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February 12, 1999

c o n t e n t s / t h i s m o n t h :
1 > The Innovation Maturity Model
2 > NPD On the Web: NSF Research on NPD and Innovation
3 > Dilber-TV: A Quick Review
4 > Top Ten NPD Candy Heart Phrases
5 > MRT News – Product Portfolio Management
6 > Calendar of Events

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a r t i c l e - o n e :
THE INNOVATION MATURITY MODEL

Renowned business strategist Gary Hamel, recently featured on the cover of the December 7th Fortune Magazine, was interviewed for CP's sister publication, Product Development Best Practices Report. In this interview, Hamel was asked about his Fortune comment, "irrelevancy is a bigger risk than inefficiency." He replied:

"I don't think product development practices and processes are the principal issue. The big challenge most companies face today is how to innovate - how to create business strategies and business models that generate new wealth."

Hamel goes on to talk about the lack of streamlined processes for tapping into internal sources of innovation. We have all heard about programs at companies such as 3M, who go as far as to allocate laboratory time and resources to any level employee, including shop floor workers, secretaries, just about anyone with a new product idea, but these are far more the exception than the norm. He also mentions that in companies not like 3M, new ideas fail before they are even proposed because there is no mechanism for challenging the entrenched "dominant logic" of the company, which rejects ideas that don't originate from sanctioned channels, i.e. the R&D department.

Last December's issue of TCP talked about Eli Goldratt's perspective on Theory of Constraints and the Toyota Production System. What I didn't mention was my second question to Dr. Goldratt, where I asked him about TOC's role in innovation. "There is none," he said. "Innovation is not a constraint. There is plenty of it available." This would seem to support Hamel's contention that it is not ideas, but the means to use them that are the barrier. In retrospect, I wish that I had phrased my question to Dr. Goldratt this way.

I think it is important to draw a few distinctions about innovation, as not all innovation is created equal, and far too often the customer is neglected in the process. To borrow from an old advertising saying, "if it doesn't sell, it's not creative," the same can be said here. Product development decisions that involve innovation need to be considered against the business objectives of the company, so that its benefits, such as increased market share, can be traded off for the expense, such as schedule delay, product cost and other factors.

The following are what I've defined as the five levels of innovation that exist in product development. Let's call it the--

"Innovation Maturity Model (IMM)":

LEVEL V - "Disruptive" - Borrowing from Clayton Christensen's vernacular in his book, The Innovator's Dilemma, disruptive innovation can be the type that renders your core product(s), and therefore your business model, obsolete. (e.g. What compact discs have done to vinyl record albums, and what the Internet is doing to intermediaries everywhere.)

LEVEL IV - "Breakthrough Solutions" - These would be new to the world products or services that address a need in a way not considered before or that nobody knew existed. (e.g. 3M's Post-It(TM) Notes products)

LEVEL III - "Solution Enhancements" - These would be whole new products that address existing needs, but in a way that changes the paradigm. (e.g. The Zip drive, which added a new category to the already existing market for digital storage media.)

LEVEL II - "Feature Enhancements" - These innovations exist at the product feature level, and either create a new capability for an existing product or service, or improve upon its performance. (e.g. An ergonomically shaped computer mouse or caller id service on your telephone.)

LEVEL I - "Superficial" - These innovations are hardly innovative at all, but are deemed so on a purely subjective rather than functional level, such as with the product's appearance. (e.g. Baywatch Barbie, or the iMAC, except for its new "firewire" capability)

This is not meant to be a definitive model. I am sure that there are other distinctions that I may not have thought about; in fact, the above is most likely a composite of many other people's ideas that I've heard and read over the years. If you have any suggestions or think I've missed something, please drop me a line.

Comments or questions? Send them to gregg@roundtable.com

"Reader Responses" to this article

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a r t i c l e - t w o :
NPD ON THE WEB

"NSF Research on NPD and Innovation"

Link #1: http://www.eas.asu.edu/~kdooley/innovation.html
Link #2: http://www.eas.asu.edu/~kdooley/nsfnpd

Sponsored by the National Science Foundation, with additional support from 3M and Honeywell, Kevin Dooley of Arizona State University has compiled an impressive site based on his team's NPD research. Of principal value (from the first hyperlink above) are the Acrobat .pdf files of the following research reports:

A River Runs Between Us: Legitimate Roles and Enacted Practices in Cross-Functional Product Development Teams

A Quality Theoretic Framework for New Product Development

The Impact of Best Practices and Maturity in New Product Development

The Application of Risk Analysis in Nuclear Power, Space, Chemical Processing, IT, and Telecommunications Industries

Measuring Programmer Performance in a Reuse-Driven Software Development Environment

Social Networks of Systems Engineers in Integrated Product Development

Know a website we should review? Send the url to gregg@roundtable.com

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a r t i c l e - t h r e e :
DILBER-TV - A QUICK REVIEW

(Dilbert - 8:00-8:30pm Mondays - UPN Network)

You may think a review of a television show, and a cartoon at that, is a bit of a departure from the subject of this publication. However, it is far from moot that the bent-tie protagonist known as "Dilbert" has had a profound impact on the business world in general, and on the cubicle-dwelling community of product developers in particular. My current metric for this type of social impact is the frequency of Dilbert references in conference presentations, which for 1998 came in at an impressive 1.2 per hour (references to Microsoft came in a close second at .96).

Following the oft-misused notion that "if a little is good, then more is better," the UPN network (itself a strange phenomena) has thrown the daily comic-strip hero into TV's prolific animation war spurred by The Simpsons. This begs the question: Can Dilbert make this transition?

The jury is still out, but if one were to put all your judgement eggs into the first-impression basket, Dilbert's debut three weeks ago was not encouraging. I heard from more people who said the show's opening sequence, showing Dilbert characters evolving out of the primordial ooze, was the best part.

Voiced by movie actor Daniel Stern (Home Alone 1&2, City Slickers), Dilbert comes across adequately as the oft victimized, weak-willed, yet brilliant engineer. His evil pet, Dogbert, seems inappropriately cast with Chris Elliott (whom you may know from the 80s David Letterman Show, a brief stint on Saturday Night Live and a bunch of Tostito Chip commercials), whose voice just doesn't sound mean enough. In my experience, whenever a silent medium gains a voice, disappointment is inevitable.

The story and jokes, the same ones that come across brilliantly in my daily paper, seem overly simple and child-like in this new medium. The choice of "Orwellian" background music, while meant to enhance the overall pessimistic tone of the show, is overused and trite. In all, it just seems too forced, and easily cultivates the attitude that Dilbert creator, Scott Adams, has really sold out (of course, you could have already come to this conclusion from his omnipresent over-merchandising - I mean, who really needs Dilbert flatware?). In his defense however, how many of us could resist a TV executive who drives a truckload of money up to your house?

I have caught parts of two more episodes since the pilot, and have noticed incremental improvement. Just like any new product development project, but more like software, I leave open the possibility that, through iterations, it could become a higher quality, popular show. But, compared to the fact that 50% of all NPD projects are doomed to failure, the 90+% failure rate of new TV shows is not encouraging. But then again, I felt the same way about the first couple seasons of Seinfeld.

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a r t i c l e - f o u r :
TOP TEN VALENTINE'S DAY NPD CANDY HEART PHRASES

from the MRT home office in Lexington, MA...

10. Sex Sigma
9. Injection Molded
8. UR Cube or Mine?
7. B My Resource
6. I Love FEA
5. Meetings Suck
4. Let's Co-Locate
3. Activity Based Loving
2. Time-to-Makeout

...and the #1 NPD Candy Heart Phrase --

1. Hardware Enabled

Send your Top Ten List suggestions to gregg@roundtable.com

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a r t i c l e - f i v e :
MRT NEWS

Over the years, we've heard from many of our customers on the problem of balancing the opportunities of new product development with the resources to get it done and the business priorities of the company. We are pleased to announce a new conference this May that will tackle this critical challenge:

"Product Portfolio Management: Balancing Resources with Opportunity" to be held May 10-12, 1999 in Cincinnati. Featuring:

Robert Cooper, product development expert and author, "Portfolio Management for New Products"

James Matheson, co-author, "The Smart Organization"

Tom Keelin, co-author of the HBR article, "Making Better Resource Allocation Decisions at SmithKline Beecham"

And practical case studies from Procter & Gamble, General Electric, Eastman Kodak, Sun Microsystems, DaimlerChrysler, Medrad and others...

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U p c o m i n g M R T e v e n t s

> "Gaining Buy-in & Alignment on Cross-Functional Product Development"
1.5-day intensive, experiential workshop
February 11-12, 1999 - Detroit

> "Developing Products in Half the Time"
w/cycle-time reduction expert: Preston G. Smith
February 17-18, 1999 - Seattle

> "Product & Process Leadership Conference"
April 6-9, 1999 - Boston
Featuring renowned strategists Gary Hamel, Clayton Christensen, Michael Dertouzos and many others...

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A D M I N I S T R I V I A

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**Reader Responses**
Dear Critical Path: Your second paragraph quote, "how to innovate . . . create business . . . models," triggered the following observation and suggestions: Observation: with every product development "level," methodology, nomenclature, or activity there is a corresponding business element. Level V -- "disruptive" The business innovators disruptive innovation can render both your and/or your current competitor's product obsolete. An example is an aquisition we recently completed. The target company was floundering based on a $40,000 one-time-license for hardware and software with unlimited use. We changed it to $7,000 one-time plus $99 per student. The product officially releases this week, yet by word of mouth and limited sales training (three weeks ago) we already have orders equalling our first three months forecast. Level II -- Business Model Enhancements -- Adding rental or leasing, money-back guarantee on capital equipment, . . . Level I -- superficial -- extended credit, a new ad campaign, money back on consumables, extended ordering hours, installation services, . . . . However, a package of superficial changes may result from a breakthrough study of customer habits and wants. The best time for such a study is before and after product development. George Walls Director Product Innovation Laerdal Medical Corporation CP: George, thank you for your examples and illustrations of applying the IMM to business model issues. It was apparent to you and some other readers that the "flavor" of this approach is applicable to a number of different business aspects, especially strategy. In fact, as I had noted at the bottom of the article, the ideas are hardly innovative. See the next letter below... --Gregg Dear Critical Path: Your description of the Innovation Maturity Model is similar to Altshuller's categorizing of patents, the basis of TRIZ. You may want to check out this TRIZ site: http://www.jps.net/TRIZ/Tech1Rev.htm David Anderson Sr. Vice President Herbst Lazar Bell CP: Wow - yes it is remarkably similar, while not entirely congruent. "Small world" or "great minds...." I'm not sure which. Before I get blamed for plagiarism, I've been aware of TRIZ/TIPS for a number of years, but had never seen Altshuller's official model before. Thank you for the pointer. For those unaware - TRIZ, also known as TIPS, stands for "Theory of Inventive Problem Solving". It is a Russian method that is composed of fundamental "invention" or "engineering" problem-solving algorithms based in part on patent information. With TRIZ, one would try to find existing applications of innovation and technology to apply towards engineering problems in unrelated fields. For example, if your problem is "What is the best technique for heat dissipation in a fleece winter hat", you may go to the patent information, and, with the proper problem analysis and query approach, find a solution from something as obscure as "steamboat exhaust systems". I hope I am not butchering this explanation. Please follow the weblink above for more information or use any search engine (we prefer Altavista). --Gregg Dear Critical Path: I like your newsletter very much. I have one comment for you on your Innovation Maturity Model: Level 1 is labeled as "superficial" which may be an innovation oxymoron. Superficial implies on the surface or trivial. Sure Apple could have changed the color & material of its PowerMac's but that would not have made it an iMAC. iMAC's surface level change would not have been possible without innovative vision and core functional, technological and process changes. A very interesting & powerful thing happens though when this type of innovation is pulled off properly. You positively impact on consumers emotional levels and change the quality of their experience and even behavior with products. Therefore, I would like to suggest that Level 1 be renamed to "Experiential Enhancements" which for me is closer to capturing the innovation I see working in so many successful aesthetically cool products today. For me, the product appearance is one of the tangible deliverables from orchestrating a product usage experience to delight consumers. Building a great experience, requires vision and innovation at the emotional level. Appearance communicates powerfully and immediately. And there are products with good appearance that fail, in part, because once you interact with the product they fail to deliver on performance. I am all for new exciting product appearance, however, I believe the real innovation is the result of creating a new enriching "experience" in which the product is visually exciting (looks good) and its performance exceeds expectations (works good). Herb Velazquez Aesthetics Research Fellow CP: Regarding your augmentation of level I to be "Experiential" - I like that. I didn't realize that I had let my own subjective opinion reek into that piece with a negative term such as "superficial". I guess this is because the "superficial" type has been the characterization of what I see most frequently (what you would label "looks good, doesn't work". While I still firmly believe there is overproliferation of the "superficial" type, I can not challenge your assertion that innovations in product appearance can have tremendous value. Perhaps level one should be split into Level I and Level I-A. This is the classic "form follows function" or "3-F" debate. I have recently lurked on an Industrial Designer's e-mail discussion group where a thread was begun on "Braun's 10 Design Principles", which consisted of a bunch of one liners about what is "good design", such as "good design enhances usability" or "good design is unobtrusive". While simplistic, these principles supported the idea that purely aesthetic design improvements are not usually sufficient or a valuable contribution. If such innovation can be judged to provide increased value to the customer, and "I greatly enjoy using such a colorful device" DOES COUNT, then the "experiential innovation" as you noted has been achieved, product performance has been enhanced, which leads to market success, and therefore deserves merit. However, such improvements still need to be judged against tradeoffs, and needs to be linked to the overall economics of the product. In the majority of cases, I think customers are more satisfied by the fact that a product works and is reliable, then how good they look using it (fashion industries excepted - where the value definition changes). Perhaps in a future TCP, we will discuss the various hierarchies of product features that influence purchase behavior. On a side note, when I wrote this article I purposefully chose the iMac as an example of superficial innovation to elicit a response such as yours. Thanks for "taking the bait", and providing me the opportunity to comment. -- Gregg Dear Critical Path: As a student of TRIZ I was amazed at how close your model matches Altshuller's 5 levels of inventive solution. As to "The big challenge most companies face today" I have a very different opinion. Upper management of most companies, especially public companies, is concerned with maximization of shareholder's equity. This concern blocks the way for "Disruptive innovation" since the results are far removed from this year's Profit Statement. In my experience truly disruptive technology, high tech excluded, requires 15-20 years for implementation. While "Solution Enhancements" may be implemented in a year or two. Another reason to stalled innovation lies with differentiation between operational and capital funds. I worked with a client on a project where we developed a solution saving that client about $400,000 annually in maintenance expenses. The problem causing these expenses remained unsolved for over 15 years. The solution cost was estimated at $700,000. The company rejected this solution for lack of capital funds. In general, it is not the innovation process or NPD that is a problem, implementation or lack of a proven process that is an obstacle more often than not. Mark G. Barkan, Ph.D. Concept Catalysts

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