Innovation and New Product Development are Two Different Animals

Innovation and New Product Development are Two Different Animals | Diebold Nixdorf Blog

Can we talk about “innovation”? I put the word in quotations because it’s a big buzzword, no matter what industry you’re in – and buzzwords tend to become meaningless over time. If you ask three people what innovation is, you’re likely to get four different answers.

So what does it mean, really? More importantly, what makes innovation something different from how many companies operate? Most organizations have robust operational and decision-making processes that govern new product development, but do you have a culture that can balance the unique challenges associated with new product development as something quite different from innovation?

At Mobey Forum’s annual (and excellent) Mobey Day in Barcelona, Spain recently, I had the opportunity to flesh out some parameters our own innovation team uses which have proven to be successful in other large organizations looking to innovate. While innovation frequently drives the new product development function, how these two activities are governed and managed are drastically different.

The Known vs. the Unknown 

At Diebold Nixdorf, our software innovation team is small and focused – but the skill sets and backgrounds of the team are broad, extending well beyond the borders of the financial industry. As a small, trusted team, we’re empowered to move quickly. In the early stages of innovation, the focus is on exploration and learning so the culture can be oriented toward speed, agility and defining a problem statement that can be tested and either supported or rejected.

Innovation lives in the world of the unknown. New product development, on the other hand, tends to move in a lockstep series: define a business case, design, build, test, deploy and manage the new product. Minimize the unknowns before project kickoff. Assemble a cross-functional internal team in a conference room to vet the project in the early stages. Ask questions like, “how many units will this sell?” and “what type of profit margin can we expect to generate?” Perfectly valid questions, and ones that must be addressed before investing the resources necessary to build and launch a new product. That structure is designed to ensure a solid plan and an attractive business case, something that every department feels comfortable approving and allocating resources against while understanding and managing all the various operational and market adoption risks.

That is fundamentally not a structure that is conducive to success in the world of innovation, where, by definition, there are many unknowns. Innovation occurs where most business case questions cannot yet be addressed – it is an area where we are defining problems to be solved, exploring the ways people solve them today, determining if we have a truly better way of solving that problem. Said differently, innovation is inherently a process of exploration, learning and managing a portfolio of innovation opportunities as opposed to a focused, single, new product development effort.

Redefining a Key Concept

Instead, we model how we operate more like a venture capital firm. Our team is fairly self-contained, but connected to other departments where we are able to take advantage of unique knowledge and skill sets when necessary. We intentionally try and keep other departments informed when, if successful, an innovation project is likely to impact their organization in the market, but we keep their involvement light – they don’t take action items and produce deliverables. They have day jobs on which near-term business performance depends. Likewise, key executives are aware of and connected to our work, but the perspective is shifted. The key questions are about whether the anticipated learnings are relevant to the strategic direction of the business, rather than asking approval for or engagement in new projects.

We’ve found success in explaining this concept to executives in terms of a portfolio rather than a project – and then it becomes a slightly different conversation. Of course we want every investment/innovation to succeed, but we recognize that’s not going to happen. Instead, we focus on aggregate returns. To say it differently, innovation is not about the success or failure of any individual exploration, but rather about the team creating a collection of important learnings that can move the business forward over time.

From that perspective, “failure” isn’t defined the way we usually think of the term – as something that didn’t hit its business goals. For us, failure means we failed to learn something valuable from the exercise, something that we can use to drive the next round of innovation. Innovators should absolutely be held accountable for their work – it’s not a playground by any means – but the questions we ask are, “did we prove or disprove the underlying hypothesis?” and “are we managing the resources of the team to maximize learnings in areas that are strategically important to the business?”

Once an organization makes this shift (and it is fundamentally a shift in orientation and organizational culture), you may discover that you’re able to enter into new conversations with employees and executives. Through concept and prototype development, you start to be seen in a different light – as a partner with whom other organizations can collaborate in new and exciting ways. And that’s a future-focused approach that will help your organization be ready for – and be involved with – new ventures, emerging trends and actual, meaningful innovation.

In a video taken at the recent Mobey Day event, I offer insights on how to start a successful innovation initiative and avoid common reasons for failure.

Interested in finding out more about how we approach innovation and collaborative partnerships? Let’s talk.