Away With the Innovation Funnel Process

by Yoram Solomon

There is a wide range of definitions for the terms “Creativity” and “Innovation”. The one I use the most has two elements to it. From a domain perspective, Innovation is an organizational function, while Creativity is an individual function. From a process perspective, Innovation is a Creative idea that got implemented. The implementation of a creative idea generated by an employee is an organizational prerogative, and the tool typically used at the beginning of that process is the “innovation funnel”.

In their 1997 article “3,000 raw ideas = 1 commercial success!”, published in the Research Technology Magazine, Stevens and Burley summarized a study based on project literature, patent literature, and venture capitalist experience, and concluded that “across most industries, it appears to require 3,000 raw ideas to produce one substantially new, commercially successful industrial product”. The funnel they described acts as follows: 3,000 raw ideas turn into 300 ideas for which minimal action is taken (such as simple experiments, patent filing, or management discussion); 125 of the 300 ideas become small projects; 9 out of the 125 become significant projects with a significant development effort; 4 out of the 9 become major development efforts; 1.7 out of the 4 is commercially launched; and 1 out of the 1.7 launched (59%) becomes commercially successful (this last success rate varied from 40% to 67%, depending on the source of information, industry, and geography).

However, care must be taken when considering this a perfect Darwinian process in which only the truly viable ideas are launched, and the bad ones are caught before major investments are made. Rosenfeld and Servo wrote the chapter “Facilitating innovation in large organizations” in the 1990 book “Innovation and Creativity at work”, in which they claimed that in large organizations good ideas can be dropped in the organization in many places, and they emphasized the role of champions and sponsors (with high status and track record) in driving creative ideas through the innovation funnel and not letting them drop for illegitimate reasons.

When I worked at Texas Instruments, as part of my job as a technology strategist, I audited the “patent committee” which was tasked with deciding whether an idea presented by an employee/inventor was worthwhile pursuing as a patent application (trying to find the 300 out of the 3,000). The process was similar to the process of the innovation funnel I observed in so many other companies. A group of managers and engineers sat in a room, while an inventor was given 3 minutes to “make the case” why his or her idea should be pursued (as a patent, or for development). I remember once being confronted by an employee who complained that he presented so many ideas to management, but all were shot down. The problem, obviously (to him), was management’s lack of vision. However, he acknowledged that in his presentation he did not really address the commercial viability of his ideas, for one.

There are four problems with the current innovation funnel process:

  • Given the poor success statistic (only one in 3,000 ideas is commercially successful) and as a general risk-averse culture in mature companies, the funnel “auditors” err on the side of caution and rejection of new and risky ideas;

  • Because of the huge number of ideas that need to be processed and reviewed, the amount of time spent on reviewing each idea is extremely short and not enough (in TI patent committee meetings I attended, the inventor would get 3 minutes to present, and 2 minutes for the funnel team to deliberate);

  • To be fair (to management), most idea presenters are typically technical people who present an idea based purely on its technical merit, putting the burden of business viability consideration on the reviewers (because “I’m a technical person, that’s not my job…”);

  • The reviewers are in no way in a position to judge the market viability of all inventions presented to them, and certainly not the technical feasibility, utility, and inventiveness of each idea, definitely not within the short period of time in which they need to “judge.”

As a result, good ideas get thrown away, and in many cases bad ideas get implemented, and fail. So how do we improve those odds?

Ah, glad you asked!

I recommend to get away from the innovation funnel in its current form. To replace it, I would start by empowering a diversified team (I will write about this topic in a later article) to come up with ideas. Not just a single (typically purely technical) inventor. The team has to be a team trusted (or at least the team leader should be) by senior management in the company, as their recommendation should be accepted by management based on that trust and respect for the team’s competency. The team will be presented by management with the questions that need to be answered (a framework made of the four rules presented in my 2012 article “Four Rules to Snap Judge a New Venture”. Those questions address technical uniqueness, the value add that the uniqueness presents to customers, the competitive advantage, and the financial viability. The team will now be empowered to pursue looking for ideas. This does not have to be their 24×7 activity. Intrinsically motivated employees, believing they can make a difference in their companies (or even in society), will find the time to work on their ideas on top of their day job. When I asked the engineers in my team at Texas Instruments to develop a prototype of the USB 3 interface so I could convince Intel that it was feasible, I told the best engineers that we had no management approval for the project, that the project is “off the books”, that they could get in trouble for working on it, and that I can’t “save” them if they got caught. Somehow none of them bailed. They found the time to work on this project on top of their “day job”, and as a result we have USB 3 “SuperSpeed” today. Tasked with the four questions–they will not present only the technical idea, but the answers to everything that will make the idea viable. They will not be afraid to scrap an idea that does not meet the requirements, and will move on to the next one. This team will prototype, experiment, meet with potential customers, and create a final presentation and business plan.

When the team presents its idea to management, it should have the answers to all possible questions that might come up (again, look up “Four rules to snap judge a new venture” for a list). If it doesn’t–rather than rejecting the idea, management should send the team back to bring the answers to the few open questions. The fact that this is a team respected and trusted by senior management, combined with the fact that they answered the questions that determine whether the new idea is viable, will allow management to give the “go ahead” to the project.

The advantages of this method are:

  • Given the amount of work invested by the team(s) in researching the viability of project idea, a much smaller number of ideas gets presented to management, thus allowing those presentation to take longer than a few minutes. The initial screening mechanism already took place within the team;

  • Given the trust that management has in the team, and the fact that the team answered all of management potential project viability questions (demonstrating viability, I should add…), the senior management review team does not have to be made of experts on the subject, and will rather get the answers to questions, trusting the team that enough investigation was done to reach those answers.

(Note: parts of this article were cited from the author’s 2010 doctoral dissertation: “From startup to maturity: A case study of employee creativity antecedents in high tech companies”)

image credit: Je.T.

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Four Rules to Snap Judge a New VentureDr. Yoram Solomon is a VP of Corporate Strategy, General Manager, Inventor and Author. He has a Ph.D. in Organization and Management, an MBA and LLB. Yoram is a professor of Technology and Industry Forecasting at the Institute for Innovation and Entrepreneurship, UT Graduate School of Management; is active in regional innovation and technology commercialization; and is also a speaker and author on predicting the technology future and identifying opportunities for market disruption.

3 comments

  1. I agree that the innovation funnel as used by many corporations is by no means perfect, but I’m not sure it’s as bad as it’s described here. I have never experienced a company with a engineering-to-management handoff at the 3000 to 300 idea stage, nor do I know of a hit ratio of (only) 1 to 3000.

    In the innovation projects we work on (mostly in Germany), management is involved right from the outset in the idea generation phase, and the shape of the funnel is much closer to that of a pipe. Typical numbers are 50-300 raw ideas, 10-20 small actions and 5-10 major actions.

    As you point out, much is to be gained by applying a small number of key criteria immediately, in order to avoid wasting resources on ideas wth no future. At the very least, the target market, customer benefit, competitive advantage and strategic fit must be considered from the very beginning.

    • Graham, you are confirming my statements… The reason you don’t see such a large number is exactly because management is involved early on in your company, and by the type an “idea” is brought forward–it is already somewhat discussed thoroughly enough. I experienced first hand “half baked” (probably not even half, make it “5% baked…”) ideas brought by inventors to a management “innovation funnel” committee that is supposed to, in less than 5 minutes, decide on its merits. I know that on one hand we don’t want to lose good ideas because the inventor doesn’t bother to go through the process of forming a cross-functional team to push this idea further. However, if we create a culture in which inventors are encouraged and taught to do so–we will benefit from a self-screening process done by those teams, and by the time it reaches management–it is much more mature!

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