Many companies do not distinguish sufficiently between innovation processes and product development processes, such as pre-development. As a result, they limit their capability to innovate as well as their future-viability while at the same time generating internal conflicts. In this article, we would like to point out the importance of clearly defined and tailor-made innovation processes, and provide guidance on appropriate procedural approaches as a function of the innovation level and the innovation momentum of innovation propositions.
By Friedhelm Boettcher und Karl-Michael Schumann
Innovation can be a very complex undertaking and often not successful at that. In many cases, this can be attributed to an insufficiently developed innovation culture in combination with inadequate, limited or even lacking systematic innovation management:
- The processes and procedural models for the development of innovations are not clearly enough defined and are often not adequately managed. This situation is often encountered when the innovation proposition does not match the company’s previous fields of experience or activities.
- The innovation project management processes do not match the desired or necessary level of innovation and the innovation momentum required for market success.
- There is a low or underdeveloped capability or desire to act proactively and to respond quickly to changes in the business environment.
This has the consequence that …
- … decision-makers lack the necessary confidence and decisions are not taken at all, half-heartedly or too late,
- … innovation projects are not resourced adequately due to the competing requirements of the day-to-day business. The company’s various competencies cannot be sufficiently integrated into the innovation projects, which leads to a waste of resources,
- … the most innovative employees are demotivated and leave the company. The challenge to “innovate” is “scorched”, and the company’s ability to change and improve is damaged for a long time.
In order to prevent this, companies have to deal more intensively with the configuration of their innovation system, and build coherent innovation architectures.
Figure 1: An innovation architecture as the basis for agile innovation management
What is an “innovation process”?
The integrated operational innovation process from finding ideas to innovation success is a crucial segment of the innovation architecture. We define the term “innovation process” here as a coherent set of activities and decisions to generate specific contributions that are necessary to successfully realize innovations. All individual contributions must meet defined success criteria.
With that said, four operational elements of the innovation process can be distinguished:
- The Front-End of Innovation (FEI): The development of innovation ideas and concepts
- The Back-End of Innovation (BEI): The development of offers and services to market maturity
- Go-To-Market (GtM): The execution of the launch plan to launch and disseminate the offer or service in a market or to generate a new market.
- Customer Feed Back and Integration: The coöperation with customers to develop a continually advancing understanding of the consequences of the purchased offer or service on the customers’ side, and to start a new innovation cycle.
The four elements differ fundamentally in terms of (a) their achievements, (b) their starting points, © their characters, (d) their procedural and structural characteristics, and the competences necessary to successfully carry out the respective activities. The clear and systematic differentiation of the four elements is important because each one provides a particular, irreplaceable contribution to successful innovation. The experience of decades of innovation management (and more recently of design thinking) shows, for example, that top results from the “front-end” cannot be achieved by simple standard “back-end” activities and vice versa. Only the coördinated interplay of all four elements leads to top innovation process results.
In this article we would first like to focus on the definition and interaction of the front-end and back-end of innovation
What do we mean by “front-end” and “back-end” of innovation, and why is this distinction important?
“Front-end” activities generate a (preliminary, first) business case with a new product/service concept or a new business model that represent options for new innovations. These deliverables enable qualified management decisions on the investment of funds and resources to start a new back-end development project, and to assess the impact of these decisions on the value and balance of the company’s innovation project portfolio.
“Back-end” activities generate marketable product/service offerings and/or business models that can be produced and sold or executed, respectively. The “back-end” activities are completed when “readiness” to enter the market is achieved. In addition to the ability to deliver the offering to the customer, this includes all technical and operational factors, including trade structures, financing and compliance with regulations. The management can make qualified “go-to-market” decisions on the basis of completion reports relating to all the readiness elements mentioned. An innovation might “go-to-market” at full power, or through a step-by-step market entry that builds up a learning relationship in coöperation with the first customers.
The “Front-End” activities create the basis for the “Back-End” activities and thus precede them “logically”. The results of the front-end determine what is to be developed and what is to be invested in. In practice, however, front-end and back-end can sometimes run (at least partly) in parallel. This can happen, for example, when knowledge obtained early in the front-end already enables certain investment decisions for back-end activities, or when first front-end “prototype” products or services can or should be sold to early adopters as minimal viable products (MVP) for gathering in-market knowledge and for starting market creation.
Table 1: The key characteristics distinguishing front-end and back-end of innovation
There is not only one innovation process
There is no “one-size-fits-all” solution in the design of the innovation processes for all kinds of innovations or businesses. The successful processing of innovation propositions presupposes that a) the innovation process approach is in line with the desired innovation level and the expected innovation momentum of the innovation proposition, b) the proximity to the core competence of the company is taken into account, and c) an effective management of the innovation activities is enabled. Depending on each one of these factors,
- different types of innovation decisions must be made, and different ways of getting to these decisions must be used,
- different framework conditions, and different procedural models must be made available,
- different innovation methods and tools must be used to develop the innovation propositions.
The precise design of the innovation processes depends on the specific conditions and needs of the individual companies. For orientation, generic processes for typical innovation levels, innovation momentums, and proximity to the core competence of the companies are described below (see Figure 2).
Figure 2: Depending on the innovation level, innovation momentum and proximity to the core competence of the companies, three different generic approaches can be distinguished in the front-end as well as the back-end of innovation.
a) Embryonic FEI
Opportunities for innovative offers are identified and selected using simple methods for idea finding and idea management. Selected ideas are further “incubated” and passed on to a standard back-end product development process (PDP) on the basis of requirement catalogs.
b) Mixed FEI
A mixed FEI process is typically used whenever a simple transfer of an idea out of an embryonic FEI on to a standard-PDP is not suitable. This can occur when an idea requires peculiar feasibility assessments, functioning prototypes for testing or solutions of difficult technical problems. In all of these circumstances it is desired to reduce the risks of product development related to financial and staffing resources, and to build up technical or commercial knowledge. In many cases the mixed-FEI will also conduct advanced systematic analyses of markets, products and technologies, often coupled with Roadmapping and Scenario Analysis. In many companies, a so-called „advance development“ represents the mixed FEI. The results of this mixed-FEI process are transferred to a standard-PDP or a Stage-and-Gate back-end process. In some cases there is also a close exchange with a Systematic-FEI possible.
c) Systematic FEI
In a Systematic FEI, new innovation opportunities, ideas and concepts for innovative offers and business models are systematically and continuously searched for and developed in such a way that they can be successfully realized via subsequent back-end processes (see Fig. 3). This FEI process includes advanced analyses of the environment with Strategic Foresight, focused Market Construction to identify new innovation opportunities, systematic idea generation, and development of ideas into concepts of offerings, business models and business cases by using procedural approaches that oscillate between diverging creative and converging analytical processes. The Systematic FEI is primarily used when disruptive innovations or new business models are sought outside the traditional experience and core competence of the companies. The focus here is on generating new knowledge about the needs and behaviors of customers in new markets or for completely new applications, about future markets and the development of innovative service offerings. Learning about minimal viable products in connection with the parallel development of market entry strategies is of great importance here. Results from the Systematic FEI can be transferred to all back-end processes, depending on their characteristics. In general the Systematic FEI will transfer its results to an Agile Stage-and-Gate PDP or to an Agile Innovation Circle.
Figure 3: An agile front-end of innovation process model — modular, iterative and commutative
a) Standard product development processes (Standard — PDPs)
An improved product or service offer (also as a variant or as a conventional product adaptation) is systematically developed based on a customer request or sales inquiry or based on results of the classical idea management. The technology and process principles to be used are clear but still need to be adapted to the intended properties of the product. The realization of the concept takes place in a standardized product development process (PDP) with clearly defined documents, decision points, and criteria for approvals. Line managers responsible within the development process can make decisions fast and non-bureaucratically. The risk of using resources for unsuccessful development projects is estimated to be low. Therefore, resources for the entire project can be released at the start of the project.
b) Agile Stage-and-Gate processes
The starting point here is a “project charter” as a transfer document from idea management or from the systematic development of a business idea, e.g. via an FEI (partly including ”advance development”). The transformation of the offering concept or the business model to market maturity takes place within the framework of a defined Stage-and- Gate process. The decision points for step-by-step investments of financial and human resources into the project and the deliverables for each stage are clearly defined or definable. The decision criteria and the decision-makers to be involved are named in advance, depending on the task at hand. The risk of using resources for less or not at all successful development projects is estimated to be higher. Therefore, the release of resources for a project only takes place step by step as a “gate” decision after successful completion of a development “stage”.
c) Agile Innovation Circle Processes
Innovative offers or business ideas are implemented in an agile innovation circle when the development of the offer and the market are still in a very early phase and no standard organizational structures exist for their implementation. The learning process that started in the Systematic FEI is continued under start-up conditions. Organizational structures are being set up in parallel to the development of the offerings or business model and to their market penetration. The risk of the (possibly unprofitable) use of resources for a start-up lies primarily with the investor in addition to the innovator. In this sense, an “investor” can also be an established company that assumes this “startup investor” role in an internal relationship with an internal development project and the developers responsible for it.
Table 2: Evaluation criteria for assigning innovation projects to the different process models in the front-end and back-end of innovation.
The allocation of projects to the appropriate FEI and BEI process model is based on criteria such as:
a) the expected innovation level, b) the expected innovation momentum, and c) the proximity to the company’s core competence. A summary of an initial guidance for using these criteria can be found in Table 2.
The correct allocation of each one of the innovation propositions to the best suited innovation processes is one element of an active risk management approach that aims to significantly increase the probability of commercial success of the entire innovation portfolio. The assignment of the individual innovation projects in the portfolio to a process model must be constantly reviewed and adapted. As a consequence, companies can and must master all process models described here. The number of projects processed in the different types of front-end and back-end processes is company-specific and is strongly determined by decisions made, for example, in the strategic elements of the innovation architecture.
Which interpretation of the term “process” is the basis of the innovation process?
In a business context, a “process” is interpreted as a creation chain in which a commercial goal is achieved by a directional sequence of activities, and the use of defined instruments and methods. The flow path of innovation processes, however, differs from this conventional interpretation of processes, even though there is a “logical” direction and sequence of activities in each one of the specific elements of the innovation process. The innovation process is largely a learning process, which generates new knowledge about (internal and external) customer needs, about opportunities to satisfy these needs, and about ways of technical and organizational implementation. This learning process is strictly non-linear, i.e. innovation activities are not necessarily carried out in the pre-defined “logical” order, but in an order that builds on — and responds to the needs of — the continuous acquisition of knowledge. For example, it might be necessary and important a) to process in parallel certain activities that are far distant to each other in the “logical” sequence of activities, b) to run through work packages repeatedly in iterative process circles, or c) to jump forward or backwards in the logical chain of activities.
This special character of innovation processes challenges the skills of innovation managers, and demands a high degree of agility with regard to the design of work packages of the operational processes, the decision-making processes and the operation of the company as a whole. These particular topics, including the establishment of the right innovation teams and the design of coöperation procedures in innovation processes, will be dealt with in later publications, depending on the course of the comments and discussions on this article.
In summary: To manage innovation more successfully, different innovation processes have to be applied depending on the innovation level and momentum of innovation propositions. There is no off-the-peg procedure. The good news is: There are evaluation criteria for innovation projects which can be used to determine how the innovation processes in the front and back end must be configured. The right choice will have a profound positive impact on the success of innovation propositions.
 A more detailed discussion of the innovation architecture is found in our article on https://boettcher-consulting.de/lost-in-innovation.
 We define “innovation level” as the degree of positive change that is caused by an innovation proposition, judged from the point of view of the user. The parameters to judge this change could be a) the impact on the user experience, b) the new habits enabled, or c) the broadness (i.e. how many users experience it) of the change.
 The term “innovation momentum” describes the temporal progress of innovation propositions including both their development and their diffusion. The parameters to judge this progress could be a) the pace and the changes of the pace, b) the frequency, c) the intensity (e.g. required necessity, resources, attention, relative significance) of the temporal progress of innovation.
 Due to the high levels of ambiguity and uncertainty of innovation projects, some organizations assume that precise definitions and descriptions of innovation processes in enterprises are not meaningful. However, in our many years as innovators, innovation managers, and business consultants we have realized that clearly defined and described, yet non-linear innovation processes provide an indispensible navigation system. This navigation system reveals the stadium of an innovation proposition, which activities need to be processed, the way the learning process progresses, and which management decisions need to be made.
Building Innovation Excellence
Innovation is like a jungle full of opportunities and promising market places but also of risks, complexity and highly agile predators. No wonder, many companies struggle to navigate this universe towards innovation success and sustainable future growth. In the following, the authors want to give an outline of a best practice-based ‘Innovation Architecture’ as an adaptable framework for an agile management of innovation. By Karl-Michael Schumann and Michael Riedemann.
Can we thrive in the jungle?
The approach described in this article is designed as an agile and flexible innovation management reference framework to provide orientation by identifying the positions and distinguishing the specific characters of ten different innovation elements as well as their relationships to each other. This “Innovation Architecture” should help you navigate innovation complexity, boost innovation productivity, and create real added value for you and your customers.
A.G. Lafley, former Chairman and Chief Executive of Procter & Gamble, has pointed out more than a decade ago: “Innovation is a prerequisite for sustainable growth. No other path to profitable growth can be sustained over time. Without continual innovation, markets stagnate, products become commodities, and margins shrink”. Today, and given the ever-accelerating developments driven by digitization and transformative change, it has almost become a commonplace that companies and organizations need to develop the capability to innovate permanently and predictably if they want to stay ahead of their competition, or even just survive in the future.
On one hand, many companies report difficulties in turning innovation investments into the expected return value. And, many of them deal with rather challenging periods of time-to-value. Success rates of innovation efforts for improving existing offerings are claimed to be just over 50%, and for creating new offerings on average even less than 5%.
On the other hand, it has long been known that the exceptional performance of innovation leaders in continually developing and profitable selling new offerings is no accident. It is the result of a disciplined, systematic approach based on current best and newly developed practices. At the root of innovation leaders’ success is, among others, an integrative and guiding framework to help focus on vital success factors. These are, for example, a well-founded innovation strategy, a solid idea-to-launch process, a highly focused portfolio management, and an agile, innovation-friendly cultural climate. Innovation success, as it seems, doesn’t happen by a “stroke of genius”. It is rather based on an elaborate, systematic and integrated innovation approach.
With that said, the difficulties in innovating continually and successfully seem to root in a lack of conceptual guidance, focused strategic approaches, and agile processes. We often observe enterprises using arbitrary, disconnected innovation processes and methods. Many of them deploy multiple, non-synergistic approaches of mastering the – perceived ‘fuzzy’ – Front-End of Innovation with ideation, idea incubation, selection, and execution. Furthermore, we see various incomplete or overly complex forms of stages and gates for managing the development of physical products or service offerings. Very few of those organizations use some forms of portfolio and road map management — quite often simply derived from innovation software tools.
In this context, questions arise such as: Is there a more general framework suitable for developing new business models, processes, and products in tomorrow’s digital world? Is there any approach going far beyond the task of developing new b2c or b2b products in yesterday’s analogue world? What would be the key elements of such a framework?
Meeting the unmet
Innovation processes are highly complex having high risks and uncertain outcomes. Global management surveys show the difficulties of companies to identify the true unmet needs of their customers, bridge innovation gaps and gain ROI from investment in innovative business models, products and technologies. Here, a systematic and holistic approach can turn out to be priceless, helping us develop and implement an agile and coherent Innovation Architecture. Order is no enemy of innovation and agility if the system consists of adaptable, well-matched modules, sub-modules, methods and tools that help to manage the most important aspects of innovation in an integrated way.
The modular architectural approach drives innovation based on business and corporate strategies. It is designed to further improve an enterprise’s existing innovation capabilities and strengths as well as to address existing innovation gaps and weaknesses. Due to its agility, adaptability and responsiveness to change, it allows commutative and iterative ways of operation. Organizations can focus resources on paramount and most pressing innovation issues and tasks at hand.
Experience often confirms that well organized, comprehensive, systematic innovation frameworks form strong backbones of agile organizations. They enable organizations to reliably adapt to changes, and significantly innovate on a permanent basis with a high rate of success.
Now let’s have a closer look at our proven and best practice-based Innovation Architecture. In general, it consist of ten modular key elements which are divided in three main categories:
|I “Strategic Decisions”||1. Innovation Strategy
2. Strategic Innovation Capabilities
3. Strategic Portfolios & Roadmaps
|II “Operational Processes”||4. Front-End of Innovation
5. Back-End of Innovation
7. Customer Integration
|III “Foundational Elements”||8. Innovation Culture
9. Organizational Structure
10. Individual Innovation Skills
The seven Elements of the first two categories – “Strategic Decisions” and “Operational Processes” – operate in concert like well-tuned clockworks. The three elements of the third category “Foundational Elements” are required “basics” to enable enterprises to run the seven-elements clockwork above in an effective and efficient manner.
Here, it is important to distinguish these ten elements carefully. Each one of them provides specific deliverables and is managed by a specific set of methods and tools. However, these ten key elements do not operate as isolated silos. On the contrary, all of them continually correspond with each other, providing mutual input and capitalizing on each other’s output. It is also important to understand, that the ten elements do not operate bureaucratically in a specific consecutive order. They typically work continuously in parallel, although with different degrees of intensity – depending on the innovation needs and capabilities of the enterprise at a given point in time.
On top of that, each one of these ten modular elements comprises a number of separate, integrated sub-modules. Together, these modules and sub-modules help to systematically manage innovation continually from end-to-end, as well as to facilitate agile leadership control, operational certainty, and organizational capability.
Reaping the fruits
Once implemented in companies or organizations, the framework of the Innovation Architecture shows immediate benefits for top leaders charged with managing innovation. In general, there are three major benefits:
First: Enhanced Agile Leadership Control
Many Executives for the first time get access to an integrated framework for effectively navigating and steering a multiplicity of business, product, service, and technology innovation initiatives. Our approach enables them to much better transform or advance their organizations’ innovation culture and behavior, based on a unified understanding of what is needed and desired. The framework provides them with a synergistic set of structures, processes, methodologies and tools that help them address innovation objectives and goals, and execute their innovation strategies and measures in an agile, and highly effective manner.
Second: Increased Operational Certainty
The core principles, concepts and procedures of the Innovation Architecture will foster organizational alignment. Such a common innovation framework and language throughout the enterprise will help eliminate or reduce friction and inefficiencies caused by multiple interpretations of goals and strategies. The framework provides guidance through signposts that make it easier for managers to set or change direction as needed during the course of innovation initiatives.
Third: Improved Organizational Capability
Every strategically relevant innovation portfolio and roadmap insight that results from the application of our Innovation Architecture will boost the enterprise’s innovation quality and deliver faster and more profitable growth. It will also help engage all business functions (beyond marketing, technology and product development) in the enterprise’s innovation activities, and provide stronger support to individuals who lead innovation initiatives.
“Make us more innovative!” – Proven track records
Can we prove what we say? Here is an example of how the Innovation Architecture presented here was used as a starting point for an enterprise-specific integrated innovation management system. From the very beginning, this activity was designed to help one of the authors’ client to overcome innovation barriers and expand their organizational capability. In this case, the New Business Development plans of a global supplier of key components to the FMCG (Fast Moving Consumer Goods) industry had suffered from misalignments and lack of collaboration between regions and functions after a series of acquisitions. Furthermore, the organization had figured out its Portfolio Management as well as its Back-End Innovation processes did not work effectively, leading to budget and resources inefficiencies. The task was now to enable them to move these critical business processes to a higher level of effectiveness on a global scale, as well as to further strengthen their competitive advantages and grow sales.
To achieve these goals, we worked with the company to first understand existing barriers to effective collaboration and innovation management. Once these were understood, we designed a 24-month development and implementation plan for a custom-made management approach, based on our integrated “Innovation Architecture”. It contained a …
- … new Innovation Strategy applying the OGSM principles (Objectives, Goals, Strategies and Measures)
- … novel framework for strategic and tactical Portfolio and Roadmap Management
- … Back-End and Technical Capability Development approaches. The specific choices here were highly efficient Stage-and-Gate and Fast-Track decision processes with strategic project kill-rates
- … new Front-End of Innovation (FEI) program to feed the Back-End with concepts of new offerings and with the related Project Charters.
All these choices were specific to the innovation needs and capabilities of the company. In other cases we might have designed more start-up-like processes, were Front-End, Back-End, and Go-to-Market processes are more tightly integrated.
As the program advanced, we delivered detailed templates for the key innovation system modules the client had chosen to implement. Only after 12 months of implementation, sales was growing twice as fast as the market, with doubled cash flow from operations.
This article should only provide a first introduction into how companies and organizations can overcome barriers to innovation by using a well-wrought and proven framework to enable sustainable future growth. Given the complexity of the matter and issues involved, it aims only to trigger further coöperation and discourse. For everyone interested in more details on this matter, the future_bizz network’s management team will provide a series of articles on each of these modules and sub-modules on the future_bizz web platform. The publications will give insights into how these key elements and aspects like a highly agile FEI work together creating value for companies and organizations. In the meantime, the authors look forward to receiving your feedback on the approach presented here. We would also be happy to discuss these issues with you in person. Please free to contact us any time at future_bizz.
 „Succeed at New Product Development the P&G way: A key element is using the „Innovation Diamond“, in: PDMA Visions, VOL. XXIX NO. 4, page 12.
 Tony Ulwick, Two Prerequisites for a Successful Innovation Management Strategy, https://strategyn.com/wp-content/uploads/2013/11/innovation-management-strategy.jpg
 See „Succeed at New Product Development the P&G way”, pp. 9 – 13.
 See e.g. Innovation and commercialization, 2010: McKinsey Global Survey results: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/innovation-and-commercialization-2010-mckinsey-global-survey-results
The digital world is changing the way customers research, order and pay for products and services – as well as how they give feedback on their “customer journey”. These increased possibilities lead to growing demands on services and products. Consequently, companies have to adjust their business models and respond to the developments.
Over the next months, the future think tank and its members will jointly gain important insights into and develop means of guidance. Here, it is our goal to better understand how people are changing the way they think, communicate, behave and consume. In addition, we want to learn more about how companies can cope with digital life models and lifestyles, what happens when customers participate in shaping products and processes, as well as the opportunities and risks coming along with these developments. Other topics areas address issues of cyber security and psychology in the interaction of humans and machines.
How can companies master innovation instead of becoming obsolete? For this, we developed a reference model. It supports navigation in the “Font End of Innovation”, while at the same time providing access to a comprehensive set of methods.
This is important, because it is not possible to work in a linear and strictly process-oriented manner in the early innovation phase. It is rather vital to take heed of the fact that the starting point depends on the individual task, the starting conditions and the degree of maturity of the idea. With this said, it is generally necessary to pass through the process several times. In this context it is not only allowed but necessary to skip forward and back. It is rather difficult to track results gained in the early innovation phase. This is especially the case when it is about to create services and business models that significantly differ from the companies’ core skills and capabilities. Mostly, there is a lack of appropriate follow-up processes and the Stage&Gate product development process is not designed for such tasks. Here methodical questions are, however, not the biggest issues when it comes to continue to proceed with the projects. It is rather factors like corporate culture and decision-making processes that slow down the innovation process. As a consequence, we have to expand the FEI model and increase the business agility of the company.