By Becky Partida, Research Specialist, Product Development and Innovation, APQC
Bolstered by the increasing rate of change in many markets, organizations are seeking ways to get to market faster, deliver greater value to customers, and better manage costs. Open innovation, with an emphasis on collaborating externally and internally, can help organizations achieve those goals.
APQC’s recent Open Innovation: Enhancing Idea Generation Through Collaboration study examined the open innovation practices of successful organizations. Three of the organizations featured in the study—British Telecommunications plc (BT), Amway, and Cisco Systems Inc.—connect innovation to the rest of the business and involve key stakeholders in the open innovation process.
Align Processes and Engage Stakeholders
Agile innovation processes have multiple stages, beginning with early-stage business case development and related processes that are integrated seamlessly with later-stage processes for new product or service development and commercialization. Although success is more achievable when an organization fully aligns all related processes, it is important to note that process is not the only important factor. It is just as important to have the right people involved at relevant steps. Leaving out stakeholders, such as representatives from marketing, legal, purchasing, and the executive team, can kill an open innovation deal quickly.
The sourcing of ideas from external organizations and internal employees is part of BT’s concept-to-market (C2M) idea development process. This process has four stages:
business case, and
BT’s open-ended idea stage involves sourcing and filtering ideas. BT moves a concept into the proposal stage when it is deemed worthy of consideration for a business case. This stage takes 60 days or fewer to complete and can involve conducting early customer trials, codevelopment with customers, and proof-of-concept development.
Once the idea has been validated, it can move into the business case development stage. BT conducts trials of the product or service that can range from small-scale trials evaluating how the product or service will work to large-scale trials evaluating how customers will use the product or service. This stage lasts 120 days from business unit validation to customer trial.
During the delivery stage, BT completes any development necessary to get a quality launch for the new product or service. The process ends with a full commercial launch.
BT has also established an accelerated development process called C2M Lite (concept-to-market lite) for ideas that do not need complex validation processes. BT created C2M Lite to facilitate a “fail fast, fail cheap” environment that makes product market trials more efficient. The process involves testing and validating minimum marketable features of potential products and services using early market testing. The results are then used to support decisions on creating business cases for potential products and services. With C2M Lite, trials can be shortened to 60 to 90 days.
At Amway, a formal, enterprise-wide process guides innovation. The process consists of four phases:
product development, and
The technology surveillance phase involves identifying ideas and taking them through early concept development. Amway identifies thousands of ideas each year, but only about 150 reach the second phase, R&D exploration.
During R&D exploration, Amway further narrows its portfolio and creates a project proposal and business case for each idea. Ideas are presented to Amway’s technology review board at key milestones, and this group ultimately decides which ideas move forward and receive additional funding.
Approximately 20 to 30 projects each year reach Amway’s business case development phase, where they are refined using a formal stage-gate process. Amway’s project management function creates a project brief, which is a contract among the development groups, the marketing function, and representatives from the markets where the product will be initially launched. The project brief defines each idea further and lays out exact details regarding scope, costs, and the timeline for development and launch. Approximately 10 to 15 projects reach this point each year, 90 percent of which ultimately result in product launches.
The business sustaining phase of Amway’s innovation process begins once the product is launched. This phase addresses ongoing evaluation and continuous improvement.
Within Amway’s integrated process there is an overlapping transition period between phases rather than a sharp handoff. This gradual shift helps team members ensure that all relevant information is communicated and that the receiving team members preserve continuity in the project.
Cisco uses a six-phase framework when it incubates ideas that could take the organization into new markets:
filter and shape,
graduate or eliminate.
The framework begins with Cisco looking for ideas for new businesses using an open innovation approach. The next step is to filter and shape an idea by developing a prototype and a proof of concept to decide if Cisco should, like a venture capital firm, invest seed funding to create that new business. During the incubate phase, Cisco has a set of milestones to manage the process to start a business. The incubation team is given considerable freedom to refine the idea.
One of Cisco’s critical success factors is that a member of the business incubation team stays with a startup business through the initiate phase and when it goes to market in the accelerate phase. After the accelerate phase, Cisco either places the startup into another mainstream business unit or suggests exiting completely. At any time, the organization has three to four startups operating. However, Cisco does not expect a 100 percent success rate on these new businesses, and when a project is cancelled, people are redeployed to other projects.
The organizations studied by APQC have developed innovation processes that align with their later-stage product development processes. They also remain flexible so they can customize processes based on the type of innovation and the needs of the business. These organizations involve key stakeholders in the open innovation process to ensure that viable projects advance and are brought to market as quickly as possible.
APQC is a member-based nonprofit and one of the leading proponents of benchmarking and best practice business research. Working with more than 500 organizations worldwide in all industries, APQC focuses on providing organizations with the information they need to work smarter, faster, and with confidence. Every day we uncover the processes and practices that push organizations from good to great. Visit us at www.apqc.org and learn how you can make best practices your practices.