Friday, January 29, 2010

Rigor and rhythm of innovation review: a P&G example

How do you check the pulse of your innovation process? Well, I like what GE’s Jeff Immelt says in Game-changer: You known innovation is taking root when there’s rhythm to the review of projects and rigor in the milestones they must meet. If I were to probe only one thing in an organization’s innovation process, I would sit through or perhaps walk-through its innovation review. Everything from who are the reviewers, what is being presented, the nature of the questions, perceived seriousness of implications – all these would send vital signals. Let’s look at how P&G conducts its innovation review as described in Game-changer by A G Lafley.

· Homework before the review: AG points out an important pre-requisite before beginning any innovation review – the business team must have already completed the hard thinking in two areas: clearly defined business growth goals for a minimum of 3 to 5 years out; and clearly defined “where to play” choices or business strategies.

· Who attends: All critical leaders - CEO, Head of business, Head R&D, Head of design, Head of consumer understanding.

· What questions are addressed: AG talks about 3 primary questions:

  1. How robust is my portfolio to deliver my goals? Judgments need to be made if there is a right balance of risk in the portfolio. This can be assessed by understanding if you have a big idea. Analyze the data showing how customers (the boss) respond to the idea. Is the proof data-rich or based on people’s opinions and experiences? Does the team know how to make the product? Do we have the right kind of patents? How well does the plan leverage core strengths? What types of help might be needed from outside the business unit?

  1. How strong is my innovation plan compared to key competitors? This question requires benchmarking, forcing teams to look externally at what’s happening in the marketplace. It helps assess key competitors’ strategies. Understand in which area they are filing patents that may impact the team’s freedom to innovate.

  1. How attractive is my innovation program from financial and return standpoint? Can the innovation be commercialized with a cost structure that enables the right balance between margin enhancement while also providing the customer a good value? Does the innovation portfolio as a whole provide a good return on investment?

· Methodology: The review happens through poster presentations similar to grade-school science fair. Why posters? Because these reviews are full of scientists, and the posters force the scientists to speak in terms that the senior management can understand. They also drive focus and simplicity. Often, the discussion also involves show-and-tell – where people get to touch and use a product or key technology element. Over a period of a few hours, the group can go through a dozen or so innovation projects.

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