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Unclogging Your Innovation Pipeline

Unclogging Your Innovation PipelineWhat can you do to unclog your innovation pipeline for accelerated growth? How can you optimize speed to market and make launching high-impact new products something your organization gets better and better at as time goes on?

Ask any manufacturer of highly engineered products what it’s doing to drive productivity in operations and you’ll get an earful about their Lean efforts. Ask the same company what it is doing to get more productivity out of its investment in new product innovation. You are likely to get a blank stare or hear some mumbling about having a “stage-gate” process.

The Knowledge Work Issue

A big part of the issue with unclogging your pipeline is that innovation is knowledge work. In manufacturing, work-in-process inventory is pretty obvious so it can be easily managed. But in R&D, WIP consists of ideas, intellectual property and projects in varying degrees of completion. Of course, none of these are highly visible or take up much space in the warehouse. So it can be really tough to visualize the magnitude of the issue, but it’s there and in a big way. What’s been worse is that new product WIP goes stale even faster than physical inventory.

Firewalling Your Pipeline

You might recognize this as an 80/20 problem. Twenty percent of that WIP returns 80% of the results. Or even more importantly, 60% of the effort delivers almost 100% of the results (Yes – that’s a part of the pareto distribution too!). Top performers unclog their innovation pipelines by culling out the underperforming projects early. So the important question is how do they keep the underperforming 40% out of the portfolio?

The answer is placing a good firewall at the front end of the process — one that screens out poor performers early by establishing commercial, technical, and manufacturing feasibility. But for that firewall to work, you must also have visibility into your portfolio. And that leads us to one of the worst root causes of poor visibility: too many programs in execution. More on Picking Winning New Product Opportunities

Being Busy is Not the Same as Being Productive

Another challenge to unclogging your innovation pipeline is the pervasive view that you need to keep people busy to be more efficient. That’s a false efficiency. Combine that with the equally pervasive belief that R&D or engineering has to run more projects to get more new products out of the pipeline and you quickly overfill the portfolio and lose visibility into what’s happening with each project.

What happens as we approach 100% capacity utilization? Wait time increases, causing cycle time or, more importantly, time-to-revenue, to soar. Experience shows the same thing. If you think of the new product development pipeline as a highway running at high capacity, it’s easy to see how letting in too much traffic, in the way of new projects, can cause traffic jams waiting for shared resources across the portfolio. In fact, that’s why freeway entrance ramp meters exist — to reduce the number of traffic jams from slugs of traffic entering at the same time.

“If you think of the new product development pipeline as a highway running at high capacity, it’s easy to see how letting in too much traffic, in the way of new projects, can cause traffic jams waiting for shared resources across the portfolio.”

Of course, you may be more interested in the impact of this wait time — reduced cash flow. To see why this is the case, let’s look at a simple example.

What Busy is Really Costing You

Let’s say a company has two similar new product opportunities each of which ramps up to $1 million in annual cash flow within 3 months after launch. However, it only has enough resources to finish one project in six months and then the other six months later. Alternatively, the company can spread its resources across both.

Being honest with itself, what are the chances that the organization would choose to run the first and let the other wait? Because of the pervasive beliefs already mentioned, most companies choose to spread their resources. When they do, the ramp up to cash flow for both new products is pushed out to 12 months. Actually, the negative impact of multitasking will push it out another six months or more, but we’ll save that for another article.

Alternatively, if the projects are pipelined into execution one at a time, the first finishes in six months and the other still finishes within the same 12 months and creates an additional $500,000 cash flow.

It’s very important to mention that I’m not suggesting that a company can work on only one project. The point is that limiting the number of projects in execution at one time, based on resource bandwidth, gets more projects finished and does so in less time. This approach also reduces risk since you can delay committing to the second project for six more months. That can be critically important if the market changes or a better opportunity comes along.

The Metering Solution

The solution to unclogging your overloaded innovation pipeline is as simple (and as difficult) as metering work into execution based on projected capacity utilization. A system like this one that you can download encourages staggering the start dates of projects so that individual resources are never overwhelmed. This ensures continuous task flow and helps a company optimize the number of projects that make it across the finish line. Additionally, with fewer plates spinning, you’ll have better visibility into what’s really entering the pipeline so you can capitalize on the critical few and avoid the trivial many.

This article originally appeared in CFO Magazine

 

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