In a previous post, we advocated two systems for managing your company’s early stage product innovation activities. The first is a yearly planning process that ties the company’s vision to a strategy and provides a set of roadmaps that drive the annual budgeting process. This strategic planning process takes into account not only product concepts, but also projects under development, and those in the current marketplace. Such a yearly, 30,000 foot view is necessary, but, we argue, not sufficient. Most companies require another system to manage the so-called fuzzy front end. We advocate a front end management system that is an on-going process that helps to feed the pipeline with the right projects, while helping teams to make the best decisions for the company’s future.
De-Fuzzing The Front End
Companies tend to have poorly defined processes for the front end of development. Many teams argue that the pre-development, concept phase is by nature fuzzy and uncertain and that it cannot be improved. We hold that programs in this phase can be “de-fuzzed” and the inherent risks and uncertainty reduced if companies create a consistent, yet light weight process, like a set of lighthouses along the coast that guide a ship through the fog.
A viable front-end management process creates clear decision points that help to establish the starting line for projects based on the company’s priorities; that ensure that projects are staffed properly with the right resources; and that define projects such that they address the key issues and mitigate predictable risks.
Next, select a governance body and create criteria for the decision points around product concepts. The decision-making body should include executives who oversee the critical functions in product innovation and strategy (such as Engineering, Marketing, etc.). The governance body for this process should be the same group that helms the yearly strategic planning process. The same skills are required and having the same body govern both processes provides management continuity.
A robust front-end product innovation system also includes loose gates and a related set of deliverables that proposed programs (products, technologies, and investigations) must pass through in order to ensure that the team has considered the risks as well as the proposed program’s fit with the strategy.
Typically, these gates include:
- A First Review: Ensures that the project is worthy of forming a cross functional team and outlines the steps to test the hypothesis.
- A Second Review: Ensures that the team demonstrates feasibility, defines the broad parameters of the product offering, and has reduced the most significant risks. This gate ensures that the team is truly ready to enter development with a reliable schedule.
Deliverables for the Front End of Development
This front end management system also includes light weight deliverables that help to remove the fuzz from the front end. These deliverables may include:
- First Review/Approval: The leadership team reviews submission of a hypothesized opportunity for strategic fit and approves or denies requests for further investment.
- Market Assessment: Validates and documents the under-served market need.
- Commercial Feasibility Assessment: Describes the target segments, target customers and documents the commercial potential.
- Technology Assessment: Summary of proposed technologies, missing elements, critical partners, and known technical risks.
- Second Review/Approval: The leadership team reviews submission of a request to enter the product process and approves or denies requests for further investment.
Other documents the team might produce along the road include:
- Business Case: Includes relevant estimates for placement volumes, activation rates, consumables trail, cannibalization, ASPs, NPV, IRR, payback period, gross profit, and operating profit. Also may include an explanation of the business risks.
- Business Assessment: Verifies commercial and regulatory (where applicable) readiness.
- Early Phase Report: Provides evaluation of technological feasibility, manufacturability and costs.
- Updated Portfolio Roadmaps: Prioritizes newly approved projects.
Do the Work Up Front
The foregoing list of deliverables shows that a team may perform a great deal of detailed work before a project enters the pipeline. The purpose of all of this activity is to ensure that the very best innovative concepts enter the pipeline and that they have the greatest chance to deliver their expected value on a pre-determined schedule. If vague, fuzzy concepts populate the pipeline then the result too often is vague, fuzzy offerings – created at a huge expense.
The best way to reduce uncertainty in projects is to know all the facts that can be known and to marshal them in some type of order. By placing clear gates, with clear, formalized deliverables, around hypothesized programs, the team and decision-makers clarify whatever can be known, reducing risk, ensuring more predictable results, thus bringing clarity to the fuzzy front end.
Although the details of the design and functionality of a new concept will become clearer as the project proceeds, we nonetheless advocate putting in place a loose but consistent structure up front. Our experience suggests that companies that carefully define as much as they can at the stage when products are mere hypotheses, refine their markets, reduce uncertainty, avoid risks, and produce products more predictably and reliably. Accompanied by a formal, yearly strategic planning process, a front end management process, as we’ve described above, will help load your company’s pipeline with the very best – and only the best – product concepts.