Understanding the Front End: A Common Language and Structured Picture Idea Genesis and Enrichment Idea Selection Analysis ENGINE Identification Definition Selection NPD Tech SG Peter A. Koen, Ph.D Stevens Institute of Technology E-mail: pkoen@stevens.edu www.frontendinnovation.com May 25, 2004 An & Co-Sponsored Best Practice Event
Agenda What is the Front End? NCD Model What it is? Most Effective Practices Most important part of Front End macro perspective Elements of Best Projects 2
What is the Front End of Innovation? Front End of Innovation is defined by: Activities that come before the formal and well structured New Product Development (NPD) Portion Front End of Innovation New Product Development Portion Structured with a formalized and prescribed set of activities and questions FEI activities are less structured and less predictable New product development portion includes BOTH new product and process Commercialization We prefer NOT use the term Fuzzy Front End since it implies that the FEI is mysterious, uncontrollable and cannot be managed. 3
What is the Front End of Innovation? Highly Innovative and Profitable Platform Strategies Leveraging Core Competencies/Capabilities Front End of Innovation New Product Development Stage Commercialization Size of Bubble is related to Profit Potential Platform Strategies Leveraging Existing Customer Value Chain Traditional Stage Gate Idea Selection Process for Incremental Products 4
Breakthrough Definition Breakthrough products* (i.e. new to the company or new the world) offer a 5-10 times or greater improvement in performance combined with a 30-50% or greater reduction in costs *Leifer, R., McDermott, C.M., O Connor, G.C., Peters, L.S., Rice, M. and R. W. Veryzer. Radical Innovation. Massachusetts: Harvard Business Press, (2000) 5
Platform Definition Platform products* establish a basic architecture for a next generation product or process and are substantially larger in scope and resources than incremental projects. Incremental Extension: Underwater version Incremental Extension: Addition of flash New Platform: Kodak s development of disposable single use 35 mm camera **Meyer, M.H. and Lehnerd, L., The Power of Product Platforms, New York: The Free Press, 1997 6
Why Focus on the Front End? Differences Work Commercialization Date Funding Revenue Expectation Front End Innovation Experimental, often chaotic. Eureka moments. Can schedule work but not invention Unpredictable Depends. In the beginning stages many projects may be bootlegged Often uncertain with a great deal of speculation New Product Development Stage Disciplined and goal oriented with a project plan High degree of certainty Budgeted Believable with increasing certainty as the release date gets closer Activity Individual or team emphasis in areas to minimize risk Multi-function product/process development team Measure of Progress Strengthened Milestone Achievement 7
Agenda What is the Front End? NCD Model What it is? Most Effective Practices Most important part of Front End macro perspective Elements of Best Projects 8
New Development Model (NCD) Provides a common language and terminology necessary to optimize the Front End of Innovation Engine Controllable Analysis Idea Generation and Enrichment ENGINE Idea Selection Influencing Factors Uncontrollable Core Front End Activity Elements Identification Definition Selection Tech SG NPD Koen, et. al., Providing Clarity and a Common Language to the Fuzzy Front End,, Research-Technology Management, (March-April 2001): pp 46-55. Koen, et. al., Fuzzy-Front End: Effective Methods, Tools and Techniques, In P. Belliveau, A Griffen and S. Sorermeyer, eds. PDMA Toolbook for New Product Development. New York: John Wiley and Sons, 2-35, 2002. 9
Definitions A business or technical need that the company or individual realizes by design or default they might want to pursue to capture competitive advantage, respond to a threat or solve a problem Idea Most embryonic form of a new product, service or envisioned solution Has a defined form (i.e. written and visual) with features and customer benefits combined with a broad understanding of the technology needed 10
Agenda What is the Front End? NCD Model What it is? Most Effective Practices Most important part of Front End macro perspective Elements of Best Projects 11
Quiz What elements of the NCD Model are highly innovative (i.e. lots of new products every year) companies very proficient in? 20 Idea Generation and Enrichment 30 Analysis 68 ENGINE Idea Selection Definition 38 36 Yesterday s class Identification 73 8 Tech SG 12
1 st Front End of Innovation Conference 13
Agenda What is the Front End? NCD Model What it is? Most Effective Practices Most important part of Front End macro perspective Elements of Best Projects 14
Elements of Effective Projects Early senior management involvement and commitment Idea Genesis and Enrichment Analysis ENGINE Identification Idea Selection Definition Selection NPD Tech SG Front End Maturity Model Adopted from PRTM s model for the entire innovation process The prime imperative for breakthrough projects in the Front End is NOT picking the winners, but killing the losers early. 15
Elements of Effective Projects Early involvement of business executive champion Collaborative culture which encourages knowledge creation Communities of Practice Idea Genesis and Enrichment Idea Selection IT Tools which enable peopleto-people contacts Collaborative Work Space Constancy of purpose Analysis ENGINE Identification Definition Selection NPD Aggressive Goals Tech SG 16
Elements of Effective Projects Collaborative Environment What is a collaborative culture? Mutual Trust Trust in the individual that you share tacit knowledge with Active Empathy To be able to share pain and frailties Access to help Experts in the organization are will to provide help Lenience in Judgment Harsh judgment, laughter and criticism will prevent the sharing of ones own true beliefs Courage Individuals should not be afraid of exposing their concepts to fierce judgment Collaborative culture means that the organization cares 17
Elements of Effective Practices Communities of Practice Diversity Creates new knowledge within the community Connects, acquires, exchanges and builds new knowledge New science occurs through the process of building upon internal and external knowledge communities Breakthrough Knowledge Usually Occurs at the Boundaries of the Old McDermott, 1999 18
Elements of Effective Practices Communities of Practice - an example Production and Reservoir Engineering Community at Schlumberger Goal is to better optimize the value of each well Consists of 536 members around the world Focused on Schlumberger s core competence in production and reservoir engineering Developed a series of web based case histories Catalog industry practices into good idea, Local Best Practice and Schlumberger Best Practice Community creates a support network for Schlumberger s technical experts 19
Elements of Effective Practices Communities of Practice Best Practices: Focus of on the core competencies of the corporation Leader should be well respected member of the community and be able to commit at least 25% time Experts need not apply Initially the thought leaders need to be part of the community Community of Practice should NOT become another project Create passion and real dialogue since the COP is voluntary Make connections between community members seamless McDermott, R., Knowing in Community: Ten Critical Factors for Community Success, IHRIM Journal, March, 2000. Koen, P.A. McDermott, R., Olsen, R. and Prather, C., Enhancing Knowledge Creation for Breakthrough Innovation: Tools and Techniques, to be published in PDMA Toolbook for New Product Development. 2 nd edition, John Wiley and Sons, New York: 2004. 20
Elements of Effective Projects Projects get started based on: Customer Trend Analysis (Clear ) Technology Trend Analysis Technology Road Mapping Competitive Intelligence Analysis Scenario Planning These efforts create many triggers Need to envision the future Analysis Idea Genesis and Enrichment ENGINE Identification Idea Selection Definition Selection Tech SG NPD 21
Market Attack Team A process for rapidly developing actionable plans for large market opportunities 3 months Experts Meeting Effort ideally includes 3-5 full time people Phase 1 (Charter) Phase 2 (Market and Technology Analysis) Phase 3 (Business Generation) Phase 4 (Business Case Generation) Project Scope Select broad concepts to focus on Select best concepts Challenge Workshop TR 1 Business Plan Preparing to Dive 1 st Deep Dive 2 nd Deep Dive Race to the Finish 22
Why Attack Team? Attack Team approach enables World Class Innovation - Wisdom of the Sages Business-Technology Interspersing Based on Market and Technology Trend Analysis Where the future opportunities come from Science Based Core Competencies Aggressive Goals (External) Scientific Peer Review Focusing (in contrast to spreading too thin) Constancy of Purpose Process Optimization which include: Complete Business Case, Management Oversight and involvement and fact based fast kills and metrics Full time project team populated with members with demonstrated track record and company credibility 23
Elements of Effective Projects Customer Ethnography approaches Lead User Methodology Early involvement of customer champion Discovering the Archetype of your customer Business-Technology Interspersing Technology Increasing linkages both internal and external (Technology Flow) Partnering Analysis Idea Genesis and Enrichment ENGINE Identification Idea Selection Definition Selection Tech SG NPD Diversity of cognitive styles on idea enrichment team 24
Elements of Effective Projects Analysis Idea Genesis and Enrichment ENGINE Identification Idea Selection Definition Selection Tech SG NPD Portfolio methodologies based on multiple factors of: Technical Success Probability Commercial Success Probability Reward Strategic Fit Strategic Leverage Using Anchored Scales NOT just financial justification Use of Options Theory to evaluate projects Screening methodologies are not used on breakthrough projects Holy Grail Obvious RIGOROUS use of the Technology Stage Gate for high risk projects 25
Technology Stage Gate Technology Stage Gate is an effective technology development process with management overview, business and scientific rigor which creates an environment of fast failures. Traditional Project Management Assumes that there is little uncertainty associated with the technologies Starting product development before technology is known Results in canceled or delayed projects, and wasted product development effort Ajamian, G. and Koen, P.A., Technology Stage Gate: A Structured Process for Managing High Risk, New Technology Projects, In P. Belliveau, A Griffen and S. Sorermeyer, eds. PDMA Toolbook for New Product Development. New York: John Wiley and Sons, 267-295, 2002. 26
Where it fits Front End of Innovation New Product Development Stage Commercialization Traditional Project Management Technology Stage Gate 27
Traditional Project Management Repeatable Process 85% repeatable Leverage from past experiences Predictable procedures Detailed project plan of what to do and when Can estimate cycle time Structure and discipline are critical Creativity is less important Project management skills are required V IV III II I 28
Technology Stage Gate Difficult to capture and leverage past experiences for future efforts Cycle time difficult to estimate Range of experimental outcomes is vast Detailed overall project plan is impractical Do not know how many gates Can t schedule invention Too much structure can inhibit creativity Project leaders need ability to manage uncertainty while focusing on project goals Technology Milestones are opaque TR N TR N-1 TR 1 TR 0 29
Technology Feasibility Point Confidence Level Technology Feasibility Point A B C D E F Confidence Level Technology Feasibility Point A B C D E F Confidence Level Technology Feasibility Point A B C D E F Technology Factor Technology Factor Technology Factor Usually MULTIPLE technologies are involved Need to concentrate on the problem child Some may be difficult to move Some may even FALL back! 30
Conclusions Front End of Innovation can be studied, evaluated and managed BUT only if there exists a common language Is NOT Fuzzy Should be thought of in a holistic manner Different for incremental, platform and breakthrough NCD Model Created Engine Five Front End Elements Influencing Factors 31
Conclusions Greatest weakness of FEI Engine Identification Technology Stage Gate Effective Practices for FEI are being better understood Technology and Market Trend Analysis Providing a collaborative environment for enhancing Knowledge Creation Really understanding unmet customer needs Managing high risk projects 32
Conclusions Breakthrough Projects Require senior management involvement, commitment and stomach Expect only 20-25% to be winners The key issue is NOT picking the winners but killing the losers early Discuss option cost to the next risk reduction milestone rather than total valuation Expect that the project will morph into something else Disruptive Businesses Sustaining Businesses need to embrace the disruptive Business Model Set up as a separate business unit Aggressively look for acquisition targets that are potentially disruptive 33