“… Because its purpose is to create a customer, the business has two — and only two — functions … Marketing and Innovation. Marketing and innovation produce results, all the rest are costs …” — Peter Drucker

The ability to develop and launch new products and services is critical for the long-term future of any business, yet 90% of new developments result in commercial failure. This article discusses some of the issues with innovation and highlights proven processes that ensure every launch is a winner. Topics covered are:

• Why you shouldn’t listen to the Voice of the Customer
• The search for Six-Sigma Innovation
• How to identify Innovation Hot-spots
• On-Demand Concept Generation

The Importance of Innovation

The creativity and inventiveness of people is a vital ingredient for any business. However, it is only through innovation, the implementation and exploitation of their ideas that a business is able to compete and prosper.

Already, the competitive landscape has significantly changed with globalisation. Now appearing are many new competitors from low-wage, dynamic economies. For instance, China has given birth to some 50 automakers, such as Geely, Chery, Great Wall Motors and Brilliance. Who knows which of these fledgeling car companies will become the global giants of the future? Staying competitive will require a step-change in innovation performance.

As Peter Drucker points out, the two key activities within any business are Marketing and Innovation. Marketing allows the identification and understanding of suitable hungry markets. Innovation allows the fulfilment of the market’s need in some unique way that customers value greatly. Without marketing, there is no customer pull. Without innovation, the proposition is copied or disrupted by competitors. In the longer-term companies that don’t innovate die.

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Is your business ready for the AI revolution?

I gave this talk at the Education Show at the Birmingham NEC back in 2014.

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There are three major areas of risk in the product development process when it comes to developing new hi-tech products:

• Technology risk
• Management risk
• Market risk

We tend to dwell on the first two, because that is what you’re aware of on a day to day basis.

Will the technology work? Do you have good development and communication processes? Do you have the right people? is the project on track? and so on…

But by far the biggest area of risk is the third one — market risk. Think about it, you only really know if you’ve got a flop on your hand when you launch the new product into the market. By that stage, you’ve already spent all of the development budget.

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In this video Raglan Tribe shows you how to build an online innovation launch community for building market consensus behind your breakthrough new product launch.

If you’re trying to launch any new product breakthrough, new product category or new service then you’re going to have to win over the early majority of the market to get traction.

Geoffrey Moore calls it the process of “Crossing the Chasm”, creating a market beachhead or assembling the invasion force. But whatever you call it, customers are reticent to adopt new ways until they see other customers recommending your product or service.

With social media, blogs and great content, the Internet makes the whole launch process much easier.

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In April 2004, my consultancy company Mindsheet Ltd won a contract from Delphi Packard to help reorganise their sales and marketing team. Also, they wanted to make a stronger bridge between their marketing and engineering activities to achieve better influence with their key car company customers. In particular, they did not want their own product planning to be left behind as vehicle manufacturers moved more towards hybrid and electric vehicles. These trends have a huge impact on the vehicle connectors and power electronics.

The first week I interviewed all the key players across the division from which I diagnosed the main issues. Namely, that sales were organised by product line and territory and not by global account – therefore the car companies were running rings around them. The other issue was that sales and marketing didn’t do any marketing this was all done by engineering, who then kept their marketing strategy to themselves. The remedy was to transform the sales organisation into an account structure, work with each account team to create an account strategy and have representation from engineering within each team.

There were 10 key accounts, one for each car company and the account leader needed to come from the same territory as their home customer account. Furthermore, they wanted all the strategies to be presented within two months at a divisional growth workshop all with the same format and scorecard. I had to devise the format, train the account teams, be in each territory all at once and bring engineering to the party.

The contract lasted for two very intense months split between the US, China, France and Germany. The sales bookings quickly got back on track and were up to $1.2 billion for the year. However, the margin still needs improving and that is being addressed by the engineering strategy which is now in step with marketing.

The figure overleaf shows one of the tools that I developed for conducting this contract. It is a spreadsheet that helps develop a structured gap analysis between the Delphi offer and their competitors. Each account team completed this for their accounts and are now focused on the key areas for improvement.

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My first role was to resolve numerous field issues resulting from a previous disastrous product introduction programme in the late 90s. Next to ensure better quality development, I formed Group R&D by integrating all of the worldwide technical resources into a single project focussed team of 260 scientists, engineers & technicians operating from 6 sites across the US & Europe. The organisation was a matrix structure with key disciplines in one direction against projects and the divisional businesses in the other. The Currency division could now access engineering skills from Cash Systems and Global Services could access the chemistry skills from Currency. This obviously led to the cross-fertilisation of ideas and the creation of new products.

I also introduced best practise product development processes such as project phase reviews, technology road mapping, an R&D intranet and Intellectual Property management. The performance of this new organisation was then demonstrated by the successful development and launch of a wide range of new banking and retail cash handling products that exploited the opportunities from the Euro introduction and that contributed £57M of good margin (50%) sales to the Group within their first year of introduction. Also some multi-million government identity card contracts were fulfilled with a 40% margin enhancement (£8M out of £20M), many new anti-counterfeiting tools for banknote production were developed, 140 new patents were filed and £1M of license revenue was developed. I also supported the CEO with M&A work resulting in the acquisition of several medium-size businesses in the USA.

However, De La Rue had been in a boom-bust cycle for some time. In the early 1990s, the bonanza was due to the break-up of the Soviet Union when they benefited from a large number of lucrative banknote manufacturing contracts. During the aftermath, R&D was scrapped which resulted in a new product crisis by the late 90s. I was then recruited from the Automotive Industry to introduce better product development disciplines and design for manufacture.

During my time, the bonanza was the introduction of the Euro. Again, De La Rue wrongly portrayed this benefit as on-going rather than a one-off. And once again during the hangover period it was R&D that was scrapped. I failed to smooth the cycle and introduce a more measured and continuous approach to new product introductions, despite having ready access to the board and CEO. Hence after dismantling my own structure that had performed so well, I resigned.

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Even so, the automotive industry continued to consolidate and the vehicle manufacturers were looking for super-tier 1 suppliers who could provide not just complete brake systems, but total chassis solutions for instance. In May 1999, Victor sold the whole of LucasVarity to TRW inc for $7 billion. The new group had a turnover of $20 billion and majored in automotive, aerospace, space and defence.

The key rationale behind the acquisition was the creation of a fully capable ($6 billion turnover) chassis systems supplier that combined Lucas Varity’s braking systems business with TRW’s steering and suspension business. I was given the role, by TRW’s CEO – Joe Gorman, of leading the Chassis Transition team and creating a Chassis Systems strategy.

The challenge was enormous – just the technical integration involved bringing together 2,500 steering and suspension engineers with 1,500 braking systems engineers. The atmosphere was politically charged as the business structure was still to be determined. The strategy that I created had to be very rigorous to counter all the critics who lost out in any forthcoming reorganisation.

Additionally, the automotive industry had become increasingly cost-competitive as the vehicle manufacturers sharpened their purchasing teeth. The engineering teams were already over-committed to stretched delivery programmes and it was difficult to make room for chassis solutions thinking.

The transition team had representation from sales and marketing, engineering, technology, purchasing and each major territory around the world. The strategy covered our market and competitive position, financials and our disposal, mergers and acquisition plans, industry trends such as globalisation and vehicle module integration.

Technology is a key differentiator in the industry and so we developed a comprehensive technology and product roadmap. The roadmap helped define the critical product platforms for cost-effective chassis development.

At the time, the vehicle manufacturers were wrestling with the management of complexity and so we simplified their task by breaking the vehicle down into simpler modular assemblies. A complex chassis system could be broken down into smart corner and cross member modules that included the actuation, structures, sensors and electronics leading to a “lego” type vehicle build. In South America, we even delivered entire rolling chassis in partnership with Dana.

The major shortcomings that the strategy had to address: was the development of the right chassis solutions, a weak TRW balance sheet after the acquisition of LucasVarity and relentless price cuts across the automotive industry. TRW sold the Diesel Systems business to Delphi Automotive; they sold their aerospace arm to Goodrich and their Space and Defence business to Northrop Grumman.

TRW Automotive was spun out as a separate $12 billion company on Wall Street under my old boss John Plant. As far as I can ascertain from press releases and product launches, TRW Automotive is still progressing with my Chassis Strategy and are still number one in the Automotive Chassis industry 5 years later.

After completion of the strategy and transition duties, I was made Technical Director for Chassis Systems. However, I did not see the role through, three months later I handed in my notice. I had been hard-driving for 12 years in the industry and had travelled “long haul” virtually every week for the past three years. It was time to move on and spend more time with my family. The headhunter’s offer from De La Rue plc to relocate to the South Coast of England, to change industry and become Group R&D Director was irresistible.

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In 1995, I was the manager of the Control Systems Department (35 people) in the Group Research Centre for Lucas Industries plc. The centre was a traditional R&D organisation of 220 engineers & scientists with an impressive track record for engineering breakthroughs that included the development of the engine controller for Concord and the invention of engine management.

My own project successes at Lucas corporate R&D centre included the development of a prototype autonomous vehicle for Ford, adaptive cruise control and electric power steering. However, the centre lacked a business focus and was not seen as a key enabler for Lucas strategy.

Overall the company was faltering as the automotive industry consolidated and the UK automotive position diminished. In 1996, Lucas merged with the smaller Varity Corporation of America and their CEO, Victor Rice became CEO of Lucas Varity plc with a combined turnover of £4.7 billion. Victor was a tough but fair leader with an entrepreneurial bent who radically reshaped the company for the better.

However, in the shake-up, my boss the R&D Director left and Victor asked me to draw up plans for closing down the Group Research Centre that was located in the Midlands.

His reasons were that he disliked the concept of centralised funding (our corporate budget was £11M pa); he felt that R&D should be conducted closer to the automotive centres in Germany and Detroit; and he wanted to increase the level of technical investment in Asia.

Although I understood the reasons, it was a huge blow and I resented the loss of such an outstanding technical competence that had taken years to create. Therefore, as well as the closure plans, I drew up an alternative plan to turn the place into a profit centre by creating a consulting and engineering service business.

After some negotiation, my plans were accepted, which was the start of my real problems. We had only two months of corporate funding left, the internal business units were unwilling to buy our services because they wanted to strengthen their own technical capabilities, I had never run a business before and the R&D staff were not very entrepreneurial – things did not look good.

As general manager, within two months I had:

• heavily restructured the centre
• vacated two floors of our building, which we then rented out to the Electrical & Electronics Division
• and sold off any surplus equipment.

Our marketing plan forced us to focus on core skills that were of most use to the company. Our big break came from the Diesel division where we secured £1M of funding – our only funding commitment at the start of our first year!

Whilst the technical team delivered the Diesel programme, the management team made a big push for external funding. First, we pooled contacts and then approached the external companies where we had good relationships. Thankfully, the centre had a strong technical reputation and we quickly won contracts from Schlumberger, Bookham, Sagem, JCB, Peugeot, VW and Renault.

In parallel to a tough delivery schedule, we transformed our project processes, strengthened our systems engineering and solutions competence, and became highly customer focussed – our centre became a lean technical project factory. We also introduced a stage-gate project pipeline and drove many more concepts into mainstream product development within the Lucas Varity divisions so as to better secure downstream funding. As Victor had intended, our new behaviours were now well aligned with long term overall business success.

By the end of the first year, we had turned over £5.75M and our profits were £133K better than our budget. Our customers liked the new approach and pretty soon we were swamped with work, even from the initially reticent internal divisions. What a team and now they were very entrepreneurial too!

Today the consultancy is called CONEKT and turns over about £15M pa and is a highly prized competence within the business. Product successes included electric power steering, adaptive cruise control, common-rail diesel injection, improved Boeing 747 rudder control, new power generation systems for aircraft etc. etc. between them they have added billions of pounds to the business top line.

As for myself, two years later I was made Automotive R&D Director when all the automotive businesses were combined into one £4 billion division under John Plant, with additional technical responsibilities in Detroit and Germany.

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