products.

The viability of the front end

of innovation should be

judged not by the number of

ideas generated but rather

by the business value of the

ideas being brought forward,

and the effectiveness in

converting those ideas into

products.

Adherence to the principles

introduced in this paper can

make the difference

between a portfolio of

average ideas and a

portfolio of great ideas…

that become great consumer

products.


The State of Innovation in the Consumer Goods

Industry

Executive teams in consumer goods firms face a critical imperative as they strive to

bring more value to shareholders. They must find new ways to grow the business,

often with unprecedented resource constraints. The essential role of innovation as a

growth engine is undisputed. Eighty-four percent of the senior executives

participating in a recent global survey by McKinsey said that innovation is extremely

or very important to their company‟s growth strategy. Sixty-eight percent said that

they believe new products and services in existing markets provide the most direct

path to organic growth.5

Fact is, even the most innovative products can be reduced to commodities over

time. As this happens, their financial value to the business steadily diminishes. The

challenge is to avoid the usual trajectory of decline by creating a predictable, evergreen

pipeline of innovative, high-value products that ensure sustainable market

differentiation.

In our work over the years with consumer goods prospects and customers, we have

identified four common barriers to creating sustainable differentiation through

innovation. Part 1 of this white paper series focused on the challenges of innovation

execution, and how to successfully execute a gated process. This paper addresses a

second area of challenge—ensuring that your organization has a strong pipeline of

high-value ideas and concepts feeding into the execution process.

The challenge is to avoid the

trajectory of declining

financial value resulting from

product commoditization by

creating a predictable,

evergreen pipeline of

innovative, high-value

products that ensure

sustainable market

differentiation.

Figure 1: Barriers to Innovation Success. Sopheon’s research and experience have determined

that there are four primary reasons consumer goods companies struggle in the pursuit of their

innovation objectives.


About the Front End of Innovation The outputs of your innovation efforts can only be as good as the input into the

process. A corollary truth is that the value of your new products or services is

directly linked to the value of the ideas and concepts you choose to develop.

Some companies struggle to get enough new ideas into their innovation processes.

But in general, new ideas are rarely in short supply. Most organizations have an

abundance of them. If anything, they have too many.

Our research and experience have shown that although it is important to maximize

the number of ideas at the front end of the innovation cycle, it is equally—if not

more—important that those new ideas be of high value. So how do you generate

more good (i.e., high-value) ideas? And how do you make sure that bad (i.e., low-

value) ideas are eliminated before they enter the development process and start

consuming precious and expensive resources? Knowing the answers to these

questions, and acting on them, will significantly enhance your organization‟s ability to

generate desired returns on innovation investments.

Figure 2: Overall Impact of Front-End Activities on Costs and Revenues. Best-

practice companies have a significantly higher number of ideas entering their vetting process.

But their innovation funnel has a tighter collar. On average, only 5 percent of ideas advance to

concept, compared to 23 percent in a typical company. An even smaller percentage make it to

development. These process differences result in dramatically higher new product success rates

and substantial reductions in the amount of resources wasted on project failures. The real win,

of course, is a lot more profit and revenue from new products.

The value of your new

products or services is

directly linked to the value of

the ideas and concepts you

choose to develop.


Impediments to Developing High-Value Ideas and

Concepts

In our research and experience, there are five impediments that consistently deter

consumer goods companies from generating more high-value ideas.

1. Business silos block the nurturing and development of ideas.

Sixty-two percent of the participants in a recent survey of consumer goods

manufacturers indicated their number-one challenge at the front end of the

innovation process is that “ideas are not broadly visible and therefore can‟t be

reused by others.”6 In many cases, this problem is rooted in functional and

geographical silos that impede communication and interaction related to ideation

activity. Such barriers can also hinder idea development. Some of the best ideas

come about when people find ways to break through these artificially imposed

boundaries and collaborate with others.

2. Ideas do not transition to concept development and execution, and end

up in a black hole.

In the same survey noted above, the number-two challenge at the front end of the

innovation process was that “good ideas „get stuck‟ and don‟t move forward into

development.” This issue was cited by 51 percent of respondents.7 It‟s another

way of saying that ideas are often lost in the potential black hole between idea

generation and the pipeline to execution. When employees see this happening,

they quickly lose interest in contributing to the ideation process.

3. Inconsistent processes for managing ideas cause inconsistent

prioritization.

Most companies do not have consistent methods for facilitating idea generation. In

many instances, each region, brand, or business unit does it differently. And even

within those organizational groups themselves, it is not uncommon to find a lack

of process consistency. Sometimes methodologies change from year to year. The

overall result is disorganization and chaos, and process dynamics that frequently

resemble those of the old idea suggestion box—an idea comes in, someone

decides if it has merit, and it either dies or disappears into the ether.

4. There’s no way to identify connections between ideas, or between

people.

Another common hindrance to effective idea development is a lack of support for

linking people to other ideas, people, and knowledge sources that may be relevant

to the idea they are bringing forward. To create higher-value ideas and concepts,

the submitters should be made aware of related ideas and expertise that already

exist and that might be leveraged. For many organizations, there is no systematic

way for such linkages to be made. Individual innovators toil in isolation, not

knowing if a colleague is developing a synergistic concept in some other part of

the business.

5. Ideas are unrelated to business strategy.

Too often, the ideas being generated are out of step with the strategic direction

and priorities of the organization. This issue is prevalent among companies that

simply launch idea generation programs and leave it up to the employees to figure

out what kinds of ideas are needed.

Ideas are often lost in the

potential black hole between

idea generation and the

pipeline to execution,

resulting in a loss of

motivation by employees to

contribute to the ideation

process.

Some of the best ideas come

about when people find

ways to break through the

artificially imposed

boundaries of functional and

geographical silos and

collaborate with others.


Five Principles of Effective Idea and Concept

Development Despite the significant challenges at the front end of the innovation process, most

consumer goods firms can make this critical phase a predictable, consistent and highly

productive aspect of their innovation efforts. We have identified the following proven,

best-practice principles which, when followed, will improve both the quantity and quality

of ideas entering the front end of your process.

1. Drive Ideation with Strategy Even when companies understand the importance of the front end and invest in systems

to address those requirements, potentially great ideas can be squandered. That is

because, too often, idea portfolios stand alone. They, and the systems governing them,

are “islands” in the organization, disconnected from both innovation strategies and

execution processes.

Simply stated, idea generation, selection and development should be directly linked to

defined strategic priorities and direction. Driving ideation with strategy helps to ensure

that resources are focused on the right kinds of ideas, those that relate to areas that the

company has identified as being the most commercially promising. Unless idea generation

and development are aligned with innovation and product strategy, the idea portfolio can

become filled with low-value, non-strategic ideas.

Tools such as idea „“challenges”, when linked to strategic innovation plans, increase the

probability that incoming ideas will be a good fit with identified market opportunities,

product and technology plans, and corporate growth strategies. For example, if the

company has identified new consumer segments of the market where you want to drive

growth, idea challenges can be launched that target specific consumer needs within that

segment. These challenges can prompt people from anywhere in the organization—from

the R&D lab to the shop floor—to come up with ideas that will address those needs.

Driving ideation with

strategy helps to ensure that

resources are focused on

ideas that are a good fit with

identified market

opportunities, product and

technology plans, and

corporate growth strategies.

Figure 3: The Business Value of Strategy as the Driver for Ideation. Top innovators apply

exceptional rigor to winnowing incoming ideas and making sure that resources are focused on those

new product opportunities that have the strongest alignment with innovation strategies and the greatest

commercial potential. This approach results in more product successes, significantly lower expenditures

on product failures (in some cases up to 57 percent less), and more revenue from new products.


2. Connect Innovators to Other Ideas and to One Another The best ideation systems provide support for connecting similar ideas to aid

discovery, synergy, symbiosis and further development. A pair of ideas may be of low

value on their own, but when combined they may have great potential.

Connecting idea submitters to individuals who have made related submissions or to

relevant subject matter experts can also contribute to the development of higher-value

ideas. Often, people focused on developing ideas for a particular brand, region or

platform will have ideas or expertise that are widely relevant to others. For example,

consider brand teams that may be working on very different product offerings but that

are targeting the same consumer segments. The consumer insights that make a brand

extension a winner in one area may be directly relevant for brand extensions in other

areas, multiplying the value of that insight.

Enabling ideation process participants to more easily make connections across brands,

regions or consumer segments facilitates serendipity and often increases the potential

worth of ideas as they pass through the front end of the innovation funnel.

Increasingly, enterprise innovation systems such as Sopheon‟s Accolade® Idea Lab™

solution can foster this connection by automatically notifying idea submitters and other

stakeholders of relevant ideation activity, thereby reducing the effort required to share

new ideas.

3. Create Communities that Encourage Ideation High-value ideas and concepts don‟t happen on their own, they are developed.

Effective development requires a climate that nurtures creativity and helps produce a

culture of innovation. Reward and recognition programs can play a role here.

However, it is most important that an organization‟s actions reflect an understanding

that good ideas do not emerge from rigid structures such as gated processes, but

rather through inputs among peers, teams, and internal and external communities-of-

interest.

Innovation excellence requires an infrastructure for identifying and supporting

development of the most commercially promising ideas. Many top innovators have

realized great benefit from creating communities to support collaboration and by

implementing tools that automatically increase the visibility of ideas of high interest to

community members.

For example, communities-of-practice might be organized around target consumer

segments or consumer trends in which the organization wants to encourage discussion

and knowledge-sharing (e.g., “restaurant-quality dining experiences in the home”).

Increasingly, technology support from innovation management systems is being used to

facilitate global participation in these communities. The dynamics of these systems

allow anyone in a community to build on new ideas via collaborative discussion, and

enable idea submitters to improve and develop their ideas based on community

feedback. Ongoing communities-of-practice are excellent forums for answering

questions, solving problems and sharing knowledge.

Enabling innovators to easily

make connections across

brands, regions or consumer

segments facilitates

serendipity and often

increases the potential value

of ideas as they pass

through the front end of the

innovation funnel.

Effective development of

ideas and concepts requires

a climate that nurtures

creativity and helps produce

a culture of innovation.


4. Design Idea Flows for Consistency and Collaboration As previously noted, good ideas do not emerge from rigid, gated or phase-based

structures but rather through interaction and discussion. There must also be

consistent but flexible workflows that focus on building and improving ideas. Because

most new ideas are relatively raw, they must be enhanced and nurtured before they

are of good quality. It is not uncommon for an idea to take on an entirely new form as

it passes through the innovation funnel.

Too often, companies fall into the trap of simply collecting ideas using a “suggestion

box” mentality. This means there is essentially no front-end process at all, just a means

of submission. What is worse, no consideration is given to the collaborative process

that must occur in order to truly develop a great idea.

A best-practice approach to front-end processes ensures that what drives ideation at

the outset is a strategy and/or a consumer insight. Then, consistent steps are laid out

to help contributors understand how they can submit ideas to help address that

consumer need. Additionally, explicit provision must be built into that process for

encouraging and capturing community feedback and discussion on an idea before it

proceeds into a business review.

5. Enable Seamless Connections to Concept Development,

Screening and Execution In order to operate effectively, ideation must be tightly integrated with other critical

front-end business processes. In consumer goods firms, this means that the ideation,

concept development and screening, and commercialization processes must be closely

knit. An effective stand-alone ideation process is not enough—ideas must be able to

flow easily into concept development and execution, and lessons learned during those

downstream processes must be able to come back upstream into the idea

development process.

The connection between idea and concept development is an area where many

companies fall short. One reason is that ideation systems are often not designed to

support both processes. During idea development, process capabilities should

emphasize enablement of divergent thinking, wide-open discussion, creativity and

brainstorming. However, in concept development, process capabilities should be

focused on support for convergent thinking, rigorous evaluation, and tough decisions.

Additionally, concept development typically involves a screening process in which third

-party research organizations such as Nielsen or IRI are engaged to evaluate the

concept against formal benchmarks.

In order to support effective innovation, front-end systems must encompass ideation,

concept development and screening, and then provide a smooth transition into

innovation execution. Important historical information should accompany each idea as

it proceeds through the cycle. This ensures that critical information is retained from

stage to stage and—more importantly—provides the context that is required for

others to learn why a concept was successful or not.

Consistent but flexible

workflows are required

for building on and

improving ideas.

In consumer goods firms,

the ideation, concept

development and

screening, and

commercialization

processes must be

closely knit.


How Sopheon Can Help

For over ten years, Sopheon has provided offerings to consumer goods firms that are

looking to improve their innovation results. Our flagship innovation management

solution, Accolade, provides robust, best-practice-based capabilities that enable

companies to increase the effectiveness of their gated processes (such as Stage-Gate®),

improve their portfolio decision-making, and have greater success with their

innovation growth strategies. In recognition of our market leadership, for two years in

a row Consumer Goods Technology (CGT) readers have voted Sopheon one of the

top ten providers of new product development and introduction solutions to

consumer goods manufacturers.

Another reason for this recognition is Sopheon‟s breadth of experience in helping

consumer goods manufacturers improve the front end of their innovation processes.

To accelerate the value that consumer firms can achieve in the front end of innovation,

Sopheon has partnered with world-leading consulting firm Kalypso to introduce FEI

Optimizer, a joint offering that enables consumer goods companies to transform the

front end of the process. The offering brings best-in-class software from Sopheon—via

the Accolade Idea Lab platform—together with expert services from Kalypso, an

acknowledged thought leader in consumer goods innovation. The combination enables

consumer goods firms to dramatically improve ideation and concept-development

processes. The result: bigger and better ideas and concepts that generate improved

business results.

We recognize that organizations vary greatly in the maturity and sophistication of their

front end of innovation practices. Regardless of where your organization stands, we

can demonstrate how the FEI Optimizer solution can provide your organization with a

comprehensive process for successful idea generation and development, all within a

framework that is uniquely suited to your business. It enables global teams to gather,

In recognition of our market

leadership, for two years in a

row Consumer Goods

Technology (CGT) readers

have voted Sopheon one of

the top ten providers of new

product development and

introduction solutions to

consumer goods

manufacturers.

Figure 4: Comparing Idea Development with Concept Development and Gated Execution.

The transition from phase to phase requires a fundamental shift in orientation. Unless they support all

modes of activity, innovation systems can become “black holes” for submitted ideas.


exchange and develop ideas, and collaborate on building them into transformational

innovations. Among other benefits, the solution will allow you to:

Increase the number of high-value ideas and concepts in your pipeline; Align ideation efforts with market, technology, and corporate growth

strategies; Convert small ideas into high-impact, commercially-promising concepts; Automatically connect submitters to other knowledge sources to better

develop ideas; Apply consistent, sustainable methods for generating, organizing and

evaluating ideas and concepts; Enable cultures and communities to participate in the innovation process; Enable a workflow of ideas and concepts in a way that meets the unique

requirements of the front end of innovation; and Seamlessly advance your best ideas into concept development, testing,

and on to commercialization.

Furthermore, because this solution is based upon on our Accolade Idea Lab platform,

it is seamlessly connected to the rest of our Accolade suite of innovation management

solutions, including our offerings for gated process management, portfolio

management, and innovation planning.

We encourage you to contact us for further discussion on how we can assist you in

improving the business results from your innovation process.

We can offer practical

assistance with

improving ideation and

concept development

processes. Contact us on

[email protected] to

learn more.

mailto:[email protected]


Related Reading in the Sopheon Resource Center

The Prepared Mind: Best Practices for Selecting and Managing Winning New Product Ideas

Author: Frank van Ruyssevelt, Business Consultant, Sopheon

Guided Ideation: A Management Approach to Creativity-Based Performance

Author: Anders Hemre, founder of Interknowledge Technologies and the former chief knowledge officer at

Ericsson Canada

Overcoming Barriers to Sustainable Growth through Innovation in Consumer Goods Markets, Part 1:

Successfully Executing Gated Processes

Authors: Ed Herzog, Vice President Consumer Goods Market Development Sopheon; Bryan Seyfarth,

Director of Product Strategy, Sopheon

Reference Notes 1 CGT Magazine (2011) “New Product Development: Product Launches Hindered by Major Challenges”,

September 2011. 2 CGT Magazine (2011) above. 3 ASCHE, M. (2012) “Five Ways to Drive True Innovation and Increase Sales”, Nielsenwire. 4 GIROTRA, K., TERWIESCH, C., and ULRICH, K. (2009). Idea Generation and the Quality of the Best Idea.

MANAGEMENT SCIENCE Vol. 56, No. 4, April 2010, pp. 591-605. 5 McKinsey Global Survey 2010, McKinsey & Company. 6 CGT Magazine (2011) above. 7 CGT Magazine (2011) above.

http://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/ThePreparedMindIdeaWP.aspxhttp://www.sopheon.com/RESOURCECENTER/ThirdPartyResearchUniversityStudies/HemreGuidedIdeationwhitepaper.aspxhttp://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/SuccessfullyExecutingGatedProcforCPGWP.aspxhttp://www.sopheon.com/RESOURCECENTER/ArticlesWhitePapers/SuccessfullyExecutingGatedProcforCPGWP.aspxhttp://blog.nielsen.com/nielsenwire/consumer/five-ways-to-drive-true-innovation-and-increase-sales/

Sopheon UK LTD (UK)

The Surrey Technology Centre 40 Occam Road, Surrey Research Park

Guildford Surrey GU2 7YG

The United Kingdom

Tel: +44 (0) 1483 685 735 Fax: +44 (0) 1483 685 740

Sopheon NV (NL)

Kantoorgebouw OFFICIA 1 De Boelelaan 7

1083 HJ Amsterdam

The Netherlands

Tel: +31 (0) 20 301 3900 Fax: +31 (0) 20 301 3999

Sopheon Corporation

3001 Metro Drive Minneapolis, Minnesota

55425-1566

USA

Tel: +1 952-851-7500

Fax: +1 952-851-7599 www.sopheon.com

About the Authors

Bryan Seyfarth, Ph.D., is director of product strategy for Sopheon, and the consumer goods segment leader for

Sopheon‟s Accolade solution suite. Bryan is an acknowledged expert on product development process

optimization for consumer goods manufacturers. His perspectives and analysis have appeared in such publications

as CGT and Retail Leader, and he is a frequent conference presenter. Bryan has advised consumer goods

companies throughout the world on the use of innovation best practices to improve new product output and

financial success. He can be reached at [email protected].

Derald Kopren, business consultant at Sopheon, has more than 20 years of consulting experience. He has played

a key role in the implementation and integration of innovation solutions for major corporations in a range of

industries. Derald can be reached at [email protected]

About Sopheon

Sopheon (LSE:SPE) is an international provider of software and services that help organizations improve the

business impact of product innovation. Sopheon‟s Accolade® solution enables end-to-end innovation

management, including innovation planning, ideation, innovation process execution, in-market product

management and product portfolio management. The software suite‟s Vision Strategist™ component automates

the roadmapping process, helping users to visualize and plan the future of products and technologies. Accolade‟s

Idea Lab™ component assists organizations in generating, selecting and developing winning product ideas.

Accolade Process Manager™ automates the product innovation process and provides strategic decision support

for the management of product portfolios.

More than 40 percent of Sopheon‟s current customers are in the consumer goods sector. Among them are many

of the largest and most innovative companies in the industry, including such well-known brands as Kimberly-

Clark, PepsiCo, Electrolux, Beiersdorf, Philips, Dr. Pepper Snapple Group, Land O‟Lakes and Rich Products.

Sopheon has operating bases in the United States, the United Kingdom and the Netherlands, with distribution,

implementation and support channels worldwide. For more information on Sopheon and its software and service

offerings, please visit www.sopheon.com.
mailto:[email protected]:[email protected]://www.sopheon.com

overcoming barriers to sustainable growth through ......derald kopren, business consultant, sopheon...

Documents