The Innovation Diamond™: An Executive Framework

Product innovation is the engine that drives growth and prosperity for many companies. It is also one of the most difficult undertakings of the modern corporation. Why are some companies so successful? How do some businesses make it seem so easy – one new product winner after another? 

Exceptional performance in product innovation at these companies is no accident. Rather, it is the result of a disciplined, systematic approach starting at the top of the organization. Best practice research has uncovered a common theme in organizations that excel at product innovation. Four key areas of best practice stand out as common denominators: product innovation and technology strategy; portfolio management – both strategic and tactical; idea-to-launch new product development process, and the right climate and culture for innovation. These four performance drivers comprise the Innovation Diamond^TM.

1. A Product Innovation and Technology Strategy for the Business

Top performing businesses put a Product Innovation and Technology Strategy in place, driven by the business leadership team reflecting their strategic vision of the business. This strategy guides the business’s new product development direction and helps to steer resource allocation and project selection. Developing a product innovation strategy is one key to success.

A good Product Innovation Strategy includes:

• The goals for the business’s product innovation effort, and how these goals tie into the broader business goals
• The arenas of strategic focus – in which product, market and technology areas the business will focus its product development efforts. This strategy is more than just a list of this year’s development projects; it has a much longer term commitment
• Defining resource allocation via strategic buckets (i.e. areas of focus) and mapping of anticipated major initiatives over a multi-year period to yield the product roadmap.   

2. Portfolio Management: Strategic Resource Commitment

Best performers have an effective portfolio management system in place that helps the business leadership team effectively allocate resources to the right strategic buckets and projects. Effective portfolio management involves both strategic and tactical portfolio management.

Strategic Portfolio Management:

• Product development projects are aligned with the business strategy
• Resource allocations in the portfolios mirror the business strategy
• Effective balance of projects occurs in the portfolios (for example, between long-term and short-term projects).

Tactical Portfolio Management:

• Good ranking and prioritization of projects
• Portfolios generally contain high value projects
• Good balance between resources available and numbers of projects underway to avoid a resource crunch.

Formal portfolio management systems in many best practice companies integrate a variety of tools – effective gates, scorecards, the productivity index, strategic buckets and product road-mapping – to help select and prioritize new product projects.

3. High Quality Idea-To-Launch System

An effective new product development process or Stage-Gate^® System exists in top performing businesses – a system that drives new product projects from idea to launch and beyond. Many companies claim to have an Idea-To-Launch Process, but the best performers achieve the required breadth and depth across the entire system.

Key process components include:

• A strong customer focus supported by voice-of-customer research
• Front-end loading undertaking appropriate, often extensive up-front homework prior to development (i.e. voice-of-customer research, market research, technology assessments)
• Developing differentiated, superior products that meet customer needs better than competing products
• High quality execution of all cross-functional activities from idea through to launch
• Go/Kill decision points in the form of gates in the process (where mediocre projects really do get eliminated)
• Performance metrics to gauge project success
• A process manager in place to champion the process and its proper use and implementation.  

4. Positive Climate and Environment for Product Innovation

People, culture and leadership make up the fourth driver of performance of the Innovation Diamond. Senior managers in best performing businesses lead the innovation effort and they are strongly committed to new product development.  They make it clear that innovation is a prerequisite for sustained growth.  

In the best performing businesses, senior management also creates a positive climate and culture for innovation and entrepreneurship; they foster effective cross-functional teams and provide strong support and empowerment to these teams; in return, project teams are held accountable for project results.

Winning at Product Innovation

Winning at product innovation has less to do with luck and more to do with a well designed and disciplined approach. In top performing companies the Innovation Diamond works, so work the Innovation Diamond! It will positively impact many facets of new product development. The real challenge is making the Innovation Diamond and its drivers work together in your business. The four themes – innovation strategy, an idea-to-launch process, portfolio management and climate and leadership – make up the four points of performance of the Innovation Diamond and provide a sound framework for guiding your business’s product innovation efforts.

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