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Beyond Stage-Gate: A New Approach to Manage Radical and Disruptive Innovation Projects in an Environment of High Uncertainty

Jose A. Briones, Ph.D. SpyroTek Performance Solutions, Dallas, TX

Summary Product innovation has been described as the way out of todays difficult business environment. However, the rate of success of development projects, in particular white space and disruptive innovation projects, remains low. This low success rate can be attributed in part to the erroneous application of methods designed for incremental innovation to projects with high levels of uncertainty. Common approaches to the management of innovation projects, like Waterfall or Stage-Gate, follow a linear approach that does not provide the flexibility needed for disruptive innovation to be successful. The key to success in disruptive innovation is the use of a strategy that reconciles opposite needs: flexibility and control. A framework of controlled iteration can provide the right level of flexibility while at the same time give management the information required for proper allocation of resources. Its time for an innovation in innovation itself. The need for effective approaches to the management of innovation projects led to the development of the SpyroTek System. This method applies an iterative, agile approach to market and business development. Development projects are classified based on degree of uncertainty and managed along project tracks appropriate to the level of uncertainty. Finally, appropriate t innovation tool sets are employed based on the best fit between information available and decision making needs. The SpyroTek System offers a balanced, agile approach to innovation management. It preserves the metrics needed for measurement of project progress, but also provides the flexibility needed for high uncertainty innovation projects to succeed.

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Problem Statement Recent examples such as Blockbuster, Borders, Kodak, Nokia and Blackberry show that innovation has become a matter of life and death for companies today. But innovation may be costly. Dr. William Strauss of FutureMetrics has documented that the ratio of R&D needed per unit of GDP output has gone from 1:1 in the early 90s to ~3:1 in 2009. This increase can be attributed to the fact that the rate of success of innovation projects, particularly radical or new market innovation projects rarely exceeds 20% and may be as low as 2.5%. Referring to classical innovation management processes such as Stage Gate, Clayton Christensen, author of the book The Innovators Dilemma, has stated: The Stage-Gate system assumes that the proposed strategy is the right strategy; the problem is that except in the case of incremental innovations, the right strategy cannot be completely known in advance. The Stage-Gate system is not suited to the task of assessing innovations whose purpose is to build new growth businesses, but most companies continue to follow it simply because they see no alternative. Christensen's observation reflects the need for new management approaches that increase the probability of success, but at the same time preserve the metrics required for measurement of progress and resource allocation. The challenge is then to reconcile a formal management framework with the flexibility that is needed for innovation to thrive. The Need for Iterations: To develop disruptive innovations, 1 round of voice of the customer is not enough to be the cornerstone of a project. This is because customers cannot say that they want what they do not know, and can only provide feedback on incremental modifications on what they do know. As the American industrialist Henry Ford famously said, "If I had asked people what they wanted, they would have said faster horses." The SpyroTek Solution The solution to this challenge consists of 3 parts: 1. Classifying projects according to the degree of uncertainty 2. Adopting a controlled iterative process to discovery 3. Using the right analysis tools that correspond to the level of uncertainty at each iteration level

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The practical framework that incorporates these solutions is show in Figure 1 below

Resources Quadrant IV Home Stretch Roadmap/Timeline

Launch Level Quadrant I Discovery Idea Generation VOC

Risk Analysis 2 Customer Testing Time Supply Chain Analysis Value in Use Analysis Quadrant III Scoping Prototype Development

1
Time Technology Assessment Business Case Regulatory IP Strategy Quadrant II Assessment

Time is the X axis, resources is the Y axis. Center = 0 for both, thus they both grow from the center. This is visual way to indicate that time and resources allocated should be low for level 1 projects and grow as more information is obtained and uncertainty is reduced.

Keys to the Process: Time and resources required are low when uncertainty is high, but increase as the project advances through each iteration and likelihood of success increase. The analysis is repeated at each level, but the tools used for each level are different. o The first iteration at level 1 uses tools more suitable for high levels of uncertainty, i.e. Discovery Driven Planning, Probabilistic Decision Analysis o The 3rd level of iteration uses more conventional management tools, i.e. Linear Stage-Gate, Agile, NPV.

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Benefits of the Spiral Approach: The use of this framework offers the following advantages compared to traditional linear innovation management systems: For disruptive innovation projects iterations are needed where customers evaluate a prototype and a new cycle starts, complete with a new VOC, market and business analysis. This framework allows for the iterations to occur in a controlled manner; The use of this framework, combined with the right analysis tools, allows for effective financial forecasting even in the early stages of the innovation project where uncertainty is high. The initial iterations, where uncertainty and risk are high (represented by the inner spirals on the chart) can be completed quickly and at low cost. Ideas can be rapidly promoted to the next iteration or discarded. Because initial resource allocation is minimal, resources are made available to focus on projects that have entered iteration 3 The controlled iteration approach provides a way to properly define the right value for the product or offering, leading to more accurate price estimates. In this framework, allocation of time and resources starts at low levels. These increase as the levels go up and the uncertainty is reduced, thus minimizing risk. This approach does not compare incremental innovation projects to radical innovation projects in the early stages, a classical mistake made by established leaders which results in the early kill of radical innovation projects. This framework for the management of innovation projects provides the flexibility needed for successful innovation projects in any industry and the metrics needed for proper measurement of progress and resource allocation. By utilizing this approach, managers insure that radical and disruptive innovation projects have a chance to prove their benefits and create the innovative products and services that companies need to remain competitive. This method has been used to successfully introduce a disruptive innovation to the construction additives market in Europe. Compared to conventional innovation management approaches, this framework led to the switch from an incremental innovation goal to a disruptive innovation technology with an identified profit potential of 25 MM$/yr. Resources
A short video that summarizes the Beyond Stage Gate framework for innovation http://www.slideshare.net/Brioneja/a-new-approach-to-innovation-managment
Beyond Stage Gate Framework Presentation http://www.slideshare.net/Brioneja/brioneja-beyond-stagegate-a-new-approach-for-innovation
Stage-Gate is a registered trademark from Stage-Gate Internationals Product Development Institute Inc.

SpyroTek Performance Solutions

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Bio
Dr. Jose A. Briones is currently the Director of Operations of SpyroTek Performance Solutions, a supplier of innovation management and support services. Dr. Briones also holds managerial and board positions in the following companies: SPOTS Tracking Systems, a developer of workflow management and order tracking software for small businesses, Smarty-Ears LLC, a developer of iPhone Apps for Speech Therapy applications, Green Chemistries Inc., a supplier of hypoallergenic Natural Rubber, and Celeritas Chemicals, a supplier of specialty chemicals for the Oil and Gas industry. He is also an Advisory Board Member of the DFW Product Group. Dr. Briones has 20 years of commercial and technical experience in the manufacturing and technology industries, holding positions in the areas of marketing, innovation, sales, engineering and R&D with Fortune 300 companies such as Celanese, Air Products and Reichhold. His experience also includes management of custom manufacturing companies and software startups. Dr. Briones has been the commercial or technical leader in the launch and commercialization of over 35 new products for a variety of applications and end use segments. He has been named as inventor in 6 different patents. Dr. Briones has a Ph.D. in Chemical Engineering from Clemson University and has an Executive MBA from Wharton Business School. His expertise and experience includes: Innovation Management, Product Development and Ideation, Business Model Assessments, Product Portfolio Value Analysis, Probabilistic Forecasting Decision Analysis and use of Social Media to achieve Social Change. Recent Publications A New Approach to Innovation Management. Video submission to semifinals stage of Wharton/Wipro Innovation Tournament. 2011 My Boss Told Me to Get the Voice of the Customer, Now What? Presentation at ProductCamp Austin 2011 Quantifying Uncertainty in Innovation Project Management Presentation at 2010 Risk Conference, Applications and Training - 2010 Beyond Stage-Gate A New Approach to Innovation Management. Presentation at ProductCamp Austin 2010 Value in Use Analysis and Strategy for Product Introductions Presentation at Product Camp Austin - 2010

Recent Patents Additive composition for mortars, cements and joint compounds - Dec. 2009 Methods for incorporating polyvinyl alcohol particles into products Jun 2009

Contact Information
Brioneja@SpyroTek.com

SpyroTek Performance Solutions

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