Management of the Fuzzy Front End of Innovation

Innovation is apparently considered as vital, since it is one of the highest priorities of top management according to a recent CEO survey. Most managers work on the

late innovation process

, which is characterized by defined processes, clear procedures, and documented responsibilities and roles, despite knowing that the real leverage in generating new ideas and improving the competitiveness of innovation lies in the early stages, the so-called ‘fuzzy front end of innovation’ (FFEI). Rather than relying on long decision times before a project really starts, a company has to take the decision which opportunities and ideas to select and to pursue fast, even if this is associated with

uncertainty

and risk. The right mix of methods and processes to gather and analyze information can help to identify drivers of risk, reduce uncertainties, and thus take some fuzziness out of the front end of innovation, while at the same time entrepreneurial spirit that accepts risk and welcomes

risk-taking

is needed. Process leadership is not unimportant either, but the key capability is being good at managing people, i.e., finding the right people, setting up a good network, coaching the teams, identifying the creative potential of individuals, and providing them with a strong vision and direction. For these reasons, effectively managing the fuzzy front end of innovation is one of the most important, and simultaneously challenging, activities of innovation managers.

Structuring and managing the innovation process represents one of many critical process-related factors traditionally associated with innovation success. The turbulent environment of the fuzzy front end (FFE) of innovation requires both flexible and structured processes. Carrying out activities by parallel rather than sequential processing, and both within disciplines as well as across disciplines, helps speed up innovation and keep the balance between creativity and the systematization needed. As a start, three of the numerous existing concepts and process models for the FFE are presented and analyzed. Subsequently, a new scalable, process-oriented framework is presented whose four modules (innovation strategy, technology development, concept development, and lean concept development) are characterized by openness in the sense of the open innovation approach and its fuzzy gates. Successfully implementing this abstract framework in an organization requires building a project team and carefully analyzing the current practices so that a company-specific process can be developed and implemented.

The trend towards

open innovation

and

crowdsourcing

inspires new ways of thinking about customers’ involvement in the innovation process, which encourages companies to open up their innovation processes and gain

customer insights

from people and institutions outside the firm. In order to drive a product successfully from the front end to the next innovation stage, managers need information, which can be either

solution information

or

needs information,

that helps them reduce technical and market uncertainties. The customer’s role in the process of gathering information differs according to whether the indirect, and more traditional, approach of integrating the customer (manufacturer active paradigm) or the approach of direct customer integration is chosen, where the

creative potential

and the tacit knowledge of the user are directly used as innovation input (customer active paradigm). The targets for customer integration have to be set accordingly, and the most suitable market research tool has to be selected, which either can belong to the group of

needs-focused research methods

or of

solution-focused research techniques

. This chapter also discusses the issue of how to find the appropriate participants and to encourage them to get involved in the process and how the findings can best be implemented in the company.

Individual and collective creativity are vital preconditions for new ideas in the early phase of the innovation process, and therefore, for any physical product development activities. The cross-industry innovation process is an approach effective at stimulating creativity and making systematic use of already existing solutions from other applications or industries in order to develop entirely new ideas. Analogical thinking is a creative method applied to a problem that needs a solution and takes place if a familiar problem is used to solve a novel problem of the same type. Near analogies are much easier to identify than far analogies, as near analogies often entail obvious surface similarities. However, the combination of more distant pieces of knowledge, such as structural similarities, often results in a higher degree of novelty. Four real-life cases demonstrate how cross-industry innovation has been applied successfully for the development of technological breakthroughs and radical innovations.

Corporate foresight comprises all activities that are aimed at identifying changes on the basis of early signals in trends, creating a consolidated future outlook, and using these insights into the future in ways useful to the organization. These activities include developing a strategy, creating innovations, managing risk, and exploring new markets. The author identifies five challenges that companies may face when developing corporate foresight, which include the detection of signals that yield a competitive advantage, the detection of change when terminology is unclear, and the selection of an appropriate foresight method as well as the successful use of foresight methods in the highly iterative front end of innovation. Monitoring and scanning are two ways of conducting the search, with intelligent data mining and scouting networks as possible approaches. Foresight methods can be divided into methods suitable for exploring the future on the market side and methods more suitable for the technology aspect. Thinking in scenarios is a good choice when direction and rate of change are unknown.

Crowdsourcing – a neologism created from the words ‘crowd’ and ‘outsourcing’ – describes giving tasks to the crowd for completion. The use cases for crowdsourcing are diverse, and new ideas are constantly emerging on the internet, making it all the more important for companies to engage with the topic and to learn how to use it effectively. Various formats of crowdsourcing projects are used depending on the purpose and the initiator of the project, such as intermediate platforms, free solutions, corporate platforms, and marketplaces. The crowdsourcing process is divided into five stages, which consist of preparation, initiation and implementation of the project, and the evaluation and utilization of the ideas collected. Each step is associated with particular challenges and needs to be managed so that crowdsourcing can be used successfully as a problem-solving tool. Aside from the process-related factors, a good understanding of the web 2.0 culture, professional preparation, and a clear understanding of the goals and responsibilities are the fundamental cornerstones of successful crowdsourcing projects.

In the future, the race for comparative competitive advantages will take place between business models, and not just between products, services, and technologies. Considering that a firm’s business model is a complex system characterized by interdependencies and secondary effects, it can be assumed there are many barriers that prevent companies from developing a new business model and moving into a ‘blue ocean’. The

Business Model Innovation Map

provides a process for business model innovation structured in three steps. After one’s starting point has been defined by describing the current business model as a first step, the next step is the process of ideation with the help of various tools, such as the business pattern cards. These contain 55 main patterns of business models to encourage outside-the-box thinking and help to start analyzing how existing patterns of business models could be adapted to one’s own particular situation. A set of checklists and tools ease the third step of quickly developing the business model around a promising idea and integrating it successfully.

Management of intellectual property has increasingly been recognized as a powerful instrument of corporate strategy and a main source of competitive advantage. Patents have become ever more important for firms in order to protect technologies from imitation, achieve a stronger position in global markets, strengthen the firm's technological leadership, and enable the trading of intellectual assets. A company's patent strategy should be derived from corporate strategy and intend to both help generate new business potential and secure existing and realized potential. To this end, successful patent management follows technology management, since it is strongly linked to the life cycle of technologies. Five distinctive phases reflect the activities of patent life cycle management. While in the first two phases,

explore

and

generate

, the firm accumulates new competences about a new technology, these competences remain at a high level in the

protect

and

optimize

phases. This is true even for the

decline

phase, although here, the firm may decide to discard the patent.

Recognizing the pervasiveness of convergence and introducing new ways of solving problems requires multiple inter-organizational relationships beyond established industry boundaries. This chapter provides essential insights into the process steps necessary for successfully preparing for distant collaboration in cross-industry networks as well as for creating multilateral cross-industry networks. Cross-industry networks comprise an intensive exchange and development of knowledge in a process of mutual learning and adaptation through collaborative arrangements with specific innovation partners. The role of the technology managers, who identify synergic effects across the process stage of identifying potential absorptive capacity, and the function of the network managers, who act as interface between the firm and its external partners, are key for the exchange of ideas and for building expertise for the early innovation phase. Also cultural issues must be considered when implementing multilateral cross-industry networks, as processes of knowledge work beyond organizational boundaries entail organizational cognitive distance. An established network culture based on common values like trust and openness as well as shared norms, objectives and interests facilitates the sharing and transfer of knowledge.

Beyond a company’s ability to innovate lies a process of experimentation that enables the organization to create and refine its products and services. The constantly changing environment and complex linkages between variables require not only moving between observation, exploration and experimentation, but also iterating between experiments. Trial-and-error types of experiments are also an integral part of innovation processes, even though they are frequently not fully recognized as experiments. New technologies for experimentation, e.g., rapid prototyping, amplify the importance of managing these factors, thus providing the potential for higher R&D performance, innovation and ultimately new ways of creating value for customers. Regardless of industry, companies share an iterative process of a four-step experimentation cycle, which consists in designing, building, running and analyzing the experiment. How learning occurs, or does not occur, is affected by several factors: fidelity, cost, feedback time, capacity, sequential and parallel strategies, signal-to-noise, and type. The ‘case’ of Team New Zealand – winner of the sailing regatta America’s Cup in 1995 – is woven through this chapter and shows how learning by experimentation works at the front end of innovation by integrating new experimentation technologies with tried-and-true methods and capturing the results in the organization.

With the help of rapid conceptual prototyping and iterations,

design thinking

can help the fuzzy front end to innovate faster, achieve a better market fit, and generally create more radical innovations. This human-centric methodology integrates expertise from design, social sciences, business and engineering and creates a vibrant environment for interaction that promotes iterative learning cycles. An intimate understanding of who the user actually is and what the real user’s needs are is central to the early stages. Three ‘learning loops’ have been identified based on the product development knowledge model. Learning loop 1 describes normal institutional and procedural learning. The factors that seem to influence the creative energy and output the most are physical space, the absence of fixed processes, and a practice of letting change happen. Learning loop 2 describes the design process learning of need finding and bodystorming with the help of prototypes. Learning loop 3 focuses on the informal creation and transmission of explicit and implicit knowledge. A correlation between the usage of language and the degree of change achieved could be observed, where noun phrases and questions (deep reasoning questions and generative design questions) play a major role.

Creativity describes the ability to rethink existing solutions, to combine existing ones with solutions used in other fields, or to imagine a new way of doing things, and as such, creativity represents the basis of innovation. But in many companies the thinking prevails that not every employee is able to be imaginative and to create something new. This notion is not only false, but also demotivating and catastrophic to any innovating firm. Creativity techniques represent helpful tools that make it easier for anyone to enter a creative state of mind. There is a vast number of creativity methods, which encourage creative activity and can be used in all kinds of scenarios ranging from problem solving, to developing a corporate vision, to generating new product ideas. Depending on the specific problem situation, some techniques are more suitable than others. The presented techniques represent guidelines rather than rules and constitute a way of helping people break free from the constraints of their usual work environments.

Today, we are facing global problems that arise from a non-sustainable product culture which causes an immense waste of resources by products. Especially in saturated markets, design has been directly assigned the task of keeping consumption levels high or even increasing them by creating more new products. In addition to the predominantly product-related ecodesign, sustainable design describes a more holistic approach, focusing much more on social, ethical and economic factors of product life cycles. In the context of sustainable innovation, the greatest potential of design lies in influencing the perception of sustainability, thus making sustainability as a concept actually come to life. Designers’ creative artistic skills like problem-solving strategies based on visual skills of thinking and communication and the mastery of encoding and decoding the signs of a product can contribute to developing sustainable innovations. The contribution of design to sustainable innovation cannot be restricted to the product level, it also involves societal system innovations, usage innovations, and organizational innovations with the aim of establishing reduced resource consumption by fewer products. To establish processes of product development, production and use which are culturally sustainable in a consistent way, design depends on close cooperation with the users already very early in the fuzzy front end of the innovation process.

According to 3M's logic of innovation, knowledge, ability and desire represent the three decisive parameters for innovativeness. Knowledge denotes the ability to combine existing technological competencies across divisional borders with specific market opportunities. Ability describes 3M's process competency – particularly with respect to its stage-gate innovation process. Desire is the direct effect the company's corporate culture has on the innovation-relevant attitudes and conduct of its employees. Personal development and esteem, freedom, liveliness, stability over time and building on strengths form the vital basis for striving for the spirit of innovation. But these elements must also be accompanied by a goal- and performance-oriented organization that sets rules. Only by achieving a good balance between the freedom provided by the corporate culture and demanding performance and goal attainment is it ultimately possible to ensure a company's innovative performance.

Due to the increasing demand for battery energy storage systems, ABB set up a customer integration project to develop a prototype and new applications in cooperation with a pilot customer in a real-world environment. Project initiation, idea generation, idea pre-screening, idea substantiation, idea selection, and start of base design represent the main phases during the front end of this innovation project. For the general framing of the concept, the project team – composed of participants from the customer and ABB employees – needed additional competencies, resources and top management commitment to co-finance the prototype. Target setting, definition of responsibilities, communication and progress sharing, and team setting received special attention in the course of this customer integration project. Close cooperation between the customer and ABB during the entire front end process helped to accomplish delivery of the system and completion of commissioning work. Given the know-how and the competencies built up during this project of prototype development, ABB today has established the global center of competence for battery energy storage systems in the local business unit that had been in charge of the project described.

In addition to a clear commitment to an overarching strategic goal, strategic management of the early innovation phase in the field of life sciences requires two key capabilities: The skills and tools for sourcing additional early lead candidates, as well as the organizational and technological capability to master complexity. Both of Bayer’s life science subgroups (Bayer CropScience and Bayer HealthCare) use a stage-gate process for continuously assessing the progress, value and probability of success of their early innovation projects. The stage-gate process used is divided into four major stages: Stages 0 to 2 address the early innovation phase, stages 3 and 4 address the later phases of product development and launch. To facilitate sound decision-making, the review process is guided by a strategic process of decision analysis, using criteria like market potential, likelihood of success, degree of innovation, and costs.

BGW has developed a standardized approach for idea generation with internal and external participants and an intended output of 50 tangible ideas and 5 rough concepts. The idea generation (creativity) workshop concept consists of three sequential phases: Set-up and preparation, workshop, transfer and follow-up. Kick-off, goals and results, procedure, participants, framework, confirmation, partner selection, and the organizational planning of the workshop represent activities that have to be conducted in the set-up and preparation phase. A proven three-step approach to generating ideas forms the central part of the workshop phase, in which a mixture of different methods and tools is applied. Based on first raw ideas, the ideas are further developed until initial rough concepts arise, which mark the end of the early phase and the transition into the development process. Both idea evaluation and the selection process are regarded as critical to success during this phase. In the transfer and follow-up phase, the results from the workshop are assessed, documented, and commercialized. Based on their extensive experience with workshops, the authors point to some key success factors of workshops at the end of the article.

Emporia investigated idea generation processes with external sources as idea providers. The company conducted an online idea competition and focus group workshops in order to identify new designs, functions, improved usability, or services that could increase the value of mobile phones for the elderly and decrease barriers to their use among this population. As part of the online competition, ordinary customers registered on a website in order to submit ideas, to easily build their own ‘ideal’ mobile via a toolkit, and to evaluate, discuss, or complement others’ ideas. The focus group workshops were carried out with four groups of five or six senior citizens each and included different creativity methods. From their comparison of online idea competitions with focus group sessions the authors conclude that both techniques have different strengths and weaknesses. Although a greater percentage of focus group ideas were advanced, the online competition outperformed the focus group sessions with regard to the number of potential new product offerings generated.

Today, open innovation goes far beyond research cooperation with scientific institutes, universities, suppliers, customers, lead users, and industrial entities. Due to web 2.0, enterprise 2.0 solutions and the growing number of intermediaries, the ease and speed of identifying and reaching potential innovation partners, knowledge owners or technology providers has changed dramatically in recent years. Approaches like corporate venturing, participating in publicly funded joint research projects, corporate foresight, and direct acquisition of technology providers have found increasing interest within industrial organizations over the past few years. Evonik Industries relies on the innovation approach of positioning technology scouts in all important growth regions globally, who act as agents for the operative business units and at the same time run a kind of blue-sky scouting for strategic topics of the company. To survive in an increasingly global competition, it is more than essential to be able to identify and join forces with the right innovation partner, who offers exactly the missing piece of knowledge and competence that is needed in order to launch the next innovation more efficiently and faster than the competitors.

Google Ventures – the venture capital department of Google – couples the idea of a corporate incubator with the methods of a classical venture capital firm. A corporate incubator strives to create innovation, whereas a venture capital firm’s idea is to create money. As such, corporate incubators fill their front end with new ideas and innovative businesses in development that are related to the parent companies’ businesses. And venture capital firms select their portfolio of companies based on investment opportunities. Google Ventures tries to combine both investment strategies. Today, Google Ventures has invested in over 100 firms with a focus on the core topics mobile, gaming, energy, and life sciences. Google Ventures differs from other tech companies like Intel or Microsoft with regard to the form and intensity of support and engagement extended towards the companies Google invests in. Google Ventures makes no secret of investing deliberately in companies whose aim it is to directly compete with Google’s products. The inclusion of the funded company into the parent company Google, or the sale of the funded company to another investor represent two exit strategies Google Ventures pursues.

Henkel introduced an idea system tool and process called InnoLounge in order to invite its employees to participate in ideation and at the same time to guarantee a fair evaluation of submitted concepts. Through worldwide crowdsourcing, Henkel uses the creativity of the whole organization and stores, searches, and processes ideas and insights in only one place. Submitters of ideas have to specify their concept ideas in a clear and concise form with regard to consumer insight, consumer benefit, title of the idea concept, and the reason why. After the concept idea has been submitted, it is ready for assessment by evaluators in the InnoLounge. The evaluation process runs best if the evaluators do not know the submitters, if there is an ever changing set of evaluators, and if they also evaluate concept ideas outside their own product categories. Additional activities like specific campaigns, creativity skills trainings, information on trends, and additional activities are always necessary to keep the momentum.

Rather than constituting only a new method in the context of innovation that can help foster a business, crowdsourcing represents a new way of structuring and organizing work by relying on the principles of evolution, swarm intelligence and analog knowledge, self-selection, and task distribution and aggregation. More and more companies try to leverage the distributed intelligence of their customers, suppliers, employees, and internet users by setting up crowdsourcing platforms and broadcasting their problems and tasks to the internal and external crowd. Although crowdsourcing has become quite popular, it also faces some difficulties that must be overcome in order to provide value. The lack of a clear task description and problem explanation, of an appealing platform design, solid terms and constrains of participation, or of a fair price structure may create difficulties for companies applying crowdsourcing. But, once they have gained the relevant knowledge, companies can truly benefit from crowdsourcing and develop superior innovations.

Following the vision of creating synergy between customers’ future needs and emerging technologies, IBM Research established the first Research Client Center in 1997 – an instrument to create a bridge from research to the market. From that time onwards, IBM Research has opened up to the external world and entered into a true dialog with its clients. Today, open and collaborative innovation is imperative for IBM Research to drive innovation. In IBM’s innovation process, the Client Centers at IBM’s Research sites – the so-called Industry Solutions Labs (ISL) – are regarded as forums, knowledge hubs, and enablers. They have direct access to the scientists and benefit from the inspiring and creative atmosphere in the labs. The ISLs’ goal is to pose the right questions to stimulate valuable discussions and generate insightful answers to complex challenges. One of the core elements in ISL workshops is the discussion of key technology trends based on the Global Technology Outlook – IBM Research’s annual look into the future with regard to technology trends. These key trends identified are used to define areas of focus and future investment in the company.

In order to stimulate further growth, BMW considered a radical innovation for MINI that was associated with a high degree of uncertainty, many chances and risks, and a large amount of organizational turmoil. The company decided to pursue a unique strategy in the automotive industry by combining a small car segment with a dedicated premium approach for the first time. The development of the MINI Countryman was extremely difficult since several challenges of the early phase of product development had to be overcome. The early stage of BMW’s vehicle development process is subdivided into a strategy-/initial phase and the concept development phase. In the early phase of the MINI Countryman, not only analytical criteria, but also subjective feelings, expert assessments and strategic visions were considered. In 2006, the BMW board authorized the start of the concept phase and allocated the required resources to the project. During the concept phase, four major challenges had to be overcome that had significantly increased complexity in comparison to regular vehicle projects: management of the cooperation, goal incongruity, organizational development, and concurrent engineering. Today, MINI is one of the fastest growing brands in the industry, and the Countryman has been copied intensively since its market introduction.

In order to manage innovation properly, Autoneum formalized the early innovation phase by implementing a stage-gate process and established formal process controls while considering the basic premises of ambiguity and uncertainty inherent in invention and innovation activities. Process controls reduce the variance in the methods employed during the early innovation phase and guarantee that decision makers consider all relevant and available information. In this regard, controls can be brought to the forefront of the innovation process without hindering innovation or creativity while taking a facilitative role. Regular assessments of innovation projects facilitate discussion, arbitration, decision making, and the management of priorities. In addition, control improves information access and contributes to the development of a common understanding. Moreover, it helps to manage creativity throughout the front end and prevents the circumstances in which unchecked creativity reduces R&D performance because of a loss of focus.

According to pioneers of design thinking, innovations should satisfy three perspectives: human desirability, technical feasibility, and economic viability. Analyses of SAP's innovation projects indicate that design thinking has effectively addressed both technical feasibility and desirability, but not economic viability. Hence, SAP has developed an innovation approach that focuses on economic viability and is compatible with design thinking via business model innovation (BMI). Addressing economic viability within innovation projects by calculating business cases early on and by creating detailed business plans at a later stage is not enough. It requires an approach like BMI that puts economic viability to the very core of innovation throughout the entire process. The focus on the business model forces the team members involved to center their thoughts and ideas on value creation for the identified customer groups and even more on value capture throughout the entire process from analysis to implementation. The investigation of a possible combination of design thinking and SAP's BMI approach indicates that both approaches have many similarities that facilitate close integration, and that both approaches can benefit from each other when fitting elements from one are integrated into the other.

The Austrian research and transfer center sprint focuses on the development and utilization of advanced methods of enhancing effectiveness and efficiency of the front end of innovation. Within the area sprint>lab, an online based trend collection system has been developed to identify future technological trends and developments in pre-defined clusters by merging and analyzing opinions of experts. To support this mentioned approach, a three-step procedure was implemented following the Delphi method. The first step focuses on the collection of trends from experts via an online-based collaboration platform. For this purpose, a web-based crowdsourcing tool called sprint>radar has been developed in cooperation with HYVE. In the next step, the analytical results of the trend collection phase are fed back to a selected group of experts, using a quantitative online survey. The experts are asked to evaluate the trends regarding their probability of occurrence and relevance. This interplay between evaluation and re-analysis continues until a consensus has been reached. Based on the results of this survey, strategy workshops are conducted, where experts from industry and academia discuss the impact of the trends identified on the field of interest.

In cooperation with the University of St. Gallen, Landis+Gyr developed a standardized approach for the design, analysis and comparison of business model ideas that follow the logic of value networks. Within value networks, value is created through the cooperation of several companies that jointly form a business model that generates added value for the end customer as well as for all participants. Focusing on the energy market as area of application for the new model, Landis+Gyr made a major effort to gather various new business model ideas considering the company’s future role in the electric power value network. For this purpose, an eight-step approach for the design and analysis of value network business models has been developed that entails the most relevant dimensions required to evaluate the attractiveness of value networks as well as the attractiveness for each participant. The model is useful as it provides a structured approach to describing new, complex business models and ecosystems. Its predictive power has yet to be validated by applying it to existing business models and benchmarking the predicted performance as well as selected roles against real-life data. Only after this has been done with a positive outcome, the model will have a chance of being endorsed by academia and the business community as a tool to support business decision-making.

voestalpine Anarbeitung GmbH developed a framework for commercializing technology development (TD) projects in the automotive supply industry, which demonstrates how a commercialization process can be structured and which tools and methods should be applied in the particular process steps to turn technological ideas and inventions into effective action. Qualitative exploratory research as well as a quantitative study revealed successful process structures and appropriate management tools for activities of commercializing TD. The established framework integrates specific commercialization activities into every stage of the TD process and includes a manageable number of phase-specific practicable management tools that assist in increasing the effectiveness of technology development. Furthermore, the implementation of the framework enhances the efficiency of the TD activities due to the strategy-orientated and systematic procedure, resulting in reduced time to market and a higher return on TD activities. A project-specific validation showed that the model complements the existing TD process with a valuable market-pull perspective.

With the aim of fostering open foresight at the front end of research innovation, Volkswagen set up a project that combined the approaches of open innovation/crowdsourcing and strategy development based on scenario thinking. As a first step, four scenarios for the future and corresponding strategic options were developed and served as a framework for ‘wind tunneling’ Volkswagen's existing innovation strategy. These white spots served as a starting point for further discussion and development with the intention of identifying promising fields of future innovation. The so-called ‘information market’ – an online-based real-time trading market – was the method of choice for reaching this target. Experts from all departments of Volkswagen Group Research were invited to take part in the information market to share their knowledge. The project showed that the approach of combining open innovation and foresight is able to serve both the long-term strategic requirements of a large organization and the more short-term need of fostering innovation.

Throughout this book, several approaches, tools and principles have been presented that allow managing the front end of innovation professionally. The management task in the front-end phase involves capturing vague opportunities and ideas as well as their professional transformation into clear concepts that can be transferred into the next stage of the innovation process. It is also the task of the manager responsible for the early innovation phase to reduce uncertainty and prepare the technological and market basics for the ensuing product or process development. Fuzziness is therefore a key concept that is incorporated at this phase.