Making a difference by design…
Critical success factor #1
According to the product development authorities there are a few factors critical to be successful in product development.
On a strategic level, the literature states you need to have Product Innovation and Technology Strategy for the business.
It’s the #1 success factor.
Yet, when I ask organisations, most don’t have it.
And I can count on one hand the companies who have an Innovation Strategy backed up by a Technology strategy. They’re all technology driven companies. No surprises there.
An innovation strategy is essential to your success. And it takes only an hour or so to create it (if you have the right people in the room & my ‘How to’ tips below).
If you want to be successful in Product Development you want to start with this.
Having a strategy is key. Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments.
Chandler stressed the importance of taking a long-term perspective when looking to the future. In his 1962 ground-breaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction and focus.
He says it concisely, “structure follows strategy.”
So, start with strategy.
Your innovation strategy should back your business strategy. Where does your business want to grow to? What is its goal for 3 or 5 years from now?
How can new products help it get there? Product development projects take time. You want them to be aligned with the strategy and help to drive the business to where it wants to go.
I find the business strategy normally lives in the CEO’s head. The CFO typically has a bit of view of it too, but often lacks the full picture.
(And if you’re a CEO / owner / founder, stop shaking your head reading this… you’re in good company. And it’s natural, in your role, of course you’re constantly thinking about how to get to your goals. And that picture in your mind updates with everything you read, hear, see. Without you necessarily noticing that you’ve adjusted course slightly.) What you want, is for the team to have a clear view of the picture as well.
Like Chandler said: it gives a company structure, direction and focus.
Without a strategy, you’re just drifting.
You need to know where you’re going.
The team needs to know it too.
What’s really critical is for the wider team to understand it. Because, when you think about it, that new product touches almost everyone’s desk, doesn’t it? From management, marketing, procurement, supply, quality, PD, sales, engineering, accounting….
Dev Patnaik, in his book “Wired to Care’ says it nicely:
Real strategy is the aggregate of thousands of decisions
that employees make over time.
When you improve those decisions, you improve your strategy.
I flip that: if the team knows the plan, they can improve their daily decisions. And all those little decisions add up and help to get the business to its goals quicker.
Which makes it vital.
You want your team to understand the strategy. At least the big buiding blocks.
My tip: Make it visual.
It helps the team understand, to picture it. And it makes the strategy look achievable.
“To win you have to believe you can do it” – Sir Peter Blake.
If we all know where we are going, then the journey to get there is more fun.
How do you create an innovation strategy?
I find Ansoff’s gap chart a useful tool. I adapt it a bit and change the vertical axis from ‘market share’ to ‘turn-over’. (Mainly because turn over is an easy number that most business leaders can cite from memory and one which most business reporting is based on).
Start by putting the date of the last financial year (for most 31/3/2020) where the Y and X axis meet.
Next, find the financial data from a few years back and plot the turnover from the last 3 to 5 financial years.
If the business would keep going as it has been tracking over the past few years, where would the line take you? Draw that line. (The blue ‘current position’ line in the model).
What’s the goal? Where do you like to be in 3 or 5 years’ time? Plot that point. Draw a line from your current turnover to your goal. (The green ‘want to be’ line)
Typically, you end up with a gap. A gap between where you’d want to be and where you are likely to be if you keep going as you are currently.
How are you going to fill the gap? What are you going to do differently?
What are the big projects that will get you to your goal?
I.e. are you planning to enter a new market? Say export to Japan? Great, do we need some new products or changes to current products to get us there? What other big chunky projects will help fill the gap?
Of course you’ll still need to get to your current position as well. What are the big chunks under the blue line? Anything there that needs help from new products / services? Adjustments?
I plot the big block projects next to the gap – it’s a quick and visual way to get the picture out of people’s heads and on to the wall for everyone to see and understand.
If you want to take this to the next level, change the vertical axis label to profit (dollars in your pocket, I use GM$ or EBIT$ whatever is commonly reported in your business) – and see that changes the picture. It might add a new dimension to it.
Like Peter Drucker stated: culture eats strategy for breakfast.
But if you can align your team on the strategy, you might just change the culture for the better!
There are a few more steps to help refine your innovation strategy and add more ideas, that’s material for a next blog.
First, have a go, draw up the gap chart for your organisation (as much as you know it), get the (management) team together and add to it. Then stick it on the wall.
Having the conversation makes all the difference.
Let me know how you get on!
Let’s design for the better!
Onwards & upwards,
- PDMA Handbook of New Product Development
- Chandler, Alfred Strategy and Structure: Chapters in the history of industrial enterprise, Doubleday, New York, 1962.
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