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Are too many ideas killing your new product innovation?

poisonHow can having too many ideas be bad for your new product development success; sounds counterintuitive doesn’t it? Well, the problem isn’t actually the number of ideas generated. The problem is allowing too many of them into the new product development process at the same time. Previously, I’ve written about how multi-tasking hurts individual productivity. In this issue, I’ll show you how hedging your bets across too many projects creates unnecessary delays in cash flow and actually increases your risk. I’ll also share an approach that you can use to manage your pipeline.

playLet’s start with an example:

  • We have 2 new product ideas
  • Both can generate $1 million a year in cash flow
  • They have an equal probability of success
  • Each idea will require the efforts of 10 people for six months (60 work months)
  • We have 10 people available to work on these projects

How should we prioritize our resources for these projects? Frequently we compromise and put five people on each of them. Let’s compare two scenarios to see why there’s a better way.

Scenario 1 – We compromise and split the effort so that we can do both at the same timely. For now, we’ll ignore any shared resource constraints that might actually overlap and result in the two projects taking longer. With five people working on each idea, both programs are completed and ready for market launch at the end of 12 months.

Scenario 2 – Alternatively, in a focused, sequential approach, we put all 10 available people on Project A and are able to launch in six months. It’s possible that we could finish even sooner since individual productivity increases when we eliminate multi-tasking; we’ll ignore that for the time being. After finishing Project A at the end of the first six months, the team then moves over and spends the next six months on Project B. It’s ready for market launch at the end of the twelfth month.

So what’s the difference? It still takes twelve months to finish the two projects.

The important difference is that in a focused approach, one product launches six months earlier and generates an extra $500,000 during that period. That’s half the time that it would have taken in Scenario 1, without any delay on the second project. On average, our two projects get to market in nine months. That’s a 25% improvement in time to market with no additional resources or costs and an increase in cash flow. However, most companies try to run far more than two projects at the same time. Make this same comparison with 5 projects and you are close in on a 50% reduction in time to market (18 months vs. 30 months) not to mention the boost in early cash flow. One industrial products client that tried this approach moved from 25 projects down to five projects. As a result, they reduced project cycle time from 36 months down to less than a year: more than a 65% reduction in time to launch with no additional resources.

One of the biggest concerns I hear when discussing this approach with management teams is risk management. “We can’t put all of our eggs in one basket.” In fact, a more sequential, focused approach reduces risk. Getting some projects done sooner reduces the market risk of competitors getting to market first. Additionally, delaying the commitment point on the next opportunity adds flexibility. In our example, if the market for Project B were to erode before we finished Project A, we could move to Project C. In this case, the sequential approach saves us from working on a troubled project by allowing us to reprioritize based on the latest and best information. This leads me to an important tool that you’ll need to implement this approach: the idea bucket.

In order to effectively maximize the flow through your new product development pipeline, you need to keep a prioritized bucket of new product ideas and opportunities. Making decisions like this can be difficult. People worry that good ideas will be forgotten when you narrow your focus to fewer projects. That’s where the idea bucket comes in to play. It collects every new product idea so that they can be evaluated against success criteria, and ranked by a cross-functional leadership team.

Using a baseball analogy, the idea bucket separates opportunities into four categories:

  1. Rookies – All ideas enter at this stage. An opportunity evaluation team assesses them for strategic fit and commercial, technical and manufacturing feasibility. After assessment, they are either sent back for rework or are put in the batting order.
  2. Batting Lineup – You assess, rank and place projects into a prioritized order. However, unlike baseball, you can revise the batting order to reflect the latest conditions.
  3. On Deck Circle – The next project you will start when resources become available.
  4. Not Ready for the Majors – Some ideas just don’t fit with the company’s current strategy or business environment and don’t warrant re-work. Since we want to encourage new ideas, we archive the less qualified ideas so that we can revisit them if changes warrant.

Of course, you also need to communicate these priorities so that folks in your organization know the ever-evolving priorities. If you run a larger company, your corporate intranet can host collaboration software where your people can submit project ideas and you can communicate project status. If you are a smaller company, consider low cost or free collaboration tools like Google Apps. These allow you to set up password protected, intranet type websites where your team can submit, view, contribute and even help prioritize new product ideas.

The Bottom Line

Letting too many good ideas into your new product process at the same time has just the opposite effect that you would hope. It slows time to market and increases new product risk. Instead, focusing your resources on fewer projects sequentially, rather than more projects simultaneously, results in earlier cash flow while still completing all projects in the same time. Additionally, it increases flexibility and reduces risk since you can delay making resource commitments for the later projects. A prioritized idea bucket helps manage your pipeline to ensure a continued flow of new opportunities.

{ 2 comments… add one }
  • Pablo Alvarez July 26, 2010, 10:17 pm

    Mike,
    I have not read the book so please consider that I’m asking from an ignorant perspective, but let me explain my doubt.

    What kind of business/industry are you talking about when you say “However, most companies try to run far more than two projects at the same time.” ? Doesn’t it depend on the industry? I understand that an R&D team may be able to develop more than 2 products a year sequentially in some industries, but if you’re a software vendor – for example – you need a specialized team dedicated to a particular product. After releasing version 1, you would start working on the next release – the team can’t just forget about the product and go on with the next idea, and the acquired expertise is a required asset to improve/continue with the product. In this case, one would assign the 10 guys to only one of the ideas and discard the other, or 5 in each simultaneously.

    • Michael A. Dalton July 27, 2010, 1:50 pm

      Hi Pablo –

      Thanks for asking. Yes it does depend on the industry and of course the size of the organization, but directionally what I was trying to say was that companies tend to run projects too lean rather than with enough people to move as fast as possible. And counter to what they expect, cash flow from new products suffers as does time to market.

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