Before global direct-sale cosmetics company Mary Kay began digitizing its innovation process four years ago, many product launches took the company about three years. Since 2012, however, the company’s product-launch time has decreased as much as 30%; Mary Kay has more visibility into how products—now tailored to regional requirements—are doing in each country; and product portfolio decisions are based on data rather than anecdotal information.
Having that level of insight into the product development and innovation process is the stuff of envy for many companies looking to up their game in this fast-paced, customer-ruled business environment.
But how can you strike the right balance between innovation and the hard realities of the bottom line?
“One of the reasons companies don’t get a good yield from their ideas is because they’re working on everything rather than working on the most important thing,” says George Young, founding partner of Kalypso, a global consulting firm that has been advising clients on their innovation practices for 12 years. Some of the obstacles are within organizations themselves—too many ideas, limited resources, cost-cutting initiatives, a lack of information about return on investment or market reception, and a lack of discipline about when to pull the plug on failing ideas.
That’s where innovation management and product lifecycle management (PLM) tools and processes can give companies a head start. These applications help companies create a log of all of their new product ideas, define and analyze them for return on investment, make critical decisions about which ones to invest in, and track progress and performance. They serve as a funnel of sorts for ideas, helping to sift the promising ones into qualified concepts.
To improve its innovation process and results, Mary Kay implemented Oracle’s Agile PLM applications and incorporated the following best practices recommended by Kalypso.
1. Articulate and align on an innovation strategy
As with many technology-aided initiatives, start with the strategy. An innovation strategy is “an articulated set of statements that become a playbook to achieve the corporate strategy,” says Young. “Often, companies state audacious goals in their corporate strategy, such as becoming a leader in their industry, but they have only incremental innovation efforts. They are never going to deliver double-digit growth with an incremental innovation pipeline.”
Ideally, the chief innovation officer will write an innovation strategy and share it with the CEO to align with corporate goals, and with people that will deliver the innovation.
At Mary Kay, management decided in 2011 that it would no longer launch identical products around the globe. “We found that our customers in Asia, for example, had very different requirements for their skin care than our customers in Latin America or the United States,” says Deanna Fell, vice president of engineering and PMO at Mary Kay. “As part of our innovation strategy, we tailor products for different regions, and that has helped us meet market demands.”
Soon after making that decision, Mary Kay implemented Agile PLM to help gain visibility and insight into its product pipeline around the world.
2. Manage the fuzzy front end
This is an area that companies often need help with, and one that digital innovation tools such as innovation management and PLM can help with in particular. “A company can have thousands of ideas for new products or services,” says Young. “How do they funnel those down to figure out which are the best opportunities to pursue?”
Digital innovation management tools help to “defuzzify” or rationalize the front end of product development by requiring people to write proposals and requirements for their ideas, incorporating due diligence efforts from the start. They also provide better visibility into the pipeline, which helps managers make decisions faster.
Fell says Agile PLM has helped Mary Kay determine which innovation initiatives to say “no” to—an important capability for a company that has typically between 400 and 450 products in its pipeline at any given moment. In the past, she says, the company might take a product all the way to market before realizing there was no demand for it. Digitizing innovation efforts has helped senior leaders ascertain this information much earlier in the pipeline.
“That’s probably one of the most difficult things for organizations to adopt and figure out—‘When is the right time to stop working on this?’” says Fell. “Now we can make decisions on what will become too costly, or what the markets won’t favor. Knowing when it’s time to funnel a product out is key, so we are using our resources to work on the right things.”
3. Systematize what you can to scale
Best-in-class innovation tools help lead companies through a systematic process linking innovation efforts with development and commercialization.
“Oracle’s Agile PLM helped us set up a phase gate process with which we arrive at certain decision points, or gates, when we review the project,” says Fell. “For instance, at a certain point, a project may be ready for a committee review, and the committee will look at the data up to that point and know if the criteria to proceed or not has been met. This adds discipline to our decision-making efforts.”
4. Actively manage innovation portfolio and investment allocation
This one is simple: most companies have scarce resources for new products and services. Digital innovation tools help them keep track of project investments and projected return rates so they can make better financial decisions.
Fell says Agile PLM gives her team the ability to categorize their projects into different buckets, so that they know where they are spending their resources. “How much are we spending on maintenance projects versus innovation? Prior to using this tool, we only knew that type of information anecdotally,” says Fell. “Now, senior leaders can recognize when they’re spending resources in the wrong place, and figure out how to redirect. That information helps us drive our financial decisions.”
“That’s the crux of digitizing innovation processes,” Young says. “It allows you to see what you’re working on, to understand the resources needed, and then to make hard decisions about which efforts you’re going to fund and support.”
5. Organize and reward for success
Frequently, innovation rewards are not connected to the actual outcome of the innovation. For example, people who hold patents are rewarded because that’s easy to measure. But a company’s number of patents has “zero correlation” to the number of successful products it has in the market, says Young. “Wouldn't it be smarter to reward people based on the three-year post-launch sales performance of a new product?” Digital innovation tools can track such figures and create more logical reward allocations.
“At Mary Kay, one of our beliefs is recognizing success,” says Fell. “We routinely have product launch parties and recognize people, and one of the things we’ve tried to start doing is to recognize that success also means ceasing to spend resources on a project that ultimately would have failed—that’s very important from an organizational standpoint.”
6. Measure your results and learn to improve
“How did the innovations perform when they were introduced as products? Is the company getting better at overall performance? Are the products giving us breakthrough or incremental performance? This type of feedback helps companies understand what types of innovation efforts they need to fund,” says Young. Such data could also help companies understand how many new ideas they need to have in the hopper if, for example, they want to grow by 10% a year.
Fell says Agile PLM helps Mary Kay track a large variety of data, including percentage of times a product reaches market on schedule, or how long a product took in production. Time to market is an aspect of innovation: the faster an innovative product goes to market, the higher the chances of its success—so the company uses these statistics to help reduce the time spent getting new products to market. Since implementing Agile PLM, Mary Kay’s average product launch time has decreased by 30%.
A Run for Your Money
Fell says digitizing innovation has helped Mary Kay take more successful risks. With the combination of successful practices and tools “the senior leadership team has more information than they’ve had in the past to make decisions,” she says.
Taking calculated risks is something companies need to get more comfortable with, says Young.
“Innovation is simply not easy,” he admits. “The competition is trying to do the same thing, and failure rates are pretty high. Technology lends visibility, discipline, and decision-making capabilities to the process, so that companies can learn from these mistakes, and turn them into success.”
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