Introductory presentation on Front End Innovation by Dr Peter Koen

1. Understanding the Front End:
A Common Language and
Structured Picture
Idea
Genesis
and
Enrichment
Idea
Selection
Opportunity ENGINE
Analysis
Concept
Definition
C
Opportunity Se onc
le ep NP
Identification ct t
io
D
n
Te
c h
SG
Peter A. Koen, Ph.D
Stevens Institute of Technology
E-mail: pkoen@stevens.edu
www.frontendinnovation.com
An & Co-Sponsored Best Practice Event
May 25, 2004

2. Agenda
T What is the Front End?
T NCD Model
S What it is?
T Most Effective Practices
S Most important part of Front End – macro
perspective
S Elements of Best Projects
2

3. What is the “Front End of Innovation?”
T “Front End of Innovation” is defined by:
S Activities that come before the “formal and well
structured” New Product Development (NPD) Portion
Structured with a
New Product formalized and
Development prescribed set of
Front End of Portion
Innovation activities and questions
Commercialization
FEI activities are
less structured and New product
less predictable development portion
includes BOTH new
product and process
We prefer NOT use the term “Fuzzy Front End” since it implies that
the FEI is mysterious, uncontrollable and cannot be managed. 3

4. What is the “Front End of Innovation?”
Front End of
Innovation New Product
Development
Highly Innovative and
Stage
Profitable Platform
Strategies Leveraging Core
Competencies/Capabilities Commercial-
ization
Size of Bubble is
related to Profit
Potential
Platform Strategies
Leveraging Existing Traditional Stage Gate
Customer Value Chain
Idea Selection Process
for Incremental
Products 4

5. Breakthrough
Definition
Breakthrough products* (i.e. new to the company or new the
world) offer a 5-10 times or greater improvement in performance
combined with a 30-50% or greater reduction in costs
*Leifer, R., McDermott, C.M., O’Connor, G.C., Peters, L.S., Rice, M. and R. W. Veryzer. Radical Innovation. Massachusetts:
Harvard Business Press, (2000) 5

6. Platform
Definition
Platform products* establish a basic architecture for a next
generation product or process and are substantially larger in
scope and resources than incremental projects.
Incremental Extension:
Underwater version
Incremental Extension:
Addition of flash
New Platform: Kodak’s development of
disposable single use 35 mm camera
**Meyer, M.H. and Lehnerd, L., The Power of Product Platforms, New York: The Free Press, 1997 6

7. Why Focus on the Front End?
T Differences
Front End Innovation New Product Development Stage
Experimental, often chaotic. Disciplined and goal oriented with a
Work “Eureka” moments. Can project plan
schedule work – but not
invention
Commercialization Unpredictable High degree of certainty
Date
Depends. In the beginning
Funding stages many projects may be Budgeted
“bootlegged”
Revenue Often uncertain with a great deal Believable with increasing certainty as
Expectation of speculation the release date gets closer
Activity Individual or team emphasis in Multi-function product/process
areas to minimize risk development team
Measure of Strengthened Concept Milestone Achievement
7
Progress

8. Agenda
What is the Front End?
T NCD Model
S What it is?
T Most Effective Practices
S Most important part of Front End – macro
perspective
S Elements of Best Projects
8

9. New Concept Development Model (NCD)
Provides a common language and terminology
necessary to optimize the “Front End of Innovation”
Engine Idea
“Controllable” Generation
and Influencing
Enrichment Factors
“Uncontrollable”
Idea
Selection
Opportunity
Analysis ENGINE
Concept
Definition
C
Se onc
Core Front End Opportunity le ep
ct t
NP
D
Identification io
“Activity” Elements n
Te
ch
SG
Koen, et. al., “Providing Clarity and a Common Language to the “Fuzzy Front End,” , Research-Technology Management, (March-April 2001): pp 46-55.
Koen, et. al., ““Fuzzy-Front End: Effective Methods, Tools and Techniques,” In P. Belliveau, A Griffen and S. Sorermeyer, eds. PDMA Toolbook for New
Product Development. New York: John Wiley and Sons, 2 -35, 2002. 9

10. Definitions
T Opportunity
S A business or technical need that the company or
individual realizes by design or default they might
want to pursue to capture competitive advantage,
respond to a threat or solve a problem
T Idea
S Most embryonic form of a new product, service or
envisioned solution
T Concept
S Has a defined form (i.e. written and visual) with
features and customer benefits combined with a
broad understanding of the technology needed
10

11. Agenda
What is the Front End?
NCD Model
What it is?
T Most Effective Practices
S Most important part of Front End – macro
perspective
S Elements of Best Projects
11

12. Quiz
What elements of the NCD Model are highly innovative (i.e. lots of new
products every year) companies very proficient in?
20
Idea Generation
and Enrichment
38
Idea
Selection
30
Opportunity
Analysis
68
ENGINE
36
Concept
Definition Yesterday’s class
Opportunity
73
Identification
Te
ch 8
SG
12

13. 1st Front End of Innovation Conference
13

14. Agenda
What is the Front End?
NCD Model
What it is?
T Most Effective Practices
Most important part of Front End – macro
perspective
S Elements of Best Projects
14

15. Elements of Effective Projects
T Early senior management
involvement and commitment
Idea
Genesis
and
Enrichment
Idea
Selection
Opportunity ENGINE
Analysis
Concept
Definition
C
Se onc NP
Opportunity le ep D
Identification ct t
io
n
Te
ch
SG
Front End Maturity Model The prime imperative for
Adopted from PRTM’s model for breakthrough projects in the Front
the entire innovation process End is NOT picking the winners, but
killing the losers early. 15

16. Elements of Effective Projects
T Early involvement of business
executive champion
T Collaborative culture which Idea
Genesis
encourages knowledge and
Enrichment
creation
Idea
S Communities of Practice Selection
S IT Tools which enable people- Opportunity ENGINE
Analysis
to-people contacts Concept
Definition
S Collaborative Work Space
C
Opportunity Se onc
T Constancy of purpose Identification le ep
ct t
NP
D
io
n
T Aggressive Goals Te
ch
SG
16

17. Elements of Effective Projects
Collaborative Environment
T What is a collaborative culture?
S Mutual Trust
R Trust in the individual that you share tacit
knowledge with
S Active Empathy
R To be able to share pain and frailties
S Access to help
R Experts in the organization are will to provide
help
S Lenience in Judgment
R Harsh judgment, laughter and criticism will Collaborative culture
prevent the sharing of ones own true beliefs means that the
S Courage organization cares
R Individuals should not be afraid of exposing their
concepts to fierce judgment 17

18. Elements of Effective Practices
Communities of Practice
Diversity
T Creates new knowledge within the community
T Connects, acquires, exchanges and builds new knowledge
T New science occurs through the process of building upon
internal and external knowledge communities
Breakthrough Knowledge Usually Occurs at the Boundaries of
the Old” McDermott, 1999 18

19. Elements of Effective Practices
Communities of Practice - an example
T Production and Reservoir Engineering Community at
Schlumberger
S Goal is to better optimize the value of each well
S Consists of 536 members around the world
S Focused on Schlumberger’s core competence in production and
reservoir engineering
S Developed a series of web based case histories
S Catalog industry practices into “good idea,” “Local Best Practice”
and “Schlumberger Best Practice”
Community creates a support network for
Schlumberger’s technical experts
19

20. Elements of Effective Practices
Communities of Practice
T Best Practices:
S Focus of on the core competencies of the corporation
S Leader should be well respected member of the community and
be able to commit at least 25% time
R Experts need not apply
S Initially the thought leaders need to be part of the community
S Community of Practice should NOT become another project
S Create passion and real dialogue since the COP is voluntary
S Make connections between community members seamless
McDermott, R., “Knowing in Community: Ten Critical Factors for Community Success,” IHRIM Journal, March, 2000.
Koen, P.A. McDermott, R., Olsen, R. and Prather, C. , “Enhancing Knowledge Creation for Breakthrough Innovation: Tools and Techniques,” to be
published in PDMA Toolbook for New Product Development. 2nd edition, John Wiley and Sons, New York: 2004. 20

21. Elements of Effective Projects
T Projects get started based on: Idea
Genesis
S Customer Trend Analysis (Clear and
Enrichment
Opportunity)
Idea
S Technology Trend Analysis Selection
S Technology Road Mapping Opportunity ENGINE
Analysis
S Competitive Intelligence Concept
Analysis Definition
C
S Scenario Planning Opportunity
Identification
Se onc
le ep
ct t
NP
D
io
T These efforts create many n
Te
triggers ch
SG
T Need to envision the future
21

22. Market Attack Team
A process for rapidly developing actionable
plans for large market opportunities
3 months
Experts
Meeting
Phase 1
Effort ideally (Charter)
Phase 2 Phase 3 Phase 4
includes 3 -5 (Market and
Technology
(Business
Concept
(Business Case
Generation)
full time people Analysis) Generation)
Challenge TR1
Select
Select broad Workshop Business
best
concepts to Plan
Project Scope concepts
focus on
Preparing 1st Deep 2nd Deep Race to the 22
to Dive Dive Dive Finish

23. Why Attack Team?
Attack Team approach enables World Class
Innovation - Wisdom of the “Sages”
T Business-Technology Interspersing
T Based on Market and Technology Trend Analysis
S Where the future opportunities come from
T Science Based Core Competencies
T Aggressive Goals
T (External) Scientific Peer Review
T Focusing (in contrast to spreading too thin)
S Constancy of Purpose
T Process Optimization which include:
S Complete Business Case, Management Oversight and involvement
and fact based fast kills and metrics
T Full time project team populated with members with
demonstrated track record and company credibility
23

24. Elements of Effective Projects
T Customer
S Ethnography approaches
S Lead User Methodology Idea
Genesis
S Early involvement of customer and
Enrichment
champion
Idea
S Discovering the Archetype of your Selection
customer Opportunity ENGINE
Analysis
T Business-Technology Interspersing Concept
Definition
T Technology C
Opportunity Se onc
S Increasing linkages both internal Identification le ep
ct t
io
NP
D
and external (Technology Flow) n
Te
ch
S Partnering SG
T Diversity of cognitive styles on
idea enrichment team
24

25. Elements of Effective Projects
T Portfolio methodologies based on
multiple factors of:
S Technical Success Probability
S Commercial Success Probability
Idea S Reward
Genesis
and S Strategic Fit
Enrichment S Strategic Leverage
Idea R Using Anchored Scales
Selection
T NOT just financial justification
Opportunity ENGINE
Analysis T Use of “Options Theory” to
Concept evaluate projects
Definition T Screening methodologies are not
Opportunity C
Se onc
used on “breakthrough” projects
NP
Identification le ep
ct t
io
n
D S “Holy Grail”
Te
S Obvious
ch
SG
T RIGOROUS use of the Technology
Stage Gate for high risk projects
25

26. Technology Stage Gate
Technology Stage Gate is an effective technology
development process with management overview,
business and scientific rigor which creates an
environment of fast failures.
T Traditional Project Management
S Assumes that there is little uncertainty associated
with the technologies
T Starting product development before technology
is known
S Results in canceled or delayed projects, and wasted
product development effort
Ajamian, G. and Koen, P.A., “Technology Stage Gate: A Structured Process for Managing High Risk, New Technology Projects,” In P. Belliveau, A
Griffen and S. Sorermeyer, eds. PDMA Toolbook for New Product Development. New York: John Wiley and Sons, 267 - 295, 2002. 26

27. Where it fits
Front End of
Innovation New Product
Development
Stage
Commercialization
Traditional Project
Management
Technology
Stage Gate
27

28. Traditional Project Management
T Repeatable Process
S 85% repeatable V
S Leverage from past
experiences IV
T Predictable procedures III
S Detailed project plan of what
to do and when II
S Can estimate cycle time
I
T Structure and discipline are
critical
S Creativity is less important
T Project management skills
are required
28

29. Technology Stage Gate
Technology Milestones
T Difficult to capture and leverage are “opaque”
past experiences for future efforts
S Cycle time difficult to estimate
T Range of experimental outcomes
TRN
is vast TRN-1
S Detailed overall project plan is
impractical
T Do not know how many gates
TR1
S Can’t schedule invention TR0
T Too much structure can inhibit
creativity
T Project leaders need ability to
manage uncertainty while focusing
on project goals
29

30. Technology Feasibility Point
Technology Feasibility Point Technology Feasibility Point Technology Feasibility Point
A
Confidence Level
B
Confidence Level
Confidence Level
D F
D E F
B C E
C
D
B E
C
A F A
Technology Factor Technology Factor Technology Factor
Some may be difficult
Usually MULTIPLE Need to to move
technologies concentrate on the
are involved “ problem child “ Some may even FALL
back !
30

31. Conclusions
T Front End of Innovation can be studied, evaluated
and managed – BUT only if there exists a common
language
S Is NOT “Fuzzy”
S Should be thought of in a holistic manner
S Different for incremental, platform and breakthrough
T NCD Model Created
S Engine
S Five Front End Elements
S Influencing Factors
31

32. Conclusions
T Greatest weakness of FEI
S Engine
S Opportunity Identification
S Technology Stage Gate
T “Effective” Practices for FEI are being better
understood
S Technology and Market Trend Analysis
S Providing a collaborative environment for enhancing
Knowledge Creation
S Really understanding unmet customer needs
S Managing high risk projects
32

33. Conclusions
T Breakthrough Projects
S Require senior management involvement, commitment and
stomach
S Expect only 20-25% to be winners
R The key issue is NOT picking the winners – but killing the
losers early
S Discuss option cost to the next risk reduction milestone – rather
than total valuation
S Expect that the project will morph into something else
T Disruptive Businesses
S Sustaining Businesses need to embrace the disruptive Business
Model
S Set up as a separate business unit
S Aggressively look for acquisition targets that are potentially
disruptive 33