Matthew White, Head of Opportunity Discovery at Sagentia, provides an insight into how you can weight the innovation dice in your favour. http://www.sagentia.com/our-services.aspx

1. Innovation - a game of
chance?
Weighting the innovation dice in your favour

2. Innovation - a game of chance?
Executive summary
Innovation is the key to survival in which end users find no value and do not
today’s complex global market buy. So what can companies do to turn
place. Companies need to regularly the tables? How can companies ensure
launch new products and services that their new innovations are successful?
to keep ahead of aggressive In our experience, the main cause of
competition, win new customers failure is the way that many companies
and provide security for the future. approach innovation. Often they do not
seek to really push boundaries, they
Business gurus now talk of the new mitigate what they perceive as high-risk
‘creative economy’, the ‘core competence opportunities by sticking to ‘routine
of creativity’ and ‘macro innovation’ – the innovation’ that results in incremental
big idea that will boost the fortunes of a developments and uninspiring line
company. In fact, a recent survey of extensions.
business leaders found innovation to be a
high priority. But how much of it is going Successful innovation strategies challenge
on – and more importantly, how much is the way we do things but manage risk
delivering real end user value, return on effectively. They maintain a clear focus on
investment and subsequently boosting understanding stakeholders; identifying
company profits? unmet needs and valuable trends; pushing
creative boundaries in a focused manner;
Other figures indicate that 96 percent of continual technical, business and
innovation initiatives fail to meet return on stakeholder validation; and the ultimate
investment targets – a massive failure creation of concepts that delight
rate. With thousands of products and stakeholders and deliver real business
services being launched around the world value. Innovation should not be a game of
every year, huge sums of money are chance.
being wasted developing new products, in
1
© Sagentia 2011

3. Innovation - a game of chance?
Introduction
Business leaders around the world are But how much of this is reality in business
seeing great changes in the markets in today? How much innovation is really
which they operate. For example, going on and, more importantly, how much
companies in China have moved from of it is successful and generating profit?
being just a low-cost centre for
manufacture, to now delivering full turnkey According to a recent survey, 96 per cent
design and manufacture of increasingly of innovation initiatives fail to meet return
complex products for both themselves and on investment targets. With thousands of
their clients. Western companies are products and services being launched
understandably taking advantage of this every year, huge sums of money and
opportunity to outsource detailed resources are being wasted developing
development to a lower cost environment new products, in which end users find no
but what does this then leave behind? value and do not buy.
Innovation is the obvious answer. All innovation carries an element of risk
Unsurprisingly a recent survey of CEO’s and genuine breakthrough innovation is,
and government leaders carried out by by its nature, the riskiest. However, many
IBM found that ‘innovation’ was high on companies struggle to manage these risks
their agendas – it has to be, it is going to on a project by project basis. When this is
deliver the future of the business. The combined with a short term perspective on
critical and most valuable element of the the likely returns, organisations take what
entire innovation process is undoubtedly is perceived as the low risk option and
the front end – the identification of real pragmatically shy away from true
stakeholder needs and their translation breakthroughs.
into deliverable and valuable new product As a result, many innovation strategies
concepts. focus on launching a steady stream of
As a result, the knowledge economy has, product enhancements and line
according to business gurus, been extensions. Whilst incremental innovation
superseded by the creative economy. is a hugely valuable part of an innovation
Increasingly, they tell us, ‘the new core portfolio, in our view failure to develop
competence is creativity - the right-brain medium to long term innovation projects
stuff that smart companies are now leading to ground breaking new products
harnessing to generate top-line growth’. or services presents a much higher risk to
the ultimate success of a business.
Managing Innovation Risk
Breakthrough innovations deliver Finding current unmet needs of users
something new, something of value and stakeholders.
something that stakeholders didn’t know Understanding and capitalising on
they needed. But where do these trends to meet future needs.
breakthroughs come from and how can Disrupting the value chain with new
companies consistently create them? technology or practices.
Identifying where new technologies will
Fundamentally they all start with the
disrupt a market/product or service.
discovery of an opportunity. However,
repeated success comes from
“With a good innovation team and
systematically developing a deep
understanding of the areas of opportunity. great insight into the problems to be
This leads to insights and inspiration. addressed, only then can you enter the
more creative phase of a project.”
There are many sources for discovering
potential opportunities, for example:
2
© Sagentia 2011

4. Innovation - a game of chance?
We use a range of tools to explore these makeup of the team look like? High level
areas, which can include ethnography, strategists or those with an eye for detail?
scenario planning, disruptive technology Logical thinkers or creative powerhouses?
searching and value chain analysis. We believe that teams ideally should
Discovering and selecting the right consist of individuals with a diverse range
opportunities requires a combination of of personality traits.
analytical rigour and creativity. We build
teams that have access to broad cross- They are very challenging to manage but
sector experience and deep technical, ‘cover all the bases’ and make it possible
design, market and business knowledge. to rapidly build and kill concepts. A team
This provides the ability to validate and of substantially similar personality types
prioritise the output from the ‘understand’ on the other hand will be easy to manage
phase rapidly. but tend to lack capability in certain areas,
creating a potential downfall and an added
In our experience, while many element of risk.
organisations understand the value of
identifying the unmet needs of their users, Having chosen a team, the second
they fail to understand who other key challenge is promoting the value of early
stakeholders are. These other failure. The ability to ‘kill’ concepts for the
stakeholders may influence purchasing right reasons as rapidly as possible is key.
decisions or the manner in which a A team used to delivering incremental
product is used. innovation or product development will
expect to always deliver successfully.
For example, imagine a new product However innovation is risky. Many
concept that could reduce by fifteen concepts or opportunities are
minutes the time taken to carry out a inappropriate because, for example, they
complex surgical procedure in a hospital. don’t address a real need, they cannot be
The concept is genuinely revolutionary technically delivered or they will not
and is well received by the surgeons who provide a sufficient return on investment.
might use it. It would appear to be a
valuable opportunity. The objective therefore is to kill bad
concepts as soon as is realistically
However, when we delve a little deeper, possible. This will in turn free up
we find that the surgical procedure being resources that can be used to develop
addressed normally takes two hours. those concepts that do have real future
Reducing the time taken by fifteen minutes value. A team that continually uses more
actually provides very little benefit to the resource to get a ‘bad’ concept to become
hospital because it does not allow ‘successful’ will deliver late failures and
surgeons to ‘fit in’ another operation – it perpetuate the impression of breakthrough
does not increase throughput, which is a innovation being too risky.
key metric for the hospital.
With a good innovation team and great
The purchasing manager for the hospital, insight into the problems that need to be
a key stakeholder, will not pay for this new addressed, we can enter the more
device as there is no return for the creative phase of a project. Many
hospital. Considering this additional organisations already understand the
stakeholder suddenly changes the value value of using a broad range of creativity
proposition significantly. tools. However, it is important to
emphasise how involving the right group
Another weak spot for organisations is the of people from a wide range of functions
approach to creating innovation teams. and disciplines, and ensuring the team
Organisations typically bring together a remains immersed in the world of the key
group of the brightest and the best – often stakeholders and end user, are key factors
individuals who have excelled in their for success at this point.
respective fields. This creates two
challenges. Firstly what should the
3
© Sagentia 2011

5. Innovation - a game of chance?
The biggest challenge we find is that through and result in weak final concepts
companies either conceive a handful of – and another opportunity to introduce risk
new ideas, or are unable to deal with the into the process.
challenges associated with managing a
large number of ideas, say 200 – 400. It is important to mention at this stage that
You cannot stifle creativity at this point, it innovation need not necessarily be ground
is crucial that participants are taken to the breaking technology. A perfect example
extremes of their creativity in order to of this is Apple’s iPod, which brought
unleash real breakthrough ideas. together existing hard drive technology,
wrapped a software package to enable
What is required, therefore, is a means of legal music file downloading around it, and
appropriately structuring the innovation created a well designed and compelling
space. The team needs to be confident user experience.
that it has understood what the potential
None of this was rocket science but what
space for innovation looks like, that it has
covered this space and not missed Apple did exceptionally well was to
opportunities and that it has selected the understand and anticipate market needs.
best ideas to take forward. They took a well calculated risk and
created a highly desirable product that the
We have specifically developed a range of competition, so far, has not been able to
structured innovation tools to provide the match.
required confidence and minimise risk in
this creative phase. Having built a portfolio of leading
candidates, further iterations of testing and
“Breakthrough innovations deliver validation must be carried out from a
something new and of value. technical, business and stakeholder
Something that stakeholders didn’t perspective. Each of these is important if
know they needed.” all the internal business sponsors are
going to give the go ahead for further
Having generated a large number of funding.
ideas, an iterative process of idea It is important to provide a vision of the
development and filtering can be used to concept that excites all of the sponsors
gradually get down to a sensible number and internal stakeholders. The vision
of ideas to pursue. must effectively communicate what the
We believe that the most effective way of concept is, why it is valuable and how it
carrying out this selection is to focus can be delivered.
initially on removing ideas that are not An approach to breakthrough innovation
appropriate. We only start to identify or that draws on the areas outlined above is
rank the most valuable ideas when the extremely involved and detailed. It is both
number involved is relatively small, say resource and time hungry but in our
less than 50, and they are reasonably well experience, it will deliver results. When it
developed. is deployed appropriately it can eliminate
Ranking preferred ideas at the beginning much of the risk associated with
of the process is both highly resource developing breakthrough products or
intensive and also ineffective as the ideas services. Critically, it can enable
often change as they are developed. This companies to match the needs of the
can result in good ideas dropping out of customer and meet return on investment
sight before they have been thought targets.
4
© Sagentia 2011

6. Innovation - a game of chance?
Conclusion
Business gurus are absolutely right when ultimately prevail. The initial, often heavy,
they say that a company’s core investment of time and resource will pay
competence should be innovation. dividends and enable companies to create
and launch new products that are a
However, in today’s complex and dynamic significant step ahead of the competition,
market place, winning organisations will are desirable and meet return on
break away from short-term, incremental investment targets.
innovation strategies and embrace the
challenges associated with breakthrough With this approach, innovation becomes
innovation. Innovation strategies that managed, structured and planned – and,
provide the capability to develop therefore, not a game of chance.
breakthrough products and services will
For further information please contact Innovation@sagentia.com, call +44 1223 875
200 or visit our website at www.sagentia.com
5
© Sagentia 2011

7. Sagentia
Sagentia is a global innovation, technology and product development
company. We provide outsourced R&D consultancy services to start
ups through to global market leaders in the medical, industrial and
consumer sectors.
With global headquarters in Cambridge, UK, and US headquarters
in Cambridge, Massachusetts, Sagentia works with clients from front
end market needs analysis through to transfer to manufacture.
We deliver innovation around new technologies and new generation
products and services that provide commercial value and market
advantage. The company also assists business leaders to create
strategies for technology, innovation and growth.
www.sagentia.com
info@sagentia.com
Sagentia Ltd Sagentia Inc
Harston Mill One Broadway
Harston 14th Floor
Cambridge Cambridge, MA 02142
CB22 7GG USA
UK
T. +44 1223 875200 T. +1 617 401 3170