Innovation is the lifeblood of growth, but if your NPD pipeline is stuck in old habits, you might as well be running a race with your shoelaces tied together.
Growth innovation promises faster launches, better ROI, and smarter resource use - basically, the turbo boost your product pipeline needs. But to hit the finish line, you’ve got to clear a few classic hurdles that trip up even the best teams.
Ready to spot the three roadblocks between your NPD process and breakthrough success and learn how to vault over them like a champion? Because at the end of the day, if you’re not ready to (Usain) Bolt, you’re just running on the spot.
New product development (NPD) is ground zero for graduating your enterprise into second-generation innovation management, and for good reason. Out of all the innovation functions in the enterprise, NPD is where growth innovation methodology can bring about the most wins in a relatively short amount of time. Enterprises who use a growth innovation approach to NPD have realized several benefits within the first five years of implementation, including:
- Reduced time to market
- Improved ROI reporting
- Elimination of “zombie projects”
Implementing growth innovation in your NPD process brings a lot of benefits to the entire enterprise, but doing so often involves some specific challenges. In this piece, we’ll unpack three common hurdles NPD groups need to clear as they implement this methodology in the enterprise.
Curious how growth innovation builds upon traditional NPD processes? Check out our free guide: NPD vs. Growth Innovation: The One Formula for the Evolution of R&D Management
1. Linking NPD processes to business objectives
Under growth innovation, business leaders translate the overall corporate strategy to specific growth targets for innovation initiatives. While this may sound intuitive to business executives, NPD managers will immediately recognize that the top-down side of this task is far more straightforward than its bottom-up counterpart.
For most enterprises, late-stage first-generation innovation management has distanced the NPD pipeline from business strategy. As R&D disintegrated into various innovation functions, NPD teams evolved into innovation project management shops: the pipeline’s success is a function of how efficiently and effectively projects can be pushed through the production cycle. The Stage-Gate process dominates enterprise NPD pipelines around the globe, and NPD teams commonly evaluate their effectiveness by examining how on-schedule and on-budget their projects are.
This isn’t necessarily bad, but a growth innovation NPD shop needs to go further. Moving projects across the finish line is important, but in the end, executives and shareholders are far more concerned about how those completed projects perform than they are about whether or not they’re complete. Under growth innovation, NPD teams need to find ways to link their activities to the organization’s overall objectives.
How to evolve: remap reporting
The first step for enterprise NPD teams to take when transitioning to growth innovation methodology is to audit current NPD reporting against the business’s reporting. For many teams, this involves cross-functional discussions to examine how the ways NPD organizes projects coincide or conflict with how the rest of the business evaluates projects.
For example, let’s say a CPG company is consistently producing new items across several product lines. Because the NPD teams are tasked with refreshing product lines, they organize their reports to line-of-business owners around their respective lines of products. However, when the line-of-business owners evaluate performance, they’re far more interested in SKU-by-SKU performance than they are in product-by-product performance. Under growth innovation, this would be addressed by NPD and line-of-business managers, and NPD would find new, more SKU-specific ways of reporting on production.
Remapping reporting can be an arduous process—but it’s essential. Doing so allows NPD teams to confidently allocate resources and prioritize efforts in ways that directly align with the enterprise’s growth objectives. This smooths communication between NPD and other business functions, and empowers NPD to focus on what truly matters to the business.
2. Expanding success metrics beyond product vitality index and NPV
The product vitality index (the percentage of your total revenue that new products earned) and net present value are the two most common success metrics used to evaluate NPD’s effectiveness—but a second-generation innovation management can’t rely on these metrics the way we used to.
As we discussed above, every single project in the launch pipeline has expected outcomes that tie directly into the enterprise’s plan to generate new opportunities and revenue in the future—and so the metrics that you use to gauge success need to somehow translate back to at least one of those original corporate growth objectives. Unfortunately, neither product vitality nor NPV do you much good on that front.
Product vitality index: too little, too late
Product vitality is a lagging indicator. It’s a useful way to measure how well products exiting the NPD pipeline have kept you from losing ground in revenue, but it doesn’t tell you much about how you got where you are, and it doesn’t tell you anything about where you’ll go in the future.
Beyond this, product vitality is an almost un-actionable metric. It’s not uncommon for enterprises to count five-year-old products as “new.” If this is one of your main success metrics, you’re looking at the results of NPD activities that took place years ago at the earliest. Depending on how long it took to make those products, any changes that you implement in NPD based on product vitality could take a decade to come to fruition.
NPV: too little, too soon
Net present value is the same problem, but in the opposite direction. NPV is helpful when it comes to evaluating projects that have relatively predictable timelines and outcomes in a relatively predictable environment. But as any NPD manager can tell you, the process of creating and commercializing new products is notoriously unpredictable. Projects run over budget and behind schedule. Future sales may be relatively predictable for small, downstream innovation product iterations, but it’s almost impossible to predict cash flows for projects that have no analogous current or historical examples to use as benchmarks.
Furthermore, most enterprises use NPV to make go/no-go decisions on individual projects before they enter full production—but these calculations rarely take into account the ripple effects that the rest of the innovation portfolio may have on a given project. Innovation projects don’t live in a vacuum, but the NPV formula almost always tries to pretend they do.
Because of this, present value rarely even qualifies as an educated guess. A growth innovation enterprise can’t rely on a metric like this for prioritizing NPD projects and orchestrating the pipeline.
How to evolve: set more sophisticated KPIs
While a growth innovation enterprise doesn’t need to abandon product vitality index and NPV entirely, you will need to find more growth-oriented, actionable metrics for measuring the success of new products and the development thereof. Unfortunately, there is no single golden metric that conveniently does the trick for every project—and as a project progresses through the development lifecycle, some metrics will become more helpful, while others become less so.
Because of this, second-generation innovation managers often take a new approach to success metrics for the pipeline: they set KPIs that are project-specific and phase-appropriate.
Every active project should support at least one of the business’s growth objectives, but not every project will contribute to the organization’s success in the same way. Because of this, each individual project’s KPIs should reflect its specific target contributions to the overall business strategy. There should never be a one-metric-fits-all approach to gauging success. Some projects should be evaluated based on new revenue generated, some should increase market share, some should realize cost savings, etc.
But KPIs don’t need to remain static throughout a project’s course. Growth innovation leaders recognize that success may look different for a project depending on its phase in the development and launch process. When a project is greenlit, leaders may design reporting to activate or deactivate certain KPIs as the project moves through the pipeline.
No matter what metrics you choose, the transition to growth innovation methodology will likely involve an overhaul of how the organization measures a project’s success. As you plan for change, prepare to discuss this fact (and its implications) with the various stakeholders involved.
3. Resetting expectations between go-to-market (GTM) functions and NPD
One of the three principles of growth innovation is visibility, namely, making all innovation management data accessible to every stakeholder who needs it. This involves every function of the innovation organization (NPD, GTM, and FEI) restructuring and aggregating their data into a single innovation management system.
This can be an unsettling prospect for NPD and FEI managers, as it opens up in-the-works data to other functions of the enterprise. Suddenly, line-of-business owners, sales leaders, and marketing strategists have access to the entire pipeline. Without proper context, this can lead to an increase in asks—or worse, uninformed plans and promises that put NPD on the hook for promises and plans they didn’t have a say in.
However, pipeline managers can get ahead of these issues by codifying procedures and setting expectations across the enterprise when it comes to interpreting NPD data.
How to evolve: establishing ask governance
During the transition to growth innovation, pipeline managers need to set and enforce standards for requests coming from other functions of the business. This involves setting expectations when it comes to interpreting data around costs, timelines, and viability.
- Cost visibility. Pipeline managers should vigilantly capture and annotate data regarding historical, current, and projected costs associated with NPD projects. This gives business stakeholders a complete view of how projects consume resources, and adds an extra layer of context to inform their plans and decisions. Ideally, all parties should have established channels for discussing costs and spend. Doing this well reduces confusion (and time spent in meetings) regarding the costs associated with various innovation undertakings.
- Timeline visibility. Pipeline managers are most familiar with how various projects navigate their way through the NPD process, and should make as much of this available to outside viewers as possible. This allows business stakeholders to develop realistic, data-backed expectations for the amount of time various types of projects take.
- Viability visibility. Pipeline managers should expect an influx of questions regarding what NPD teams can reasonably deliver on. What kinds of tasks can be taken care of right away How long of a runway does NPD need for various types of requests? What projects will need to involve research and discovery from FEI teams? Pipeline managers should anticipate these questions, establish channels for fielding them, and set reasonable expectations for how long it will take for them to provide answers.
All of this amounts to setting clear expectations for making requests and plans based on upstream innovation data. As your enterprise transitions to growth innovation methodology, be sure to establish clear processes for business stakeholders to follow when using NPD data to make decisions—it will take a lot of effort up front, but it pays off in the long run.
Transform your NPD pipeline with growth innovation
These are some of the most common hurdles that NPD leaders need to overcome as the enterprise graduates into second-generation innovation management. Once they’ve been cleared, your NPD teams can enjoy the benefits of improved reporting, success measurements, and cross-functional communication.
Pulling this off isn’t easy—but a purpose-built innovation management system like Accolade makes it doable. Enterprises around the globe have used Accolade to clear these hurdles, improve throughput, reduce time to market, and increase new product revenue.
Because even the fastest runner needs the right track, the right shoes, and a clear lane. Accolade gives your NPD pipeline the competitive edge to not just finish the race, but take home the gold.
If you’re curious about how Accolade can help your NPD pipeline do this, we’d love to show you. Schedule a free consultation with a Wellspring consultant today!