Out to launch

Without a business culture of innovation, good ideas go begging. Victor Anderson asks the expert how to bring new products...

Without a business culture of innovation, good ideas go begging. Victor Anderson asks the expert how to bring new products successfully to market

Scott Edgett has a passion for making things work. He helps organisations develop products and services in a way that increases the chances of their successful launch.

Whether they flourish or flop, new products are a huge business, accounting in the UK for over 33% of company sales and an annual R&D spend of £13bn.

B&T caught up with the Canadian professor during his brief visit to the UK and quizzed him on the pitfalls of product development and innovation.

How do you define innovation?

When I think of innovation it is always connected with revenue and product development. There's a graduated scale of innovation from something entirely new to the world, like the first car, which is very rare, all the way down to an engineering cost reduction initiative, which isn't all that exciting but saves time and money. Innovation is essentially about risk. How an organisation manages that risk decides its level of innovation.

What fosters innovation in a business?

There isn't a single driver but a number of common themes. Senior leadership supporting innovation, allocation of funding and time, and having the right people to generate that innovation are the keys.

How important is it to share ideas?

The more ideas are shared, the more they foster other ideas. One idea may not be good but two ideas together might be very powerful. IT is important in sharing ideas because of Web-based systems and central repositories for ideas and idea data banks.

It's also a way of storing knowledge within an organisation. For example, [greetings card maker] Hallmark takes an idea and tries to pulse it by running it past 20 other people. The point is to see whether the initial idea comes back bigger and better.

What are the pitfalls between a product's conception and its market debut?

The first is the lack of an effective filter system along the development process can leave you with junk in and junk out. The second is an internally created problem of product teams failing to communicate with each other.

Some organisations cause problems for themselves by failing to clearly define the product. This leads to 'scope creep', with the organisation ending up with something completely different than it set out to create. In the banking sector, scope creep is a killer.

What is your 'stage gate' method of product development?

It's essentially a risk management model. We start with stages, each of which gets progressively bigger, more involved and more costly. Between each stage are checkpoints when executives come in and review the results to date and decide whether to move the project forward or not.

Silicon Valley's going through hell at the moment. Will the same happen here?

[Smiling] Yeah, they're bleeding! If I knew what the future held, I'd be rich through the stock markets! What's happening in Silicon Valley is the failure of companies that aren't creating value. The ones that have collapsed had no product value or differentiation. Basically, they sold an ad campaign. That's going to spread everywhere, which isn't necessarily a bad thing; it's just evolution. One difference with any other industry is the accelerated timeline. The knockouts are happening fast.

Many companies in the same industry appear very similar, so why are some more successful than others?

The successful company does a number of things better. Speed to market is critical - that means figuring out how to do things twice as fast and being in the right place at the right time. Companies will become more decentralised since fast movement requires fast decision making. More staff will be delegated and accountable, so strong leaders will stand out much quicker. New technology has shortened the product life cycle. You no longer have the luxury of 18 or 24 months to make money.

Is an economic downturn a time to innovate or sit tight?

During recessions, companies are under huge pressure to generate new revenue. One way of doing this is to launch new products. Those companies forced to downsize feel the innovation penalty two or three years down the line. When normal business resumes there's often a gap in their range of products or services. I worked with a Japanese company, Toray Chemicals, that had to make cutbacks and lay-offs. The only budget it didn't cut was R&D and innovation. The logic was that times might be tough but they still had to be able to compete. That was very insightful. Americans, by contrast, slash and burn.

How will the IT director's role change?

From the product development perspective, the IT director's role will become more critical. R&D is one of the most confidential and secret areas within an organisation. There's risk of leakage of Web-based information.

As information brokers, how important is it for IT directors to discern what's important for the organisation?

The more IT directors understand the needs of the organisation, the better they can advise on solutions and possible alternatives. In the past they were seen as a technical support person; in the future they'll be responsible for enabling corporate strategy.

Where has an IT director been pivotal to a company's strategic direction?

I was at the multinational Hollister when it was busy with a major analysis of product innovation. It was a high-profile event sponsored by the chairman, and the IT director sat through the entire process. As the suppliers came through he was constantly pushing the value equation, making sure business units understood what was being communicated and whether the solutions matched their needs. He then asked the suppliers very hard 'dollars and cents' questions about the software, value and the make/buy option. He forced the suppliers to express return on investment.

The Facts: Scott J Edgett

Born: 1956, Ontario, Canada
Degrees: 1986 BBA in Accounting, 1987 MBA in Marketing and Finance, 1991 PhD
Academia: 1996 joined the faculty of new product development, services and marketing at McMaster University in Ontario, Canada. Associate professor of marketing at the Michael G De Groote School of Business at McMaster University
Published: Over 45 papers and three books
Current position: Founder and CEO of the Product Development Institute in Ontario. The PDI helps companies improve their approach to new product development and portfolio management, and offers services to numerous Fortune 500 firms and other multinationals (www.prod-dev.com).

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