Managing Product Innovation: A Framework

Despite the pivotal role that product innovation plays in competitive success, few companies have developed a distinctive organizational capability in identifying, creating and exploiting innovation opportunities systematically. Why are some companies constantly more innovative than others? What capabilities need to be fostered to make innovation management effective? Innovation is not the result of sudden “illuminations”. It is natural to be in tune with this statement; in fact, we are well aware of the complexity and interdisciplinary nature of innovative activities. At the same time, however, this belief is often denied in contemporary organizational practice. Innovation processes are frequently managed without the allocation of appropriate resources and energy to exploration and exploitation activities, trusting in the sudden appearance of a brilliant idea that quickly leads to the birth of a new successful product or service. The myth of creative genius is resilient: “We believe that great ideas pop fully formed out of brilliant minds, in feats of imagination well beyond the abilities of mere mortals (Brown, Harvard Business Review, 86(6), 85–92. 2008). The exceptionality of the imaginative and visionary talents of some key people can, of course, be a valuable resource. Still, the ability to be systematically innovative is rooted in the collective intelligence within the organization, in the external network of competencies, and in the ability to connect and coordinate these fragments of knowledge. Product innovation is a complex and multidimensional phenomenon that requires the integration of skills of a different nature: skills to capture unmet manifest needs and new embryonic needs, to identify values and trends that are emerging in society and to exploit new technological opportunities and discover new business models. This chapter presents the innovation pyramid framework: it highlights the system of interdependent activities on which firms’ innovation capability is based. The three levels of the pyramid (intelligence, discovery and development) metaphorically represent the three “factories” that generate, at the same time, the three output streams needed to innovate systematically: inspirations, feasible product ideas, and a portfolio of profitable products.