Community Forum – Spotting Big Opportunities

How do you spot the BIG opportunities?

What operating rhythm, processes, & metrics do you employ to preferentially identify, generate, AND screen BIG new opportunities in the early stages of the innovation process?  Many businesses find themselves focused on the short term, resulting in an innovation portfolio filled with many small, resource consuming, incremental programs instead of a better mix that contains more big, breakthrough (or even disruptive) opportunities. How do you increase the number of big opportunities vs. small incremental projects? – Matt Paquette, Sr. Manager R&D, Newell Rubbermaid

Community Responses

Larry J. Howell, IRI Emeritus, Executive Director, GM R&D Center (Retired 2001)
We revamped how we managed GM R&D in 1998 to put more focus on projects with breakthrough opportunity (e.g. StabiliTrak, OnStar, plug-in hybrid, fuel cell related technology).  Our CEO at the time said he expected billion dollar opportunities rather than continuous improvement from R&D.  The point is that senior management must support the transition to put more focus on big opportunities, and to support your pulling away from short term support of operations (which the people in operations won’t like because they will have been getting terrific no cost support – I got a few unhappy calls as I pulled researchers from the field and backfilled with contract workers). 

I told the staff that I expected more risk taking while expecting more project failure.  We bubbled up a lot of projects and killed many of them.  There is no magic solution to deciding which projects to begin to scale up.  At some point you need to consider the business case, and/or a new option for the customer, but don’t use cost benefit measures at the early exploratory stage.  See the paper I wrote for RTM on how we managed the change:  Adapting GM Research to a New Corporate Strategy (RTM Vol 46, Issue 3).  It requires intense communication with the staff to convince  them you are serious about making big changes.  And the entire company needs to know you are changing focus.

Bill Miller, PhD, IRI Emeritus, President, 4G Innovation LLC
You should practice fourth generation (4G) R&D/innovation, which is based  on the fact that radical innovation follows deep macro trends served by new dominant designs (DD’s) that transform markets and industries.

One such trend is empowerment of individuals with new capabilities and structures of those capabilities governed by architecture. Capabilities are people with knowledge, tools, technology and  processes. DD’s operate at several levels from products to platforms to business models to the  economy. The macro trend of empowerment in the economy is that consumers are becoming major producers of value. Some examples in energy and information/media are residential solar/wind electric power and blogging/social networking –  Facebook. Facebook practiced 4G to discover their big opportunity. 4G does iterations of prototypes tested by customers to get convergence. Now Eric Ries and Steve Blank are teaching 4G in their books – Lean Start-up and The Four Steps to the Epiphany. Another book teaching  4G is Nail It Then Scale It.  4G replaces the failed  linear model which begins with technical research and is an “invent, push and market guess” model with a nonlinear model based on learning unmet needs of customers at different levels and  then applying a combination of open innovation and research/invention to generate an initial prototype for a solution.  In four years, an application of 4G produced new breakthrough product prototypes and a PhD at the University of Michigan in a 4G research partnership between a medium size industrial company, UofM and a small strategic supplier. The breakthrough was based on immune system engineering  (ImSE) which builds complex systems with embedded immune systems so that  the systems are largely self-diagnosing and self-diagnosing. 4G research begins with a market/industry problem that drives the acquisition a solution, which may also require acquisition of one or more businesses to build parts of a solution. In the case of ImSE, the problem was found doing a financial analysis of an industry value chain and then an iterative drill down to find the root cause, which was a lack of engineering capability. Business models in 4G are typically fusions of  manufacturing and information services with partners such as GM’s OnStar which connect consumers with suppliers and provide services including embedded analytical services. I can send you a white  paper that describes 4G in more detail. 

David Kashdan, Ph.D., IRI Emeritus Member (Director, Eastman Research Division, Retired)
As other respondents mentioned, a clear statement of priorities from Management is essential, and a thoughtful set of measures applied to various potential projects is helpful, excellent project management is essential, etc.   However, these are necessary, but insufficient attributes for your organization.  

One must recognize that high-reward projects are necessarily high-risk projects.  How those projects are funded within the R&D community will determine whether they will be nurtured and allowed a long enough gestation period to survive.  In order to accomplish this, there must be a substantial portion of R&D funding which is independent of the business units.  We must recognize that organizations respond to incentives, and that business units are incented to provide constant, steady earnings.  At the first dip in earnings, or perhaps at the first failure of a critical experiment,  it is natural that the business unit will start reconsidering its support for expensive high-risk projects whose potential return is far in the future.  That is, R&D must have its own discretionary funding if a long-term, high-risk/high-reward program is going to be successfully pursued. 

The funding issue is even more central to the problem than I’ve described above.  Of course, your employees already understand funding issues and can list projects that have suffered from inadequate funding.  They won’t support or even suggest projects which they don’t believe will have a reasonable chance of survival.  Who wants to devote a year or two of their life to a project, only to see it de-funded?  So, if your company fails to create an environment supportive of high-risk/high-value projects, such projects will fail to appear before you for funding.