A Guide to Executing Innovation Strategy

Innovation Execution = De-risking Your Innovation Portfolio

Innovation per definition includes dealing with uncertainties and moving into unchartered waters - a risky adventure.

Mitigating risk in innovation initiatives is paramount. Therefore, your innovation team should primarily focus on:

• Establishing and nurturing a stage-gate innovation funnel that filters a large amount of raw ideas into a select few well-validated projects.
• Validating innovation projects within this funnel, according to their innovation majority.

1. Set up a stage-gate innovation funnel

A typical stage-gate innovation funnel follows this structure:

• Stage 1:  Raw idea to validated idea
• Stage 2: Validated idea to Proof-of-Concept
• Stage 3: Proof-of-Concept to implementation

While most corporations excel in handling Stage 3, where larger budgets and traditional project management come into play, this blog post focuses on Stage 1 and 2, emphasizing early-stage validation and risk mitigation.

2. Validate a high quantity of raw ideas

We like to go by the mantra of “data beats opinion”. To simplify, it's best to keep the entry gates into Stage 1 of your innovation funnel wide open and welcome a variety of ideas. Test these ideas, gather data, and then decide whether to continue or stop pursuing them.

This of course demands for an extremely lean and cost-effective validation of a high quantity of ideas. A good rule of thumb here is to validate raw ideas within 2 to 3 months and establish an early budget of maximum $1k per idea. This is just enough to run first tests but too little to start building something nobody wants.

As the previous sentence implies, the focus of Stage 1 is not the feasibility of an idea, but more the desirability of an idea: Do customers actually want this?

This for example can be tested in a B2C context via a simple smoke test, or in a B2B context via a LinkedIn or Network outreach, Solution interview and even the signing of a Letter of Intent.

These are all tests, that can be performed end-to-end in less than 2 months and which require a really low investment (<$1k).

The final selection will be the gate at the end of Stage 1, where an idea champion pitches his idea. Key components to assess are the following:

• Problem and Solution: How has the problem and the solution been validated through real customer interactions?
• Business Model: What are the assumptions the business model is built upon and how have they been tested until now (first insights are sufficient at this stage)?
• Champion and Team: Are the skills that are needed to advance the project known, and do we have access to the right people or resources?
• Next Steps: How is the project team planning to further de-risk the idea?
• Request: What does the project team need to advance the idea (time, financial resources, support)?

Note that most ideas at the end of Stage 1 will be discontinued. A good ratio to obtain is for one out of 10 ideas to advance to Stage 2.

3. Run a Proof-of-Concept to further de-risk promising ideas

Stage 2 is where things get more real. From 100 initial ideas, you now have 10 promising ones, that demand more focus to validate and de-risk. Plan in around six months and a budget of up to $30k per idea.

De-risking an idea in Stage 2 means to take a close look at the following four dimensions:

• Contextuality/Strategic Fit: Explore how the idea best fits into the corporate strategy by engaging with internal stakeholders and winning over future project sponsors.
  
• Viability: Validate the pricing and business model hypothesis of your innovation project.
• Feasibility: Explore the feasibility of your project, by looking into similar solutions, existing components and consulting experts (no need to build anything just yet).
• Desirability: Double down on desirability and intensify the interactions with your target group. Reach out to us, to learn more about the methods applied in Stage 2 of a corporate innovation funnel.

This second phase is very demanding and we recommend to either work with an external partner or with an internal expert (e.g. intrapreneur in resident), who can support with methodological know-how and validation experience.

While generally speaking, from 100 initial ideas, only 10 advance to Stage 2, a good ratio from Stage 2 to Stage 3 are three to four ideas out of 10.

While many corporates have an innovation funnel in place, only few put in the hard work and dedication to validate and de-risk ideas properly in the early stages of the funnel. Sure, it can be demotivating to work on 10 ideas to only advance with 1 to Stage 2. But innovation is a marathon and not a sprint, and proper execution of an innovation portfolio demands for applied validation groundwork, a clear stage-gate process and small initial resource allocation.

By implementing these strategies and ensuring team accountability, we can guarantee that our efforts and resources are channeled towards projects that have the genuine potential to deliver lasting value to the organization.