Innovation funnel

In order to have the development portfolio doing its job in governing business and operational changes, it is essential that relevant development activities share their current statuses and objectives as clearly as possible. Innovation funnel groups development so that there will be a right balance.

Concept of innovation funnel

The idea of the innovation funnel is to categorize development activities by their maturity. Early research type of development does not yet provide value to be captured. It is, however, important to do enough research, because it focuses larger investments later. Research tries to find totally new concepts, whereas experimenting with pilots tests the researched concepts further. Most experiments or pilots, however, are supposed to die after the pilot. The successful ones should proceed through a smooth selection process towards actual investments.

This brings us to the investments basket. These are the real hard core development activities that cost a lot more. Hence, it is important to know where it is worth while to burn the money and resources. Research and experimenting focus these investments so that less waste happens.

A successful investment always leads to deployment and value capturing use. The value, however, erodes unless it is nurtured. This brings us the fourth basket of use and value. Use phase development does not bring anything new, but keeps the value capturing crisp and competitive. Use and value type of development can of course be financially an investment. Also continuous run and maintenance related development belongs to this basket.

The important thing about the innovation funnel is balance. Too low levels of research and experimenting leads to eroding services until they don't function as they are supposed to. It also leads to missed innovation opportunities. On the other hand too low levels of use and value development erodes the services as well. It is clear without mentioning that low levels of both lead to excessively high overall development costs and compromised quality. Investments take place too late and they have to be resourced with highest cost resources. Late reaction also increases percentage of failure causing sunk costs and reduced value add. It also risks business continuity.

Typical drivers behind the funnel

Innovating, ideas and piloting
1) open public innovating, ideation and research
2) city's internal and external experimentation and piloting

Obligatory
3) legal / forced development by regulation

Customer value and lean operation
4) improvement of customer experience
5) business process improvement
6) digital opportunities
7) operational processes improvement

Changes in business environment
8) PESTLE - political, economical, social, technological, legal, environmental
9) competition - rivaling services 
10) disruptions and force majeure

Continuity
11) supporting continuous development and upgrades
12) retirement, replacement, risk management

Targeting development 

A few rules of thumb about the development drivers can help in setting right kind of targets for a development activity:

1) Innovating and ideation

Objective: To identify opportunities either for improving and renewing current services or their operation or identifying completely new or replacing concepts.

2) Experimenting and piloting

Objective: To pilot new services and features before investing in full blown implementation. Pilots pursue reducing investment risks, failed investments and accelerating implementation and deployment.

3) Legal and regulatory

Character: Risk avoiding, reliable, cost efficiency.

4) Customer value and operational excellence

Objective: Goal oriented and efficient development function so that services are relentlessly improved by what customers value.

5) Changes in business environment

Objective: Continuous environment analysis and observation of change signals. Through research and experimenting focused selections towards investments. Fast reaction to force majeure and disruptions.

6) Supporting continuous development and upgrades

Objective: Relentless assurance of operational excellence of the existing services and processes.
 
7) Retirement and replacement

Objective: Risk mangement regarding services. Reliable change management and failure free continuity of the services.