Innovation and product development are strategic choices a company makes to compete to win. As such we can think of innovation and new product development as applied strategy. Thinking strategically on how to win customers and beat the competition is all about choosing what you will pursue and how you will create the necessary competencies to achieve your aspirations.
Sometimes though, strategic intent (winning through new products and innovation) gets lost in day-to-day activities of making the quarterly numbers. In the pursuit of predictability and “zero defects,” companies become too risk adverse and forgo strategic thinking and planning when it comes to defining an innovation and new product development road map.
Yes companies need to exploit their current business model. But they also need to be in a constant exploration mode to spot potential future opportunities, while developing the core capabilities and skills to define and create new playing fields, and developing the right players with the right “plays” to take the field and win when the game is on.
It’s difficult, if not possible, to predict the future. There are too many variables and “black swans” that will emerge. But one thing I can comfortably predict: the future will be played with a new set of rules, and maybe on a totally different playing field.
Using Innovation Time Horizons to define a balanced portfolio and game plan
The innovation time horizon (see figure 1) is a visual map to layout the strategy of competing to win into the future. It graphically summarizes the two dimensions of technology and market knowledge. The “horizon” analogy relates both to risk and uncertainty, and the time typically required to exploit an opportunity based on the availability of relevant know-how.
As described by Christian Terwiesh and Karl T. Ulrich in their book “Innovation Tournament,” most innovations face two types of uncertainty:
Technology uncertainty describes your ability to execute the opportunity as planned. If the opportunity is based on technology or capability that you have, the level of technological uncertainty is low. It’s medium if the technology exist outside your firm, and large if the opportunity is based on new discoveries or advances.
Market uncertainty describes your ability to understand and address the needs of a group of customers. For opportunities that address your existing customers, market uncertainty is low. It’s medium for market segments adjacent to your current business but addressed by other firms, and large for markets that are not served by anyone (i.e. the white space).
Figure 1: Innovation Time Horizon Map
Use Strategic Buckets to achieve balance between risk and reward
We can use horizon zones to define the mix of products in your product portfolio to achieve a balance between risk and reward. The percentage of development projects in each bucket is a strategic choice we make. The salient point is that if we don’t allocate dedicated resources into horizons 2 and 3, we will eventually become competitively weak and unable to compete with the new rules of the game (or games) as it evolves.
Horizon 1 are the “sure bets” but also represent incremental growth. Horizon 2 has more upside than Horizon 1 but are still within reach of current knowledge base inside and outside the enterprise. Whereas horizon 3 has lots of risk but represents potentially breakthrough innovation.
The innovation time horizon map also provides us a visualization of the technologies, capabilities and skills we need to address and master to be competitive on the future’s playing fields. The map helps us strategically define and decide what capabilities and resources we need to invest in to field a competitive team.
Managing in the zone
The innovation time horizon map helps us understand where an innovation fits in the knowledge funnel before deciding the details of the NPD process to develop and commercialize an initial idea. Each horizon zone should be managed with the right set of processes that specifically address the knowledge gap that exist in each horizon.
Don’t forget that the ideation phase needs to be managed with appropriate methods and tools to match the zone under management. Bold new ideas will require bold thinking and discover based innovation processes. Whereas, incremental improvements are natural progressions in product performance improvements and are more about execution excellence.
By recognizing the ideation processes need to be tailored to match the specific zone characteristics, you will improve your changes of discovering and selecting quality ideas that provide the fuel for future growth within each zone while achieving balance in your project portfolio.
So know your zone and innovate accordingly to come up with the right plays to win the game!