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 / Spring 2008 / Issue 50(originally published by Booz & Company)


Launch and Learn

To consistently turn out profitable new offerings, companies must integrate three distinct innovation portfolios.

Illustration by Lars Leetaru

Despite the critical importance of new products, many companies, amazingly, lack the ability to develop new products and services consistently and efficiently. Accountability for this fundamental shortcoming rests squarely at the feet of executive leadership. And so does the responsibility for correcting it. Executive leaders need to inspire, and channel, the creativity of the organization while maintaining an appropriate level of discipline. Leaders must make the strategic decisions of where to invest, when, and how much — and the most difficult decision of all: when to walk away.

The root of most business innovation problems is a lack of adequate integration among the disparate corporate activities related to product creation. Without clear linkages among three distinct “innovation portfolios” — the current portfolio of products or services, the portfolio of advanced technology capabilities, and the portfolio of product creation projects — companies inevitably waste money on needless development efforts and miss out on revenue opportunities because of poorly planned product launches.

But integrating these portfolios is no easy task. Each has its own set of stimuli and time lines:

  • The product portfolio must constantly respond to customer feedback and the competitive environment. As critical as this market-back approach may be, however, it can also place excessive emphasis on marginal enhancements and “me too” products.
  • The advanced technology capabilities portfolio tends to focus on significant new capabilities, leading-edge innovation, and adaptation of existing technologies to new purposes. Its technology-forward approach, by definition, puts it on an unpredictable time line.
  • The product creation projects portfolio, while adhering to the discipline of the stage-gate product innovation process, must operate on a relatively tight time line to ensure that new products arrive in the marketplace at the right time.

Firsthand experience with a diverse mix of companies, together with field research, suggests that there is a way to reconcile these conflicting time lines and priorities. The most effective companies employ three enablers to improve the linkages among the portfolios. First, they separate advanced technology and product development efforts but explicitly link them with technology road maps and advanced technology demonstrators (see below). Second, they employ a product architecture that offers variety to the end customer, but at an affordable cost to the company. Finally, they use annual product reviews to engage executives in a detailed analysis of all three portfolios to secure the linkages and force the prioritization (and the painful but necessary culling) of each portfolio’s contents.

Research Meets Reality
Without a forcing function to bring focus, research projects can extend indefinitely. Advanced technology demonstrators (ATDs) can fill this need by compelling researchers to validate new technologies in a context similar to that in which customers will actually use them. Unlike prototypes, which typically represent a new or existing product within the research and development process, ATDs offer a way to authenticate new technological capabilities independent of product creation projects. For example, a voice-activated remote control for home electronics would represent a step-function change in remote-control technology and accordingly would be developed independently and validated as an ATD.

ATDs prove an idea on a product “host” within a context that simulates the real-use environments for the innovation. In the voice-activated control example, a home electronics company might initially build an ATD to simulate the viability of the device in a simple bedside clock-radio with limited functions. More advanced versions would compensate for the noisier environment of a living room and incorporate the wider range of functions of a DVD player. ATDs logically link to specific product creation projects, but their development must remain separate.

Although companies do not typically explain their product introduction delays and outright failures in public, we have noted that companies lose millions of dollars trying, essentially, to invent and develop a product simultaneously. ATDs offer a flexible way to avoid this; they link research projects with product creation projects without requiring adherence to the same time line. Breakthrough innovations are inherently hard to predict; designing a product around an assumed breakthrough usually leads to disaster. ATDs can help distinguish genuine breakthroughs from great expectations. That is why product creation projects should incorporate only technologies that have been proven with an ATD, and why an ATD should be developed separately from an announced product introduction.

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