Considering the acceleration of digital transformation in all industries, innovation is critical to remain competitive. You can bring the most viable and valuable opportunities to fruition by working through these four innovation phases.
Digital transformation projects continue to pick up pace due to the pandemic, especially in the digital business consulting and implementation space. In fact, a recent McKinsey & Co. survey found that companies accelerated the digitization of their internal operations and supply chain and customer interactions by three to four years. Due to compressed timelines, however, the execution of such projects is fraught with risk.
The best way to ensure success is to make sure you are choosing the right projects to spend your limited time and resources on. This is where having a structured innovation process can help. The innovation funnel is a concept commonly used in research and development organizations to question proof of concept and better manage risk, but it can be applied in any environment where you need to pick winning bets.
Defining the Innovation Funnel for Your Operations
A quick search for “innovation funnel” will yield hundreds of different diagrams that grow increasingly narrower. At their core, these funnels have four main phases of innovation, with opportunities to review and reprioritize after each.
Often tied to strategic goals or known pain points, the ideation phase of innovation is all about capturing innovative solutions and centralizing the information for review. You can solicit ideas companywide through brainstorming sessions, hackathons, customer inquiries, and so on. Employ the five W’s (Who, what, when, where, and why) and use a template to standardize input. As you review, look for which projects could bring the most value — through new revenue streams, better enabling current resources, or other critical innovation criteria.
Now that you have a shortlist of potential projects, use the investigation phase to conceptualize and compare them. This often means building a more detailed business case, researching alternatives in the market, and laying out the plan to deliver on the potential value. Here, you should consider the time to value, feasibility, and risks of each proof of concept so you can make an informed decision on the positions you select.
The goal of the testing phase is to develop and deploy a lightweight test that will validate assumptions and help determine a heavier investment of time and resources. If you’re considering offering a new service, is there a way to test it with current customers? Are there ads you can run to gauge interest? If you’re developing an internal tool, are there prototypes you can develop through mock-ups or low-code alternatives? When evaluating tests, do you see enough of a benefit to continue? Is it in line with initial assumptions?
In the last phase of the funnel, you should start on an innovation implementation plan. You’ll need to determine the timeline, resource allocation, responsible parties, success metrics, benchmarks, etc. As with any new project, it’s important to continue to track progress and bring any learnings back into the funnel process.
Remember that the innovation funnel must work for your business and the scale of your organization. Provide clear communication across the company about what you’re looking for. Your goal should be to run the innovation funnel on a regular basis and make it a core practice.
Benefits of the Innovation Funnel
While the ultimate goal of the innovation funnel is to take ideas from concept to reality, working through the various phases of innovation has other organizational benefits. For instance, employing the funnel allows you to:
• Obtain a cross-functional view
It’s common to develop tunnel vision around strategic priorities and operational key performance indicators. By taking a crowdsourcing approach to ideation, you can expand your focus across departments and hierarchies. You may discover unknown pain points, operational vulnerabilities, insufficient resources, or other business obstacles that can be solved through thoughtful proposals. What’s more, collaboration can increase innovation success by 15%.
• See clear project value
Too many digital transformation projects get to the launch planning phase without a discernible business case or measurable KPIs. When putting projects through the innovation funnel, a baseline level of rigor is automatically applied. Why? Because each idea has been considered on its own merit and compared against others. Everyone must acknowledge whether they’ve selected a project for subjective or objective reasons. The funnel also provides a clear project management structure, and businesses with such a structure in place have 38% more successful projects.
• Understand resource project loads
Project overload is real, and it can consume your best people because they’re often tapped to be subject matter experts. Evaluating projects at each phase of innovation lets you review who you’re asking to step up. If it’s the same people over and over, consider whether the project is more important than their day-to-day responsibilities and reprioritize from there.
• Identify engaged employees
Finding your most passionate and engaged team members has never been an exact science. Ideation opportunities and follow-up projects allow for different avenues of engagement and expression that can reveal individuals you might not have come across before. You may also see people self-organize into groups that you wouldn’t have put together. Companies with engaged workforces experience 21% higher profitability, so the innovation funnel can truly impact your bottom line.
Try designing your own short innovation funnel. Take a day to weigh the potential implementation of this against other opportunities in your queue. If it’s worth pursuing, outline your business case and key tenets to shop it among your cohort. See whether there are people in your organization who are interested and have the bandwidth to take on a trial. Learn from this and iterate before generating a larger program.