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1. Stage gate model

Chapter 6 Innovation Process
(3): Innovation Implementation

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Example of stage gate system Implementing a stage gate system

The case of ABC Electronics describes the design and

implementation of a stage gate system.
See [Link]

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Dealing with radical Typical reactions to ‘wild’ ideas

innovation

• Problem is such high uncertainty that it becomes hard

to evaluate.

• Risk is that organization rejects these options.

• Need some way of handling and evaluating these

projects.

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Typical reactions to ‘wild’ ideas

(continued) A map of innovation selection space

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Selection challenges mapped on to Selection challenges mapped on to

the model the model (continued)

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2. Design Thinking Tool

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• ‘The effective use of design is fundamental to the creation of

innovative products, processes and services. Good design can
significantly add value to products, lead to growth in sales and
enable both the exploitation of new markets and the consolidation
of existing ones.’ It continues, ‘The benefits of good design can be
seen as:
• Processes improved by gradual innovation
• Redesign of existing products in response to user needs, new
markets and competitor products
• Development of new products by anticipating new market
opportunities.’

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Tools for design thinking 3. Develop new products and services

• Introduction to the Essential Ideation Techniques which are the
Heart of Design Thinking | IxDF ([Link])

• Ideation is the creative process of generating, developing, and communicating new ideas

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Market research can play a number of Figure 14.1

key roles, including: New product concept and prototype
testing
 Identify new markets and products
 Predicting success patterns & obtaining customer reviews
 Identifying barriers to success
 Improvements to existing products
 Developing new features
 Reducing risk for the organisation

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Figure 14.2
So. . . How important is market research to NPD?
The tripartite product concept

Running a company on market research is like driving

looking in the rear view mirror.

(Anita Roddick, Former C.E.O Body Shop)

Why?

Source: Adapted from Saren, M.A.J. and Tzokas, N. (1994) Proceedings of the Annual Conference of the European Marketing Academy, Maastricht.

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Customers don’t know what is possible Table 14.1

Products that initially were rejected by
• Clayton Christensen (1997) investigated why well-run companies
later failed for example, Digital, IBM, Apple and Xerox. consumers but went on to be successful
• ‘Good management’ was the most powerful reason they failed to
remain market leaders (i.e., they continued to satisfy existing
customers; ignored new customers).

• Maybe the devotion to focus groups and market research has gone
too far?

• Research often viewed as a decision-making insurance policy.

Source: A dirty business, Guardian 16/03/1999, copyright Guardian News & Media Ltd 2010.

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Figure 14.3
If the major role of market research is to uncover
Gaining new customers of the future
needs (to develop & improve products), how effective
is it at doing so?

Three types of customer needs:

• Basic Needs
• Articulated Needs
• Exciting Needs
(King, 1985)

Source: Hamel, S. and Prahalad, C.K. (1994) Competing for the future, Harvard Business Review, vol. 72, no. 4, 122–8.

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Market research may lead to the Technology-intensive industries may

rejection of good ideas require a different approach
• Market research results frequently produce negative reactions to • Morone’s (1993) study of successful US product innovations revealed
discontinuous new products. that discontinuous product innovations (e.g. Fax, Photocopier, TV) are
necessary (for continued long-term success), but research won’t
• For example: the fax machine, the VCR and Dyson’s bagless vacuum uncover these!
cleaner.
• In technology-intensive industries success is achieved through the
• Yet companies continue to seek the views of consumers on their new creation of entirely new products and businesses.
product ideas; the debate is long-standing and controversial.
• Incremental improvements are necessary for maintaining leadership.
• To what extent is market research justified and should companies
sometimes ignore their customers?

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Main reasons for rejection Market research new product

1. Lack of imagination and foresight
development dilemma:
2. Installed base effect: What can firms do?
– the massive inertial effect of an existing technology or product that
• It seems the dilemma facing companies is two fold:
tends to preclude or severely slow the adoption of a superseding
technology or product.
– Example: Qwerty – familiar, available, adjustment, software 1. At the policy level: to what extent should companies pursue a strategy
adjustments etc. of providing more room for creativity and less for market research?
– radical product innovations frequently have to overcome the
currently installed technology base – usually through displacement. 2. At the operational level: to what extent should Product and Brand
3. Switching costs: Managers make decisions based upon market research findings?
– The one-time cost to the buyer who switches to the new offering
(Porter, 1985).

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To what extent should companies pursue a To what extent should product and brand
strategy of providing more room for creativity Managers make decisions based upon
and less for market research? market research findings?
Policy Considerations Operational Considerations

Issues: • arguably the need for innovation and creativity in market research is no less
than in any other area of management.
• conservative product development decision making
– To what extent should NPD be driven by research, and aiming • market research is still necessary to bring forth insights and viewpoints from
respondents.
to avoid mistakes?
• ‘short-termism’ • the difficulties lie in the selection and implementation of research methods
– Focus: incremental improvements and cost cutting (e.g., use of lickety stik, probe and learn or lead user analysis)
• damage to a firm’s creativity • in technology vacant consumer markets, the technology agenda is completely
• complementary market and R&D capabilities are therefore essential dominated by market research findings.

• more free-thinking and creativity needs to be afforded to the R&D department?

(in all markets!?)

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Implementation as a journey A simplified 4 stage model

• Concept generation – identifying the opportunities for

new products and services.

• Project assessment and selection – screening and

choosing projects which satisfy certain criteria.

• Product or service development – translating the

selected concepts into a physical product or a new
service.

• Product or service commercialization – testing,

launching and marketing the new product or service.

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Project selection Product development

Two filters:
This stage includes all the activities necessary to take the
Aggregate product plan – attempts to integrate the chosen concept and deliver a product or service for
various potential projects to ensure that the collective commercialization.
set of development projects meet the goals and
objectives of the firm, and help to build the capabilities
needed.

Developing specific product concepts. The two most

common processes at this level are the development
funnel and the stage gate system.

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Success factors in new product development

• Product advantage
• Market knowledge
• Clear product definition
• Risk assessment
• Project organization
• Project resources
• Proficiency of execution
• Top management support

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Winning at new products Product development influential factors

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Concept generation Concept generation

On the Portal there are several tools to help with concept

generation, for example: Follow the link below to hear a podcast on how market
research marked a shift from a producer-led to a consumer-
Design methods led approach to business
Creativity tools
Competitiveness profiling [Link]
Value curves
Lead user methods
Market research tools

See [Link]
entrepreneurship/

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4. Quality function deployment Quality function deployment

• Identify customer requirements, primary and

secondary, and any major dislikes.
• Rank requirements according to importance.
• Translate requirements into measurable characteristics.
• Establish the relationship between the customer
requirements and technical product characteristics, and
estimate the strength of the relationship.
• Choose appropriate units of measurement and
determine target values based on customer
requirements and competitor benchmarks.

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Differences between
QFD matrix
products and services
• Tangibility.
• Perceptions of service quality:
• tangible aspects;
• responsiveness;
• competence;
• assurance;
• empathy.
• Simultaneity.
• Storage.
• Customer contact.
• Location.

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Characteristics of service innovators Characteristics of service innovators

continued

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Success factors in service

SPOTS model
innovation: the SPOTS model

There is a full description of the model on the Portal

[Link]
entrepreneurship/

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Diffusion of innovations Rogers’ definition

• Diffusion is the means by which innovations are

translated into social and economic benefits. Rogers’ definition of diffusion is used widely:

• We know that the impact of the use of innovations is ‘the process by which an innovation is communicated
around four times that of their generation through certain channels over time among members of
a social system. It is a special type of communication, in
• However, the benefits of innovations can take 10–15 that the messages are concerned with new ideas’
years to be fully effected, and in practice most
innovations fail to be adopted widely, and so have
limited social or economic impact.

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Rogers’ 3 types of innovation Rogers’ 3 types of innovation

decision decision
• Individual, in which the individual is the main • Collective, where choices are made jointly with others
decision-maker, independent of peers. Decisions may in the social system, and there is significant peer
still be influenced by social norms and interpersonal pressure or formal requirement to conform. For
relationships, but the individual makes the ultimate example, the sorting and recycling of domestic waste.
choice. For example, the purchase of a consumer
durable such as a mobile phone. • Authoritative, where decisions to adopt are taken by a
few individuals within a social system, owing to their
power, status or expertise (e.g. adoption of ERP systems
by businesses, or MRI systems by hospitals).

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Models of diffusion The S-curve

In practice the precise pattern of adoption of an
innovation will depend on the interaction of demand-side
and supply-side factors:

• Demand-side factors – direct contact with or imitation

of prior adopters, adopters with different perceptions of
benefits and risk.

• Supply-side factors – relative advantage of an

innovation, availability of information, barriers to
adoption, feedback between developers and users.

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Barriers to adoption Factors affecting diffusion

In predicting the rate of adoption of an innovation, five
• economic – personal costs versus social benefits,
factors explain 49–87% of the variance:
access to information, insufficient incentives
• relative advantage
• behavioural – priorities, motivations, rationality,
• compatibility
inertia, propensity for change or risk
• complexity
• trialability
• organizational – goals, routines, power and influence,
• observability.
culture and stakeholders

• structural – infrastructure, sunk costs, governance.

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Relative advantage Attributes of innovation

• Relative advantage is the degree to which an • Primary attributes, such as size and cost, are invariant
innovation is perceived as better than the product it and inherent to a specific innovation irrespective of
supersedes, or competing products. the adopter.

• Typically measured in narrow economic terms, for • Secondary attributes, such as relative advantage and
example cost or financial payback compatibility, may vary from adopter to adopter,
being contingent upon the perceptions and context of
• Non-economic factors such as convenience, adopters.
satisfaction and social prestige may be equally
important.

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Compatibility Complexity
• Compatibility is the degree to which an innovation is perceived
to be consistent with the existing values, experience and needs • Complexity is the degree to which an innovation is
of potential adopters.
perceived as being difficult to understand or use.
• Two distinct aspects of compatibility:
• In general, innovations which are simpler for potential
• existing skills and practices, users to understand will be adopted more rapidly than
• and values and norms. those which require the adopter to develop new skills
and knowledge.
• Few innovations initially fit the user environment into which
they are introduced. Significant misalignments between the
innovation and the adopting organization will require changes in
the innovation or organization, or, in the most successful cases
of implementation, mutual adaptation of both.

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Trialability Observability
• Trialability is the degree to which an innovation can be
experimented with on a limited basis. • Observability is the degree to which the results of an
innovation are visible to others.
• An innovation that is trialable represents less
uncertainty to potential adopters, and allows learning • The easier it is for others to see the benefits of an
by doing. Innovations which can be trialled will innovation, the more likely it will be adopted.
generally be adopted more quickly than those which
cannot. • The simple epidemic model of diffusion assumes that
innovations spread as potential adopters come into
• Sometimes called ‘divisibility’ – how far can the risk of contact with existing users of an innovation.
adoption be broken down into small steps rather than
requiring a full commitment at the outset

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Checklist: Relative advantage Checklist: Compatibility

• How well does my plan show how much better off
people will be when they adopt it? • How well does my plan demonstrate that it is compatible with
• Why is this plan better than what has been done current values, past experiences and needs?
before? • Is the plan consistent with current practice?
• What advantages or benefits may there be to accepting
the plan?
• Does the plan meet the needs of a particular group?
• Who will gain from the implementation of the plan? • Does it offer better ways to reach our common goals?
• How will I (or others) be rewarded by adopting the • Who will naturally support and agree with the plan?
plan?
• How can I emphasize the plan’s benefits to all? • Can it be favourably named, packaged or presented?

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Checklist: Trialability Checklist: Complexity

• How well does my plan allow for trialability?

• How well does my plan provide for easy
• Can the plan be tried out or tested? communication, comprehension and use?
• Can uncertainty be reduced? • Is the plan easy for others to understand?
• Can it be explained clearly to many different people?
• Can we begin with a few parts of the plan? • Will the plan be easily communicated?
• How can others be encouraged to try out the plan? • How can the plan be made more simple or easy to
• Can the plan be modified by you or others? understand?
• Is the plan easy to use or follow?

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Checklist: Observability Checklist: Other factors

• How well does my plan provide results that are easily observed • What other resources will I need; how can I get them?
and visible to others? • What obstacles exist; how can we prevent or overcome them?
• Is the plan easy for others to find or obtain? • What new challenges will be created; and dealt with?
• Can the plan be made more visible to others? • How can I encourage commitment to the plan?
• How can I make the plan easier for others to see? • What feedback about the plan is needed?
• Will others be able to see the effects of the plan?
• Are there good reasons for not making the entire plan visible?

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Summary Summary

• The process of innovation is much more complex than • The adoption and diffusion of an innovation depend on the
technology responding to market signals. Effective business characteristics of the innovation, the nature of potential
planning under conditions of uncertainty demands a thorough adopters and the process of communication. The relative
understanding and management of the dynamics of advantage, compatibility, complexity, trialability and
innovation, including conception, development, adoption and observability of an innovation all affect the rate of diffusion.
diffusion.

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Summary Summary
There is a vast amount of management research on the
• Forecasting the development and adoption of innovations is subject of new product and service development, and we
difficult, but participative methods such as Delphi and scenario are now pretty certain what works and what does not.
planning are highly relevant to innovation and sustainability. In There are no guarantees that following the suggestions in
such cases the process of forecasting, including consultation
this chapter will produce a blockbuster product, service
and debate, is probably more important than the precise
or business, but if these elements are not managed well,
outcomes of the exercise.
your chances of success will be much lower. This is not
supposed to discourage experimentation and calculated
risk-taking but rather to provide a foundation for
evidence-based practice.

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Summary Summary
Research suggests that a range of factors affect the
success of a potential new product or service: • A formal process for new product and service
development should consist of distinct stages, such as
• Some factors are product-specific (e.g. product concept development, business case, product
advantage, clear target market and attention to pre- development, pilot and commercialization, separated
development activities). by distinct decision points, or gates, which have clear
criteria, such as product fit and product advantages.
• Other factors are more about the organizational context
and process (e.g. senior management support, formal
process and use of external knowledge).

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Summary Summary

• Different stages of the process demand different • Services and products are different in a number of
criteria and different tools and methods. Useful tools ways, especially intangibility and perceived benefits,
and methods at the concept stage include and so will demand the adaptation of the standard
segmentation, experimentation, focus groups and models and prescriptions for new product
customer partnering; and at the development stage development.
useful tools include prototyping, design for
production and QFD. • The relative advantage, compatibility, complexity,
trialability and observability of an innovation all affect
the rate of diffusion.

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