If your business has problems turning ideas into business growth, you may need to create an internal team charged with bringing new products to new markets.
One of our clients recently expressed her frustration that she and others in the organization were generating a lot of ideas for new products and markets, but she had no team she could rely on to run with the ball and turn those ideas into real (and profitable) revenue.
We worked with her to design an internal innovation team charged with assessing and prioritizing new opportunities. Forming the team requires us to address three key questions:
Is there truly a need for innovation in the business?
Is innovation a key value driver?
What skills do we need on the team to achieve our innovation goals?
Need for Innovation
Innovation is a key driver of profitable growth. Commoditization and me-too competition is a constant threat to our clients, who must be distinctive in the marketplace to create value for their investors.
Nevertheless, we can always supplement our bias toward innovation with cold hard facts. Three common innovation issues we encounter are:
The bulk of sales derive from products that are more than three years old. This typically shows that the business is not being innovative.
New products are introduced, but fall flat in the marketplace. This indicates that the business is being innovative, but execution is broken. Maybe the sales team is unable to sell what the product developers have produced. Maybe the products are flawed in fundamental ways.
New products are introduced and sell quickly, but at lower profit levels than existing products. In the early days of a new product introduction, low profits may be natural and expected. However, if the new product profit margins do not improve as sales increase, the innovation process may be broken--because it's cannibalizing existing products with nothing to show for it.
In our client's case, their primary challenge was issue No. 1. They were simply not introducing many new products and did not have a robust innovation pipeline. To bulk up their innovation team, we needed to establish five key stages of their innovation process:
1. Concept Validation
Validate the product concepts that have been generated, assess and quickly determine if the concept merits further consideration.
2. Business Case
Define the product specifications in the form of a business case that shows positive ROI from the investment required to bring the product to market.
3. Development and Implementation
Develop the product with involvement from the product development, process/systems, marketing and distribution teams.
Achieve "day one readiness" so that all distribution channels would be ready to support the new products.
5. Post-launch Tracking
Assess project effectiveness and efficiency and measure revenue, profitability and ability to meet customer needs on an ongoing basis.
Each of these stages requires different skills. For the early stages, market research and financial analysts are needed. For the middle stages, we need product managers and project managers who can push the product to launch in a timely fashion. Post-launch tracking requires project management skills as well, to take in learnings and execute the inevitable follow-on improvements based on those learnings.
All told, we needed to staff up 10-12 people with a mix of research/analytics, project management, product management and channel development skills. This team has to be very entrepreneurial and tenacious to drive successful product launches. The client is hiring this team now, which we believe will lay the groundwork for an aggressive effort and a robust innovation pipeline.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark