An innovation funnel is a process that companies use to filter through potentially hundreds of ideas in order to find the best ones and develop them into innovations that deliver value.
While the specifics of the innovation funnel may differ depending on who you ask and should always depend on the nature of the ideas being managed, it usually includes five stages.
Idea generation: Companies ask employees and other innovation participants to partake in brainstorming sessions and share ideas.
Idea refinement: Companies encourage innovation participants to refine one another’s ideas and filter flawed ideas.
Idea evaluation and prioritization: Evaluators score ideas’ potential, feasibility, risk, and cost, among other factors. Those that meet the required criteria move to the next stage.
Idea validation: Companies establish a validation team for each idea and give them a budget and timeframe to validate key assumptions or hypotheses. If all relevant assumptions are validated, the idea is prepared for implementation. The idea is tabled if any assumptions are invalid.
Idea implementation and impact tracking: The project management office plans the implementation of the new innovation. Once launched, companies keep tabs on customer feedback and introduce continual improvements.
During each stage of the funnel, companies gain insight into the idea’s potential impact, feasibility, risk, and relevancy, which they use to decide whether to greenlight or discontinue it. Only a select few ideas progress to the next stage (typically less than 10%), while the majority are filtered out.
As innovation managers who have built corporate innovation funnels for the last 10 years, we’ve noticed that many companies make critical mistakes during each stage of the innovation funnel that stop them from generating good returns.
We put together this article to discuss each mistake in more detail and explore best practices of companies with the highest-performing innovation funnels.
InnovationCast has enabled companies such as DHL, Visa, and Vodafone to implement results-driven innovation funnels in less than 4 weeks. Book a quick demo to see how we can do the same for you.
Stage 1: Idea Generation
Idea generation is the foundation of an effective innovation funnel.
Companies usually ask employees, customers, and other innovation participants to submit innovative ideas. This harnesses hundreds of subject matter experts' creative energy and competencies, leaving companies with plenty of high-quality ideas.
While we advise our clients to use this crowdsourcing approach, most companies make one key mistake when collecting ideas that threaten the effectiveness of their innovation funnel.
Specifically, they set up a company email address such as ideas@companyname.com or web form and message all innovation participants, asking for ideas. We called this the digital suggestion box, and it has two major limitations.
Companies struggle to collect ideas on their priorities: Participants don't understand company priorities, so they end up brainstorming and submitting ideas relevant to their daily lives. Companies fail to collect many ideas related to their priorities.
Companies struggle to keep participants engaged: While the digital suggestion box may generate some excitement when first launched, this quickly dies down, and employees forget about it. Companies fail to collect ideas in the medium to long term.
Instead, companies with the best innovation funnel processes start filtering irrelevant ideas at the ideation stage — a great way to do this is by running Innovation Challenges.
Innovation Challenges are posts containing context around the company's priorities. Companies can create a challenge and notify participants to look at the information inside and submit relevant ideas. Innovation Challenges have three advantages over traditional open calls for ideas.
Ideas align with company priorities: Participants know what topics the company is focused on, so they brainstorm and share more relevant ideas.
Better-quality ideas: The context of the challenge helps participants understand the priority's nuances, enabling them to submit more detailed concepts.
Higher volume of ideas: Challenges have a deadline, so participants must get involved quickly. Plus it's not a one-and-done call for innovative ideas because companies can create new challenges as new priorities emerge. The innovation program stays at the top of participants' minds long after it has been launched.
By creating individual challenge postings targeted at specific priorities, companies establish a solid foundation for filtering innovative ideas.
Read more: 5 Detailed Innovation Challenge Examples & Best Practices
InnovationCast Helps Companies Create High-Quality Innovation Challenges
Companies can easily create Innovation Challenges inside InnovationCast. We have resources such as templates, examples, guides, and videos detailing how to create high-quality challenges that participants want to respond to. There’s no need to start from scratch.
We also offer an AI co-pilot trained on the most successful challenges. It analyzes the content inside your challenge and suggests ways to improve.
When a challenge is launched, InnovationCast emails all relevant innovation participants to review the challenge posting and share ideas.
To filter duplicate ideas, InnovationCast’s duplicate checker prevents participants from submitting ideas similar to those already collected and instead asks them to collaborate with the original idea author.
Stage 2: Idea Refinement
When first conceptualized, most ideas have holes and flaws that must be solved before they can progress down the funnel.
This is common and perfectly normal. Even the best ideas start as not-so-good ideas! Ideas need to be considered from technical, financial, functional, marketing, and sometimes even legal perspectives. However, an idea author doesn’t have expertise in all those fields.
Consequently, companies should include an idea refinement stage where employees from other departments can review ideas and apply their expertise to refine them.
This has two benefits:
The entire workforce can improve ideas: Employees working in engineering, manufacturing, product, IT, etc., can help the idea author reflect on different perspectives. Idea authors increase the chances of their ideas being chosen and companies end up with more refined ideas.
Companies filter flawed ideas from the start: If an idea author sees that their colleagues are pointing out limitations with their idea that cannot be overcome, they can abandon the idea before it goes to evaluation.
The mistake we see companies make during this stage (aside from neglecting idea improvement altogether) is facilitating idea improvement through voting. They may export ideas into their project management system and ask all employees to vote on them. The ideas with the most five-star ratings or thumbs-up are moved down the funnel.
However, the most popular ideas are rarely the best, and voting alone does not provide an opportunity for employees to refine ideas with their colleagues.
InnovationCast Allows Companies to Refine Ideas Using the Intelligence of the Workforce
All public idea submissions are displayed on the InnovationCast activity feed. Employees from different departments and with varying skill sets can see the ideas their colleagues contributed and are encouraged to share suggestions for improvement.
While InnovationCast does have a “voting” feature, what sets our platform apart is that it is designed to collect actionable feedback, and colleagues must give a reason for their opinion. Idea authors are notified whenever someone provides feedback on their idea and can use that feedback to refine it.
Stage 3: Idea Evaluation
Once companies collect ideas, refine them using the workforce's expertise, and filter out flawed ones, they forward the remaining ideas to an evaluator.
Evaluators scrutinize the evidence inside each idea and decide whether it should be approved or terminated. They typically use scoring systems to simplify this decision, but it all depends on each idea's risk vs reward profile and the company’s growth appetite.
Scoring systems comprise questions such as an idea’s strategic fit, potential impact, risk, and uncertainty. For each question, evaluators review the idea’s supporting evidence (e.g., customer support tickets, ad campaign performance, sales calls) and give a score that can have a specific weight on the assessment.
However, for revolutionary ideas, where the author suggests doing something that has never been done before, there is no data supporting the idea, so evaluators can’t simply score the idea.
Instead, evaluators discuss with top management whether to approve the idea. If a potentially revolutionary idea is approved, it doesn’t go directly to implementation; instead, it’s moved to validation. (We discuss validation in more detail in stage four.)
There are two errors we see companies make during idea evaluation:
They send all ideas to the innovation department for evaluation.
They don’t provide local departments with guidance on evaluating ideas (e.g., what data to bring in, what factors to consider, how to prioritize ideas, or how to assess potential risks).
Local Departments Should Manage Their Own Ideas
Many companies send ideas to the innovation department for evaluation. We do not recommend this for two reasons:
Innovation managers don’t have the time to evaluate all ideas: Companies may collect hundreds, perhaps thousands of ideas on any particular topic. A handful of innovation managers don’t have the time to evaluate each idea.
Innovation managers don’t have the competencies to evaluate all ideas: Companies may collect ideas on topics like engineering, marketing, finance, etc. Innovation managers don’t have the competencies in all these fields to know which ideas to approve.
Instead, local departments should evaluate their own continuous improvement ideas.
InnovationCast Contains Workflows and Scoring Systems That Help Evaluators Make More Informed Decisions
Through our experience, we’ve realized that while idea evaluators have the expertise to decide whether to approve or reject an idea, they sometimes struggle with the mechanics of evaluation. That is, knowing what data to consider, what scoring systems and evaluation models to use, when to send the idea back to the author, etc.
As a result, innovation managers need to guide evaluators’ decision-making by providing frameworks and instruction on how to evaluate ideas.
To overcome this issue, we built InnovationCast with evaluation workflows that direct evaluators through the process of evaluating ideas, step by step. These roadmaps recommend what data points to consider, what factors to review, how to prioritize ideas, what scoring systems and evaluation models to use, etc. These factors naturally differ based on the type of idea.
Step 4: Prioritize the Most Impactful Ideas
Once evaluators score ideas, InnovationCast automatically sends all approved ideas to relevant stakeholders for prioritization. Stakeholders can see all the data backing the idea, how evaluators scored them, and decide which ideas to implement first.
Stage 4: Idea Validation
Idea validation is the process of testing key assumptions about an idea — like profitability, market demand, feasibility, viability, customer needs, or pricing — using minimal resources to determine whether it justifies further investment. This is done throughout several stages until the company can get to a full-scale launch.
Through validation, companies can confirm whether there’s enough demand and that the innovation solves a real problem. This helps avoid pouring millions into something that doesn’t resonate with target audiences.
Companies normally validate ideas by creating a validation team consisting of an engineer, designer, and marketer. They give the validation team a budget to test key assumptions; assumptions are statements covering what must be true for the idea to work.
For example:
Assumption: Customers are willing to purchase the new product.
Experiment: Set up a product page under a different brand name, run ads to it, and measure how many people check out.
Assumption: Our prototype can address the problem at hand.
Experiment: Release the prototype to a few customers, interview them, learn whether the prototype solves the problem and ask what improvements can be made.
Assumption: The product adheres to regulatory requirements.
Experiment: Consult legal experts and review relevant regulations.
After each assumption has been tested, the validation team and top management have a decision to make. If the assumption is valid, teams test the next assumption that can render the idea useless. This process continues until all assumptions are validated and the idea is ready for implementation.
If an assumption is invalid, the validation team will either pivot by trying to make the assumption work differently, find alternative assumptions to test, or they will terminate the idea.
Companies commonly make two critical mistakes when validating ideas:
They fund the entire validation project upfront, resulting in wasted resources.
They don’t guide validation teams through how to validate ideas, leading to failed projects.
Use Metered Funding to Fund Validate Projects
Most companies allocate funds for entire validation projects before any assumptions have been tested. This creates two problems:
Companies waste resources: By funding projects upfront, validation teams are more likely to create expensive experiments instead of focusing on the most economical ways to validate ideas. Companies end up spending more resources on each project, reducing the number of ideas that can be tested and thus reducing the chances of finding that once-in-a-lifetime idea. While low success rates and some resource expenditure are inherent to innovation, strategic validation approaches can significantly improve resource efficiency.
Companies cannot reallocate resources to the best ideas: Because the entire project is already funded, they can’t take resources away from failing projects and put them into more promising ones. Resources get tied up in unsuccessful projects.
We encourage companies to think more like “venture capitalists” when validating ideas. Instead of funding the entire validation project, give a smaller amount of capital and time to validate the highest-risk, highest-uncertainty assumptions. Only once those assumptions are validated should companies provide the second round of funding. This is known as Metered Funding.
Most validation teams won’t be able to validate the highest-risk, highest-uncertainty assumptions, and that’s fine. Companies should filter those ideas and move the successful ones onto the second phase of funding to test the next few assumptions. These steps occur until all assumptions are validated.
The benefits of Metered Funding include:
More successful innovation projects: By not funding the entire project upfront, validation teams must find the most affordable method of validating their ideas. This enables companies to pursue a higher volume of ideas and improves their chances of discovering a true breakthrough idea.
The best ideas naturally receive the most support: To receive more funding, teams must demonstrate that pre-determined assumptions are validated. This reduces the chances of teams receiving a budget based on favoritism or connections.
InnovationCast Guides Teams on Validating Ideas
In our experience, most validation teams aren’t familiar with managing the innovation validation phase of innovation projects and this is expected; they are engineers, designers, and marketers, not innovation professionals.
Remember, managing validation in innovation projects is entirely different from regular project management. It isn’t just about allocating resources, setting deadlines, and completing tasks before those deadlines.
Managing innovation projects requires identifying key assumptions, determining the most effective ways to test them, and, based on the results, making decisions about whether to proceed with the idea.
Innovation departments must map out these tasks and guidelines in the form of validation workflows, so teams know what to do. Companies that do this correctly have significantly higher project success rates.
With this in mind, we built InnovationCast with validation workflows that guide teams on validating different kinds of ideas; we have workflows for continuous improvement ideas, product ideas, service ideas, business model ideas, and more. We developed these workflows using our experience managing validation projects and seeing what works.
Here’s an example of a client managing three validation projects: a mobile app, a patient-carer boot camp, and a new waiting room MVP.
Validating each task involves a different set of experiments (e.g., seating requirements, mobility assistance, field testing).
Note: Like idea screening and evaluation, many companies ask the innovation department to manage all validation projects. We do not endorse this. Validation should occur independently of the innovation department.
Stage 5: Implementation and Post-Release Impact Tracking
Once all assumptions about the idea are validated, it is ready for implementation or concept development.
Implementation is straightforward and is not the responsibility of any innovation personnel. Once the final green light is given by top management, the project management office is notified. It begins the innovation process of developing and launching the full-scale innovation. This phase typically includes several components:
Timelines — Establishing clear deadlines and milestones to ensure the project stays on track and progresses from product development to full implementation.
Promotion — Introducing the innovation to the target audience, building awareness, and driving adoption through various promotional channels.
Scalability — Ensuring that the innovation is designed for growth, with the ability to expand operations, and accommodate increased demand.
For continuous improvement ideas, such as improving an app’s UI or adopting better software, the implementation steps can be as simple as coding the UI update or buying the licensing to new software.
Upon release, the company continues to monitor metrics like adoption rate, user engagement, customer satisfaction, and revenue to gauge the innovation’s performance and customer sentiment. This information is used to improve the product, service, or process.
For continuous improvement ideas, companies track performance and compare it to benchmarks set by the previous iteration. If the new improvement does a better job, they’ll keep it. If the older version actually outperformed the improvement, they may consider making more improvements or perhaps even reverting back to what they did before.
InnovationCast Enables Companies to Measure KPIs Within a Single Dashboard
InnovationCast’s portfolio management feature provides innovation managers with a comprehensive dashboard to track both ongoing and past implementations. They can monitor key details, assess successes, and identify shortcomings in previous initiatives.
With clear visibility into which ideas thrived and fell short, managers can pinpoint inefficiencies and refine workflows for future projects.
Establish an Innovation Funnel That Transforms Ideas Into Innovations with InnovationCast
Book a quick demo with our customer success team to learn more about how we can help set up an effective innovation funnel.
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