Wednesday, August 23, 2006

Innovation Pipeline

What do you think would happen to a sales executive in a large organization who was asked about his pipeline and could not produce one? As we all know, sales management is constantly hounding the sales team for up to date sales projections. A typical salesperson spends at least an hour a day updating his or her sales pipeline, noting the opportunities being pursued, the size and scope of the opportunity and the likelihood of winning the deal. Various levels of sales management receive these updates, apply "judgement" to the reporting and consolidate the report into a final pipeline.

A good sales manager knows what deals will happen next week, next month and next quarter. Every large organization has some form of sales reporting and pipeline management. Otherwise, they'd be driving blind, going into the future without a good sense of near term potential revenue.

Contrast that with the state of innovation today. There are teams and individuals working on new ideas which may become new products or services. Unlike the sales teams, these innovation teams do not have an integrated management structure, don't report to the same people and don't generally have any incentive to report their status or prospects. Additionally, they don't share a common methodology or philosophy, naming convention or set of reporting tools to collect and report their status. In fact, many of these teams seek to keep their work secret (skunkworks) to keep it from being influenced or killed by management or other teams.

So, in many "innovative" firms it is difficult if not impossible to get any sense of an innovation pipeline similar to a sales pipeline. Want to know what ideas people are currently working on that might become that new product in six months? Go ask each team, if they'll tell you. What's the potential return on the innovation investment for a particular idea? What measurement should the team use in order to report that? How likely is an idea to become a valuable new product or service? What are the odds of a successful launch and winning in the marketplace? Whose definitions should we use?

Too often, ideas are wrangled through disparate systems and processes by idea champions who quite literally pick up the flag and carry it through the muck and push and cajole and beg until their idea is considered and moved forward. If you are lucky enough to identify these people and have them report consistently to you, then you might be able to create a reasonable picture of your innovation pipeline. Otherwise, trying to find the ideas and teams and trying to apply judgement to the ideas to determine the value of your innovation pipeline and its potential timing is close to impossible.

Why should this be? If innovation - defined as bringing a new idea to market as a valuable product or service - is the driving force for new organic growth, and if innovation is a top three priority for most businesses, certainly we'd want to know where the investment is going and what the likely return is on that investment, and the relevant timeframes. If the sales teams can create a reasonable, quantifiable sales pipeline that is used by industry analysts and Wall Street experts to judge the financial well being of the company, certainly any firm that prides itself and differentiates itself on innovation should be able to create an innovation pipeline.

What's standing in the way? A lack of enterprise systems to capture the ideas, a lack of corporate standards to judge the ideas according to their viability and potential return, rosy scenarios about the length of time it will take for the idea to blossom and the real cost of bringing the new product or service to market. Sales guys figured out a long time ago how to quantify their opportunities, and sales management applies the relevant judgement on those reports to create a viable pipeline. Innovation managers need to create their own standards and begin reporting the likely return on innovation and the timeframes or they won't be taken seriously for very long.

Sales management benefits from the fact that all sales people belong to and report to the same business function, and are compensated not only for closing deals but for reporting their progress and pipeline. Obviously the sales team has an easier job capturing and managing the information, but that does not excuse the fact that the important innovative ideas that will drive future growth are not well managed or reported today.
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posted by Jeffrey Phillips at 2:16 PM

26 Comments:

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Blogger Bill Shockley said...

Your statement in the skunkworks paragraph, "A skunk works isn't really scalable so it does not necessarily lead to consistent improvements in innovation - rather it indicates that there are clearly two types of people in the firm - those the CEO thinks can innovate (a very small team) and those not trusted to do so," may not be just a matter of trust, but may be that a few people are paid to innovate, and the rest don't think its their job to innovate.

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