Countless studies illustrate that all over the world and in many industries “innovation” has a top spot on the management agenda. At the same time, we observe that the scope and nature of innovation is changing with concepts like Big Data, Social Innovation, Additive Manufacturing (3D-Printing etc.) and Design Thinking becoming Good Practice in innovation management.
In their search for innovation success, firms have established solid practices in “making innovation things right” (i.e. efficiency in the back-end of the innovation funnel with strong procedures and Product Lifecycle Management systems). This is good, but not good enough to take a leading spot in the innovation race. The innovation race is won by doing “the right innovation things” (i.e. becoming more effective).
Study after study shows that “innovation” has a premier spot on the Top Management Agenda. True, the word “innovation” may be overused. So for example, upon learning that the “Peanut Butter Pop Tart” was one of the most important innovations of a USD 15B food company, the Wall Street Journal remarked: “Some CEOs spray the word ‘innovation’ as if it were an air freshener“.
But there is indisputable evidence that truly innovative firms capture more revenues and more profits from their innovation efforts than firms who are not excellent in innovation.
One might initially assume that heavy investment into R&D correlates with innovation success. However, this is not the case as numerous studies have shown, for example in “The Most Innovative Companies” (BCG, 2014).
In fact, R&D investment is a necessary but not sufficient condition to innovation success.
The best innovators allocate their innovation investments to the most relevant areas. They are better in capturing the noise in the business environment and read the innovation signals contained there. They perform better in translating these signals into insightful ideas. They find clever ways to co-innovate with the best and brightest outside the firm. And finally, they empower their innovators to grab the ideas and run with them.
If R&D spending is not the key driver for innovation success, where does it come from? Actually, there are a number of elements that make up a successful innovation engine. At the core there are strategy, processes /IT, management / governance, culture and innovation networks (ecosystems). Plus some enabling factors like the absorptive capacity of the organization.
Out of these element’s dimensions, we picked “processes/IT” as focal point for a study that we conducted with leading firms.
If one focuses on the “process/IT” element of innovation excellence, one finds that there are two major sub-processes. The first is about reading the environment for impulses and creating strong, well-defined innovation options. The second is about successful execution of these options, including all the many details that need to be fleshed-out, ending with the successful market introduction of a new product, service or business model.
Now, excellence in the “execution phase” is widely spread. Living proof of this are widely shared Best Practices, standard Phase/Gate processes that almost every large firm has implemented and Product Lifecycle Management and Project Portfolio Management systems that support all these activities.
FFE excellence = Insights + serendipity + internal work + Open Innovation.
It is early phase in which “the right innovation things” are picked that has the biggest influence on innovation success and innovation results.
And yet this is a part of innovation management where there is no clear-cut “how to.” So firms are trying and testing a lot of approaches such as, amongst others, Open Innovation, Collaborative Innovation on Enterprise 2.0 platforms, ambidextrous structures that separate breakthroughs from incremental “bread & butter” innovations to serendipitous search for breakthrough ideas and many more.
The term “Fuzzy Front-End” (FFE) has been coined for the early innovation phase where “fuzzy” refers to the fact that not all of the activities – in particular the creative process leading to insightful ideas – can be planned and executed as a stringent business process.
The FFE is not an isolated process. It is linked with other business processes such as the strategy process, the resourcing process, the IP Management and Technology Management processes.
It would be wrong to imagine a one-size-fits-all FFE. Every firm needs to define its “optimal” FFE which depends on its industry characteristics as well as its internal characteristics and external business environment.
For example, external factors are things like industry clock speed and disruptive risks while internal factors comprise innovation strategy and the innovation culture in the company.
Firms are using software in the Fuzzy Front-End to support one or more of the following key activity areas:
For the last number of years, software to support the FFE was a niche product in the overall market for enterprise software. Recently, SAP released software explicitly targeted at supporting the FFE. This software addresses the point mentioned in the list above and offers some unique new features. Based on SAP’s footprint in the market for enterprise software, SAP’s move will most likely increase the interest and the budgets that firms will allocate for optimizing their FFE.
Given the importance of the FFE and in the light of recent developments in the market for FFE software we decided to conduct a study in order to find answers for three questions:
We conducted 17 in-depth, structured interviews with leading firms from 5 industry sectors. The industry sectors where chosen to capture a wide variety of external factors that influence the FFE design. For instance, industries with a high clock-speed such as Consumer Packaged Goods (CPG) and industries with a high disruptive risk such as Utilities.
Rob Munro runs innovation.support’s business in UK and Ireland. Before consulting with leading companies on innovation management, he spent over twenty years within multinational chemical and material companies creating new technologies, building new businesses and developing capability. He has held senior management positions from manufacturing to commercial and R&D with a track record in developing business and innovation strategies, improving business work processes and delivering complex high-value projects. Rob also founded The Growth Engine specializing in developing innovation strategy for clients and guiding them to build more robust, effective innovation systems.
Frank Mattes founded innovation.support and runs its business in the German-speaking countries. Frank Mattes has more than 15 years of experience in managing innovation, change management and projects. He has worked for several specialized medium-sized consulting companies and for The Boston Consulting Group. He also worked at C-level for an IT and a professional services firm. Frank also founded and runs innovation-3 which focuses on integrating cutting-edge innovation approaches into existing innovation management systems. Frank is the author of several books and a contributing editor to InnovationManagement.se, the number one platform for innovation management practitioners.
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