The Growth Equation: Four Levers for Increasing Your Innovation Throughput

The Growth Equation: Four Levers for Increasing Your Innovation Throughput

This article on frequency is the first in a series of four articles on the Growth Equation Framework for New Product Innovation Throughput.

If you work in the manufacturing industry, there’s a good chance your company is making a sizeable investment in new product innovation. U.S. companies alone invest over $280 billion in R&D annually—yes that’s billion with a B. We hear innovation success stories all the time from the Gods of innovation—companies like Apple and Google. But back here on this physical plane, it’s a different story with only 55% of companies seeing the kind of return they expect on that investment.

So what can mere mortals like us do to get more out of that investment and fly a bit closer to the sun like the top performers? Quite a lot actually.

Remember the ancient Greek scientist Archimedes of Syracuse? In addition to that unfortunate bathtub incident, he discovered the principle of leverage. And while Archimedes originally conceived leverage as a mechanical concept, it turns out to have application in processes like new product innovation too.

There are four levers you can pull to increase your growth through new product innovation. These levers come together to make up our Growth Equation Framework:

The first installment in this four-part series provides a quick overview of the levers and then goes into more depth on applying the first lever. Subsequent installments will each address a new lever that companies can employ.

The four levers of the Growth Equation Framework are:

  1. Frequency or flowrate: The number of new product programs that you launch each quarter, year, etc.
  2. Predictability: The percentage of new products that you launch when initially promised and with all of the features initially requested.
  3. Time-to-Revenue: The cycle time it takes your new products to go from proposal to generating cash flow. Time-to-Revenue is in the denominator so it should be decreasing.
  4. Market Impact: The cash flow or throughput increase that your new products deliver or are expected to deliver.

Launch Frequency

Frequency measures how effective you are at bringing new products through all of the steps required for launch. The better you are at managing innovation resources and navigating the internal and external obstacles, the more new products you can launch each period.

The biggest impediment to flow or frequency that I run across in my consulting work is that too many companies fall into the trap of believing that they have to work on more projects to get more done. But once you reach the number of projects that delivers optimal flow, every project you add reduces the number that you can complete during a given period.

Multitasking is at the heart of the problem here. While pop-culture may laud the ability to multitask, it’s really one of the biggest productivity drains there is. This two-minute test should prove that to you.

Time how long it takes you to write out these two lines in sequence:

Task 1:                 RAPID NEW PRODUCT INNOVATIONS

Task 2:                  ABCDEFGHIJKLMNOPQRSTUVWXYZ

Task 1:____________________________________________________________

Task 2:____________________________________________________________

It probably took you anywhere from 10-20 seconds to complete each task for a total of 20 to 40 seconds.

Now let’s add multitasking. Start by writing one letter for Task 1 on the line below, then one letter for Task 2, then back to Task 1 and so on.  The sequence should look like R,A,A,B,P,C,I,D,D,E,N,F….. 

Task 1:____________________________________________________________

Task 2:____________________________________________________________

How long did it take this time? Most people take between 50% and 100% longer. And notice how uncomfortable it felt switching back and forth. The interruptions make it impossible to get into a rhythm or flow.

Now let’s look at an example applying this to your new product pipeline. Let’s say you have four opportunities in front of you and:

  • All four are for equally important customers
  • If you put your entire team on one project they can complete it in 3 months
  • Each has the same return - $1M cashflow per quarter once complete
  • Each project has an influential internal sponsor pushing to start ASAP

Now if you’re being completely honest with yourself, what are the chances that your organization wouldn’t spread the resources out and have someone working on each one? Here’s a one year snapshot of what that would look like with each project represented by a different color and W’s indicating wait time:

Over the year, your resources move back and forth between projects, with a significant amount of each projects timeline spent waiting. At the end of one year, all four projects finish and deliver $4 million in cash flow.

The Benefits of Focused Execution

Now I’ve had the occasional skeptic look at this and tell me that it’s too simplistic of a view. Fair enough, so here’s a real world example. When I recently started working with a multi-billion dollar OEM, I was initially told that they had nearly 100 major programs underway. Digging a level deeper, the data showed that only 30 to 40 of these programs were actively being worked on in any given month. It was the same thing we saw in the multitasking example. They were trying to keep all of the projects moving forward and as a result, wait time was overwhelming their ability to keep project flowing rapidly.

But wait, it’s worse than that. We already saw that multitasking made the work we did less effective. Even if we only assume a 33% reduction in output, the loss in effectiveness due to multitasking means it will actually take closer to 18 months to finish all four projects.

So let’s compare that to 18 months of focused execution with each project resourced for full speed.

After 3 months, the first product launches and starts delivering cashflow of $1 million. At the end of the second quarter, another product launches and now 2 products are generating cash flow for a cumulative of $3 million. And so on…until at the end of 18 months we have 6 products out in the market delivering $21 million in cash flow and doing so much earlier.

And that’s the power of launch frequency.

In the next part of the series we’ll tackle the second lever—predictability.

Mike Dalton, author of Simplifying Innovation: Doubling Speed to Market and New Product Profits with Your Existing Resources, helps companies increase innovation throughput and speed. Read an overview of his FastTrack to Innovation Results service or contact him by e-mail at [email protected]

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish