At Pennovations in Chicago, Bernhard Kappe of Pathfinder Software and the Chicago Lean Startup Circle spoke about the importance of getting customer and market input into the business plan. As you can see, the visual he used to illustrate a plan’s first contact with customers neatly made his point that “No business plan survives First Customer Contact, untouched and as is.”
While this insight makes intuitive sense, and many companies have a process on paper, it’s less common to see disciplined processes enacted and driving breakthrough innovation in the B2B space.
How to Employ Discipline in the Front End of B2B Breakthrough Innovation.
Ashland is a mid-tier, global specialty chemical company with nearly $8 billion in annual revenues and 15,000 employees, doing business in 100 countries. Its largest commercial unit, Ashland Specialty Ingredients, manufactures and sells products across a wide range of industries such as skin, hair and oral care, nutrition, coatings, construction and pharmaceuticals. To help drive top-line growth, Ashland Specialty Ingredients has set its sights on having about 25% of its annual revenues come from products launched within the last 5 years. This means it needs a full pipeline of products ranging from line extensions to breakthrough innovation. The line extensions have been successfully managed via its robust Stage Gate process. And, beginning last year, a cross-functional team of Ashland Specialty Ingredients marketers, research and sales managers were dedicated to identifying breakthrough innovation opportunities and developing a process to generate business cases to help determine if the company should pursue any of the new ideas.
To do this, the team developed a front-end innovation assessment tool that is based on 3 guiding principles:
- Start from Ashland’s core chemistry, and identify new markets that could readily leverage its core products by creating fully-differentiated new solutions.
- After the team determines that its core chemistries are adaptable into the new market, the sales team begins to form strategic partnerships with major customers in the new market. This team is joined by marketing and R&D to uncover more unmet needs and begin to work with external resources, such as subject-matter experts, to define a second generation of new product ideas. Because of this input, the team now has clarity around which problems need solving and why Ashland’s chemistry and scientific know-how is the best partner for solving customer needs. This process builds a full pipeline of new product solutions and positions the company as a strategic innovation partner to the customer.
- In the third step, the Ashland team builds a preliminary business case to show the long-term financial opportunity and required investment to build out the full platform of ideas, first to third generations.
These guiding principles form the foundation of Ashland’s Breakthrough Innovation process. The big ideas enter their stage-gate process after the initial business case has been approved by management, as explained by Nancy Shea, VP Global Innovation and Marketing:
“We use a disciplined front-end innovation process to identify the right opportunity and define how our current products link to the new market opportunity. To build the second and third generations of new products for this new market place, we work with expert networks to help us better understand the market and develop truly differentiated solutions. It is important to work closely with customers early in the innovation process so they can evaluate our capabilities and decide if we should be their partner. Finally, we build the preliminary business case that outlines the size of the opportunity by each generation, the estimated return on investment and the level of resources required to produce the new products over the long term.”
Successful Breakthrough Innovation front-end processes start with building an understanding of the core products or services and how to leverage into new growth opportunities. The inclusion of external experts help further vet the problem and can prevent the team from moving in the wrong direction. Finally, building a multi-generational innovation platform gives your customers a longer-term vision of your innovation plans.