Editor’s Note: Although there may be a pandemic-related slowdown, there’s no stopping new product development. To better help readers with corporate innovation strategy, Prepared Foods turned to leaders at the Eureka! Ranch and the Innovation Engineering Institute, Cincinnati. Founded in 1986, Eureka! Ranch has become a global think tank and innovation training company. 

In the first of four installments, authors Doug Hall, PhD, and Maggie Nichols look at accelerating corporate innovation success with whole-business seed funding methods and mindset.

Greetings. In this four-part series, we’ll explore a new outlook to accelerating innovation in a corporation. In this first installment, we glean lessons from history and encapsulate how and why those past executives—responsible for innovation—met with success or failure.

For starters, here’s an opening look at the evolution of innovation management.

Old World Dictator (1950-70s)
Innovation management in the 1950’s, 60’s, and 70’s was a dictatorial “waterfall” approach where leadership defined the new product or service along with a linear and highly structured procedure.  This approach was useful when design requirements and scope were fixed and stable.  When there was high uncertainty with the technology or business model, the result was epidemic failure rates.

Inspect & Control (1980s)
In the 1980’s, with innovation failure rates in the 80% to 90% range, various “phase and gate” control systems were introduced. This brought discipline to the process through concrete success standards at each “gate.”  Executed properly, the result was a reduction in failures. Sadly, this was driven primarily because of a reduction in the “innovativeness” of projects.

Free the People (2000s)
Frustration with the lack of “big ideas” and the “gates” became more bureaucratic (whenever a failure occurred the result was additional inspection steps) the 2000’s sparked interest in people-centric systems like “Lean Start Up” and “Design Thinking.”  

The result was renewed energy and creativity at the “front end” of the development system.  This new “right brain” mindset was reinforced through a reduction in perceived barriers to creativity. Quantitative testing was replaced with qualitative opinions. Rigorous sales and profit forecasting was replaced with personal passion. This all contributed to a “mirage” of innovation at the front end of development that usually came to a hard stop as real time, energy, and money needed to be invested into development.

Seed Funding (Today) 
Today’s corporate executives and investors look for investments with exponential potential. High ROI requires more innovative technologies and or business models.  Because, greater levels of innovation mean greater risk, there is a new movement toward “Seed Funding” of small teams that blend internal and external experts. Their purpose is to test, learn, pivot, and reinvent to resolve critical “death threats” and thus define a viable business opportunity worthy of Series A funding and beyond. 

The Seed Funding approach is especially valuable in situations that involve high uncertainty for the organization.  Uncertainty can come from an innovation involving new-to-the-company  technologies, markets/industries and or business models.  It also can come from the complexity of new assets with service offerings or innovations that include both analog and digital components.

It’s clear that this approach is spreading. Global seed funding venture funding reach a new annual record in 2020, despite the pandemic. [1] And whereas most of the US seed funding action was localized to Silicon Valley in previous years, other geographies are adopting the approach as well. In January 2021, CNBC reported, “Silicon Valley’s share of total VC count in the U.S. will fall below 20% for the first time in history” [2] with Miami, Atlanta, San Diego and Denver showing triple-digit growth.  [1] 

Quite simply - investors and companies are finding that making lots of bets on “big ideas, technologies, business models” creates a great return on investment. 

As seed funding has grown, there is increased need for systems and tools to improve the speed and effectiveness of these start-ups. Critical to these start-up explorations is an ability to think beyond classic product, positioning, and pricing—to a new mindset of seeing the innovation as a dynamic system of interconnected parts.  As it turns out, this system mindset was what “saved” USA manufacturing in the early 1980’s when faced with the rise of Japanese quality manufacturing. The method then was based on the “system thinking” mindset of Dr. W. Edwards Deming.  

Today, the most progressive innovation methods apply the system thinking of Deming to the world of seed-funded start-up teams. It brings together the best of “gate” discipline and “free spirited” creativity.  It also bridges the historical debate of being “technology driven” versus “customer-consumer” driven.

The result is improved success rates and speed to market.  Note: Throughout this series we will use the term “customer-consumer” as the methods defined are applicable to both business-to-business (B2B) customers as well as business-to-consumer (B2C) customers. 

The next installment:  A New Way, Whole-Business Concurrent Development 

[1] PwC/ CB Insights Money Tree ™ Q4 2020
[2] Silicon Valley’s share of venture capital expected to drop below 20% for the first time this year, CNBC.com, January 14, 2021