From Ideas to Products
The process of choosing which ideas to convert to full-scale product development is perhaps even more critical to a company’s innovation success than is the ideation stage. The conversion stage is the point at which companies use all the processes and tools at their command to decide whether a given idea in the pipeline is a “go” or a “no go.” In the view of many innovation experts, this is where the most value is added. Says John Evans, corporate vice president for technology and innovation at the Lockheed Martin Corporation: “The conventional financial metrics appear to say that most of the value is created in the last steps of a project: development and commercialization. But those steps are the most expensive and risky. I believe that it’s this middle conversion phase, which we call investigation, where the value of a project can go up by a factor of 10.”
Most companies maintain data on their conversion rates, and on the rate at which products in development ultimately find their way into the marketplace. Overall, 43 percent of survey respondents said their company converted fewer than 20 percent of its ideas to development projects, and just 12 percent reported moving more than 60 percent into development.
These numbers, however, don’t really reflect the attitudes of innovators toward the number of ideas that ought to be generated, and the percentage of projects that should not be further developed. In this regard, company size matters. Our survey results show that the smaller companies in the Global Innovation 1000 (the companies ranked 101 to 1,000) report themselves to be twice as effective at the conversion stage as their largest peers (the companies ranked in the top 100), no doubt because the organizational issues are less complex, and ultimately less bureaucratic.
Compared with the processes and tools used at the ideation stage, those used at the conversion stage do not vary much among the three strategies. Three-quarters of all companies, for instance, depend on internal networks for help in vetting ideas for further development — an unsurprising result given that most companies, even Need Seekers, simply do not go far afield for conversion of their ideas, and some might even see going afield as a risk. The only external mechanism that many companies report using is “leading customer reviews,” in which top customers are given an early glimpse into the development pipeline. This tool is most popular among Market Readers, perhaps because their general cautiousness prompts them to double-check whether their products will succeed in the marketplace given existing alternatives.
Yet the true key to success at the conversion stage isn’t the specific tools and mechanisms used — after all, companies report that, by and large, they all use quite similar processes. The key to success is for companies to have the right people in place to manage the process, using experience and judgment to rigorously make the needed decisions. Says Solomon of Agilent: “Our pipeline is about how much we think a technology can move the needle in creating value for our customers, and usually, that’s not a numbers question when you are assessing a disruptive technology. It’s easy to make anything look good. [What matters is] the judgment of people who are very experienced in leading research, and we are fortunate to have really smart people who have a good combination of technology and business sense.”
That combination is critical when deciding which ideas to carry through to commercialization and which to kill. As ideas and projects move down the pipeline, business considerations become increasingly important. “In managing the research portfolio that is in the labs’ funnel,” says Solomon, “we constantly ask ourselves, ‘What have we learned about the technology that makes it more or less attractive than [it was] six months ago? What have we learned about the market, the competitive technologies — and what’s going on in the world that might help us decide whether the technology is now even more valuable or perhaps becoming a “me-too” technology? What has changed within Agilent in terms of our business priorities?’ All of these perspectives evolve over the course of our longer-range research, and influence our decision whether or not to continue to invest in a particular project.”