How Stage-Gate Throttles Disruptive Innovation:
The Chasm in Strategic Innovation
Part 1: Strategy & Tactics
An innovation manager recently commented to me that: ‘Ideas are easy. Execution is the hard part.’ And to some extent, she was right, and she put voice to a common sentiment: moving from an idea to a successful product in the market is tough. Innovation has been known to fail at a high percentage, especially when it comes to higher-level differentiation and disruption. But why does it fail in execution? From our experience, big ideas are often doomed in large organizations before the execution process even starts. Her comment highlights one of the core flaws in the way companies today approach innovation.
Execution, inherently, is a tactical activity; but most companies’ innovation programs are flawed at the strategic level. What does that mean? And how can we fix it? First, let’s take a brief look back at the history of corporate innovation. How did we get here?
Often, big ideas are doomed before the execution process even starts
During the last few decades of the 20th century, changes in the auto industry sparked a major shift in the modern approach to systems. Toyota led the way into the world of Kaizen, Six Sigma, and Lean - highly optimized ideologies and processes for maximizing efficiency, always on the quest for continuous improvement. This shift happened first in manufacturing sectors and quickly spread throughout other processes and, ultimately, corporate culture at large.
Around the same time, companies started calling for more systematic, predictable innovation, so applying an optimization process to innovation soon followed. In the 1980s, Robert Cooper developed the Stage-Gate New Product Development (NPD) process, which gave R&D teams a tool for systematizing the chaotic world of creating something new.
The timing was perfect. Stage-Gate promised to bring rigor to the murky waters of innovation, and modern industry jumped on board. Continuous innovation mirrored continuous improvement. Stage-Gate quickly became the dominant innovation process; Cooper’s group, the Product Development Institute, estimates that today up to 85% of corporations in North America use some form of a phases-and-gates process.
Let’s acknowledge this as a major achievement. Innovation is a complex challenge, and for the first time at such a sweeping scale, innovation had a process. This meant that you could see (and manage) what was coming next, and more, you could control your risk and investment by including a mechanism for killing projects. This unquestionably added tremendous value - and continues to do so today. Chances are, your company uses (and benefits from) a Stage-Gate process.
So what’s the problem?
Real organic growth won't come from your current products
Stage-Gate reflected the predominant thinking of the day - when the world heavily focused on optimization. At its root, optimization is about improving what you already have. It’s making existing products better. By definition, this is incremental improvement. You can improve your margins and, if you’re lucky, you might gain a few points of market share. This is what Stage-Gate does well.
The trouble is, as we continually read and hear, incremental innovation is not enough. No one wants to be the next (insert your favorite B-school case study here), whose entire world is disrupted by a new player. Shareholders demand more, and fast, but real organic growth won’t come from your current products. Today’s innovation requires a balanced portfolio that includes more than improvements to current products - you have to build into adjacent spaces, and even create of new-to-the-world offerings.
That brings us back to Stage-Gate. The reason so many companies get stuck at incremental change is not that Stage-Gate, in itself, is flawed. It’s just not enough.
Stage-Gate is all about execution. From the very first stage, you know where you’re heading, so you’re primarily asking ‘How do we get there?’. This is a tactical question, which is best answered by a very convergent kind of thinking. You take known information and converge on a solution, as quickly and with as little risk as possible. You can even see the emphasis on convergence in Stage-Gate from the way it is drawn: the funnel starts wide and narrows as you move forward.
By contrast, disruptive innovation (and even differentiation) needs a healthy dose of divergent thinking. It requires a venture into the unknown. Before you ask how you get there, you have to figure out where ‘there’ is. And ‘Where should we go?’ is a strategic question. You see, NPD starts with the idea; the thinking assumes the ‘ideas are easy’ part. It doesn’t address where ideas come from, or how you get them to stick. We love the way Donald Norman and Roberto Verganti put it: with phase-gate processes you climb to the highest point on your current hill. But how do you find new mountains to climb?
Companies lack a complementary strategic process to bring rigor to the divergent phase between their operational goal ('grow big - organically') and their Stage-Gate Process.
In our decades in innovation consulting, this is the biggest struggle we see. There is a gap. In fact, it often feels more like a chasm, and it’s so prevalent it even got a name - you’ve heard of the ‘fuzzy’ front end? Companies lack a complementary strategic process to bring rigor to the divergent phase between their operational goal (‘grow big - organically’) and their Stage-Gate. The lack of strategic process makes it extremely challenging to move to the point where teams can take a big idea into Stage-Gate and really run downhill with it.
To summarize, this is the dynamic in corporate innovation. Stage-Gate NPD, firmly embedded in the vast majority of cultures, offers a measured, rigorous way to answer tactical, ‘how do we get there’ questions. But because it is a convergent approach, Stage-Gate throttles higher-level innovation, which needs a divergent (yet still rigorous) process. Organizations typically don’t have a strategic process in place, or at least not a very good one, so they do not diverge and converge to bridge the 'fuzzy' front end.
The good news is that you can build a robust strategic process for the divergent phase - if you avoid common innovation mistakes, like fixating on the idea.
Brian Roderman is President and Chief Innovation Officer at IN2 Innovation.
Brian has worked in innovation consulting for over 25 years and is often a featured speaker on design and innovation at events and symposiums worldwide.
Luke Jordan is an innovation strategist, and he leads IN2 Innovation's business development efforts.
Luke is a process geek who focuses on designer-led innovation.