Decision-Making Process for Innovations

Most companies do not actually lack ideas, but they lack the ability to make bold decisions.

Example: Leitz, the world-famous microscope and camera manufacturer from the small town of Wetzlar, pioneered small cameras with fast lenses that were prized by professional photographers. Leitz lived by the motto “quality, consistency and reliability instead of constant state-of-the-art technology” and continued to draw on the innovations from the decades before until the end of the 1960s. Leica cameras continued to be perfected and technical innovations were developed in Wetzlar, such as the autofocus developed in 1976, which was, however, not produced by Leitz but by Japanese competitors. As early as 1994, Leitz (now Leica) established an electronic department, much earlier than any other camera manufacturer. But for real breakthroughs in the market, Leitz lacked the clear commitment to march on (Andreas Kaufmann, majority shareholder at Leica since 2005). The market changed quickly, but the Leica camera hardly changed at all. Japanese camera manufacturers such as Canon overtook their Leitz role model by launching the first SLR cameras. It was not until many years later that Leitz, in cooperation with Minolta, sought to catch up technically.

Formalize the process for making decisions about innovations in your company. It has proven useful to form an innovation committee, ideally made up of executives from different operational functions, like this:

Product development                                  Chair and moderator with voting rights

Marketing                                                         Permanent member with voting rights

Head of Sales                                                   Permanent member with voting rights

Controlling                                                        Permanent member with voting rights

Operations Manager                                    as required and without voting rights

Purchasing Manager                                     as required and without voting rights

External partners (university etc.)          as required and without voting rights

Feel free to adapt functions and designations to the practice in your company. It is crucial that you involve all affected stakeholders in the innovation process. This may take some convincing, for example, if your plant manager tells you that he is concerned with current operations and has no interest in new ideas. Convey to him that he is now getting the chance to help shape products to be produced in the future and that he can make his life easier in the future as a result.

This innovation committee should meet regularly, but please not just regularly once a year. A recommended cycle is 2 months. In the meetings, the committee talks through all ideas and projects that are in the innovation process and decides on additional ideas to be included. The goal of the meetings should be to decide on the transition of ideas and projects to the next release phase.

With an initial release of ideas, the committee grants a time and cost budget for market analysis, for a basic concept and for an initial assessment of success.

Once the results of this first phase are available, the committee decides on the budget for a second phase in which, for example, design work is carried out or a business model is developed.

In a third phase, a decision can be made about the development of a so-called functional prototype, which shows the product features and functions. A business model can also be implemented together with a lead customer. This phase serves to provide the “proof of concept”, i.e. proof that the idea can actually be implemented.

In a fourth release phase, decisions are made about development to market and series maturity, make-or-buy decisions and the involvement of development, manufacturing and marketing partners.

Subsequently, decisions can be made about a fifth phase for rollout in the market, before – not to be forgotten – a formal success review should take place in a sixth phase. This brings us to product management.

If you follow such a formal innovation process, always taking into account current developments in markets, you can benefit from an ongoing stream of managed potential innovations.


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