How Your Organization Can Better Manage Innovation Performance

APQC recently interviewed Dr. Scott J. Edgett the CEO and Co-Founder of Stage-Gate International, who APQC recently collaborated with for the benchmarking study Innovation Performance: Critical Drivers of Success. In the following question and answer session, Edgett, one of the top experts in product innovation discusses what organizations can do to better manage innovation performance.

APQC: Dr. Edgett, in your experience what are critical things top-performing innovation organizations do differently from ones that don’t innovate?

Edgett: This is a good question, but a hard question to answer simply because becoming a top-performing organization in innovation is the result of many things occurring well within the organization. The common trait is understanding that innovation is a critical capability within the organization, so top-performing organizations are doing things to ensure that as a critical capability, it is constantly improving within the organization. For example, in our recent benchmarking study that we conducted jointly between Stage Gate International and APQC, we explored current benchmarks for product and service innovation performance, as well as looked at whether organizations are mastering the four key drivers of innovation performance that comprise Stage-Gate International’s Innovation Performance Framework:

product innovation strategy,
portfolio management process,
idea-to-launch process, and
culture and leadership.

The research provided four different capability perspectives. The first perspective looks at whether organizations have a good product innovation technology strategy in place. In other words, are they aligning to an innovation vision? The second perspective looks at whether organizations have a good portfolio management process in place that invests in the right projects at the right time. The third perspective evaluates whether organizations have a good tactical and operational idea-to-launch process so that they can do the projects right. And finally from a culture and leadership perspective, organizations have to look at whether they are creating the right environment within the organization. The results of the study indicated that top performers are clearly doing things differently than other organizations. They are making sure that all four components (strategy, portfolio management, idea-to-launch, and culture and leadership) are all working well within their organization and that they have a strong capability in each area. Organizations can’t just excel at one innovation performance driver at the expense of another. They also work hard to make sure that multiple levels of the organization are all contributing effectively. This is not an easy task, but certainly some organizations are rising above their peer groups and are able to deliver the results.

APQC: For innovation frameworks, one size doesn’t fit all. What are differences in product innovation practices between organizations that are focused primarily on business-to-business product development versus those organizations that focus primarily on consumer markets?

Edgett: That’s an interesting question and one we hear that a lot. Organizations often say “we are in a business-to-business (B2B) market, so we are different.” Or organizations in consumer packaged goods will say they are different when it comes to product innovation practices. Interestingly in our most recent benchmarking study that we did with APQC, there weren’t as many differences between B2B and business-to-consumer (B2C) as one might suspect. Whether an organization is B2B or B2C it doesn’t really matter, because a good executive and a good leadership team can craft good innovation strategy. They can also develop good portfolio management practices, ensure that the right idea-to-launch processes are well defined and working, and they can add the mandate to create a vibrant culture that supports innovation. The top performing organizations excel across the board regardless of industry sector or market.

The few areas in the research where we did notice a bit of difference is with the B2C where the consumer packaged goods (CPG) organizations tended to have a slightly more vibrant front-end to ensure more innovation with consumer insights. Consumer based organizations tend to have a more robust idea-to-launch process than the B2B category. B2C organizations also have a slightly stronger commercialization process. The decision meetings (Gate) are also more effective throughout the process. So, if you look at the four drivers of innovation for B2B and B2C, they were equal on capabilities on innovation strategy, portfolio management, and the ability to create a culture that supports innovation within the organization. We do acknowledge that CPG organizations in the study have a more structured and well defined idea-to-launch capability. Other than that the differences between the two groups are not statistically significant, which is actually very encouraging because that means that the best practices we have identified in our studies is supportable across multiple industries and multiple sectors.

You can read the full transcript of the interview in the article Innovation Performance: An Interview with Dr. Scott Edgett.

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