The Agile Organization - Scaling Innovation to Create Competitive Advantages

The Agile Organization – Scaling Innovation to Create Competitive Advantages

Companies that excel in a global manufacturing environment have learned to build value and growth for existing and prospective customers, and develop engaged employees.?Successful leaders understand that the velocity of business predicates new products with better functionality, easier adoption and without increased risks and costs.?Furthermore, growth oriented companies are adept at identifying market and technology trends that create both new opportunities, as well as, disruptive risks.?Finally, progressive enterprises have learned that navigating change is both a daily function and often the accelerant to push their organizations to the next level.

This article examines how organizations can apply Key Performance Indicators (KPI’s) in front end demand generation and new product development processes to select the best opportunities to resource and develop.?In addition, new concepts such as the application of forward looking metrics as Business Health Indicators (BHI’s) and the use of lean methods and additive manufacturing in process optimization are discussed. ??????

FORWARD LOOKING MARKET AND TECHNOLOGY INDICATORS

Effective organizations are constantly assessing both external market needs and internal processes to cost effectively meet and scale to address customer requirements.?To this extent sales, marketing and business development teams have primary and secondary responsibilities for customer engagement with some functional overlap. ?Building a robust sales pipeline with sustainable and profitable revenue streams are high level requirements of these commercial activities.?More specifically, the key outcome of marketing is to generate an adequate quantity and quality of leads that can be converted by inside and outside sales to generate a sufficient revenue stream for the organization.?Adding predictive metrics, Key Performance Indicators (KPI’s) include:

·??????Marketing Qualified Leads (MQL’s) Generated

·??????Lead Conversion Rates (MQL’s -> SQL’s -> and SQL’s to Opportunities)

·??????Sales Qualified Leads (SQL’s) Generated

·??????Quantity of Opportunities Generated (from SQL’s)

·??????Value of Opportunities Generated (Quotes)

·??????Won Opportunities (Quote Win Ratio)

·??????Revenue (Organic Growth, Acquisitions)

·??????New Customer Onboarding

As shown in the workflow outlined in Figure 1, the quantity and quality of leads generated via digital marketing has a significant impact on both the opportunity and revenue generation efficiency.??With marketing spend approaching 10% of annual revenues in some, high growth companies, it is important balance costs and level of effort to produce new business revenue.??

Focused Lead Generation and Conversion

Building a robust sales pipeline is both a key indicator of future revenue and of a financially healthy enterprise.?Effective marketing establishes the front end of the revenue equation by educating “suspects” and engaging prospects to bring them into the sales funnel.?Using a series of questions to determine budget, interest and time frame, digital marketing has developed a general “lead scoring” qualification process to prioritize general web leads into Marketing Qualified Leads (MQL’s).?In most B2B organizations, sales takes ownership of the marketing qualified leads and converts them into Sales Qualified Lead (SQL’s) opportunities and sales revenue.??Revenue forecasts are built from the Sales Pipeline using a total identified business with a close probability calculation and time frame.

As shown in Figure 2, lead generation is one important task of digital marketing.?The “Above the Sales Funnel” process of qualifying and converting leads to opportunities and revenue is of critical importance.?In this context, the resources and time spent in lead conversion defines the efficiency and success of the process.?In a fast paced, competitive environment, customer engagement is often dictated by the rapidity and competence of the sales and marketing team.?As leads are converted into opportunities, more nuanced criteria such as technical fit, value proposition and responsiveness become important to prospects as they “down select” potential vendors.?

From a lead management perspective, automated processes can eliminate obviously poor prospects.?Direct contact is still necessary to determine the opportunity value, urgency and detailed?requirements, potentially constrained resources and diluting the effectiveness of lead conversion if a high number of low quality leads need to be contacted.?Studies show that, in fact, if the time spent with disqualifying leads and prospects, exceeds the time spent adding new opportunities to the pipeline your new business process needs to be evaluated.?Likewise, is cases where the potential opportunity is a “poor technical fit” for the organization, the lead generation process needs refinement. Some of this misalignment between companies and prospects is a result of a digital marketing approach casting a broad net through SEO, AdWords and PPC advertising to attract a large volume of prospects that may not fit the core competencies of strategy of the company.??Predictive indicators of business health starts with lead generation and conversion, the value of the sales funnel and new business metrics (value of new business closed/total sales bookings).???

One potential solution to refine the lead generation and conversion process is to adopt a “Competency Centric” approach to digital marketing.?By narrowing SEO functionality and limiting outbound digital marketing to only organizational “core competencies”, lead value is increased and the quantity and time spent on low value leads is reduced. ???

In practice, defining and building a consensus of organizational core competencies may be challenging.?A potential solution, is to use a Process Effectiveness Assessment Report (PEAR) which is typically part of an AS9100 quality audit assessment.?In general, a process is deemed effective if it yields products that meets customers’ expectations for product functionality, quality and on-time delivery.?Table 1 below combines key PEAR criteria with relevant operational and commercial parameters, such as forecasted sales growth, market pricing, production yields and operating profit.?This type of balanced score card provides organizations with a gauge of rising start products and roadmap for NPD and promotional strategy.??????

In order to align, sales, marketing and business development functions, both the front end process (awareness, demand and lead generation) and the backend (opportunity creation and revenue) must be measured and formally analyzed.?Using tools such as a business intelligence (BI) platform and customer relationship management (CRM) system enables teams to measure and display data in dashboards for high level assessments.??

Accelerated NPD through Collaboration

New Product Development and market introduction is a key driver of business growth in successful organizations.?Developing a Product Roadmap and NPD Pipeline is often just as important as a robust sales pipeline.?Likewise product development in any form requires that companies apply diligence in screening internal and external NPD opportunities and in progressing selected developments with the best chance of commercializing.?The screening and development process generally includes:?

·??????Well documented design input, voice of the customer (VOC)

·??????Strong, fact based business case; including target costs, sufficient addressable market

·??????Well defined product development plan, budget and workflow

·??????Solid execution of product development deliverables

·??????Product testing, validation and launch; marketing and sales execution

·??????Post launch “lessons learned”

·??????Innovation Metrics – NPD Pipeline, Products Launched, Revenue, Gross Margin/Costs

Within this context, NPD deliverables include the ability to meet (Gate) schedules, revenue generation and profitability from new products, markets, customers (per month, quarter, year) and commonly serve as Key Performance Indicators (KPI’s).

While Stage-Gate is a verified Market-Centric process to systematically develop, manage and measure new product development, other less formal development methods are commonly used.?A Customer Centric Development (CCD) model is often a faster, cheaper method of NPD because it provides several advantages including; 1) direct key customer input on product development including technical and material expertise; 2) development funding costs are shared; 3) marketing costs are reduced because a successful development will lead to immediate business with the key customer.?In a CCD model, the customer is directly involved in the new product development usually funding part of the development costs, testing early prototypes and becoming a commercial customer once the product is completed and available.?Figure 3 shows the schematic of a how and where Stage Gate and collaborative development processes differ.

In addition, collaboration between customer and vendor (s) leverages the strengths of multiple development teams and materials resources.?In its most successful form, a supply chain model can spread development costs over multiple organizations and result in stronger upstream and downstream channels for the final product as shown in Figure 4.?

From a customer perspective, leveraging vendor technology as an extension of the company’s R & D process can accelerate speed to market and provide exclusivity.?The net result of customer centric development is that the product conceptualization and business case steps are combined because the technology developer immediately has a customer for the product.?The limitation of this type of development is that marketing to a wider group of customer may be restricted (as well as revenue generation) due to intellectual property rights.?

Collaborative Innovation & Supply Chain Partnerships

This supply chain network of customers, vendors and advisors working to solve mutual challenges, constitutes “Collaborative Innovation”, whereby expertise in areas such as materials, process knowledge and market access compress time frames and NPD spending through:?

·??????Shared R & D expenses and facilities

·??????Reduced material costs – using standard developed products vs. custom solutions

·??????Application of proven technology in new innovation initiatives

·??????Manufacturing efficiencies - running a new product in conjunction with an existing production

·??????Speed to Market

·??????Market Access

A collaborative innovation model leveraging NPD concepts, technology and manufacturing expertise of multiple companies, in contrast to a stage-gate, is usually more iterative and agile.?Figure 5 outlines the different NPD scenarios and time compression methods.??Within this context the following market dynamics can drive successful innovation by creating strategic partnerships and Multiple-Win scenarios including:

·??????Smaller companies tend to be closer to the market and collectively more innovative

·??????Large companies offer economies of scale in resources, manufacturing, materials and process technology?

In contrast to “Open Innovation” the collaborative model, provides exclusivity to those members of the supply chain funding the NPD.?Therefore, in order to foster trust and cooperation partners within the supply chain should not be in direct competition.?Likewise, intellectual property (IP) ownership and protection is always a key consideration in any new development and must be part of the initial engagement conversation and contractually protected.?

The value in collaborative innovation is to mitigate risks such as material selection, testing and validation, capital investment in manufacturing assets and market access.?As a starting point, using established functional properties and test data for NPD, can accelerate both product validation, acceptance test plans (ATP’s) and manufacturing scale up.?Additionally, using proven processes and production assets for running new products (provided they are sufficiently similar), reduces manufacturing costs and compresses schedules.?Finally, product marketing and referrals in relation to NPD can occur both upstream and downstream in a supply/value chain.???

NPD Launches & Commercialization

Once a new product has been sufficiently tested and validated, the process of market introduction and scale up generally entails the following:

·??????Generating technical datasheets and safety datasheets – based on the validation test results

·??????Building website content for a digital marketing program

·??????Pricing and promotional strategy execution

·??????Building some sample materials?for early market testing and customer feedback

·??????Supply chain and manufacturing logistics to scale up production

·??????Post launch follow up to formally capture customer feedback for product enhancement

In commercializing a product, different sets of resources are needed to develop, scale up and cost effectively bring the new product to market. ?Working collaboratively with suppliers can drive more favorable material costs and process efficiency.?Collaborative development may also include the developing party subcontracting the manufacturing process to another vendor and also supports downstream value added services such as testing/validation, converting and packaging products into market ready forms.??Especially when it brings greater efficiency, out-sourced manufacturing, can be a successful approach in bringing products to market faster and even as a sustained business model.?Especially for rapid prototyping, new business models involving “On Demand Manufacturing”, Additive Manufacturing, and “Asset Light” organizations are gaining market traction. ??????

Companies that excel at NPD and successful product launches build value and growth for existing and prospective customers.?Furthermore, accelerating the velocity of NPD without increasing the risks and costs, can be achieved through collaborative innovation and well executed supply chain partnerships.

Preliminarily, organization need to answer the following questions:

·??????Can you profitability grow business organically with your existing sales and marketing team and is your go to market plan effective?

·??????What growth and profitability enhancement can be achieved by new versions of existing product or introducing novel new product to the market??

·??????What constitutes a new, disruptive innovation in your market??

·??????What are the time frame, cost and functionality objectives??

·??????Will outside resources be needed for materials, development or manufacturing? ??

In the case of novel, proprietary NPD, the Stage-Gate route offers greater intellectual property protection, albeit typically a slower develop cycle.?If the organizational focus is on more rapid, incremental product roadmap or outside sources are needed for funding, scale up and manufacturing, then, the CCD model may be more applicable.??

In designing for manufacturability and cost, it is important to assess the features necessary to develop a Minimally Viable Product (MVP).?The MVP contains the functionality needed to meet the requirements of early customers and minimize costs and allow modification to add additional functionality with future versions.?By incorporating the voice of the customer earlier in the development process, significant time and cost avoidance can be realized.??Consequently, an iterative, lean NPD process can produce a wider innovation portfolio for companies and bring products to market more efficiently and rapidly.

To successful scale an organization for growth, establishing a process frame work and metrics should precede adding resources and costs.??From a metric standpoint, Return on Marketing Investment (ROMI) provides a general measure of marketing performance.?However, because opportunity creation, closing ratio and revenue are more easily quantified, some organizations tend to give these metrics more importance.?In reality, the success of sales and marketing functions are interdependent.?Because limitations are especially evident at the attrition points, as leads are generated and moved from qualification to close, optimizing the process in these critical areas should be a primary focus for business leaders.

For new product development focused organizations R & D costs and the revenue and profitability contribution of new products are essential metrics. Integrating key customer and market input is important to assess the features necessary to develop a Minimally Viable Products (MVP).?The MVP contains the functionality needed to meet the requirements of early customers and minimize costs and allow modification to add additional functionality with future versions.?By incorporating the voice of the customer earlier in the development process, significant time and cost avoidance can be realized.??Consequently, an iterative, lean NPD process can produce a wider innovation portfolio for companies, bring products to market more efficiently and rapidly.

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