An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Innovation theory moves along various paradigms.
In general, we can classify innovation into four main types.
That is how business model innovation is achieved.
Understanding an innovation funnel
The framework is based on the idea that many innovative projects can be brainstormed and fed through the wide mouth of the funnel.
To begin narrowing the funnel, the business must screen each idea in various ways and at various stages to determine whether it is worth pursuing.
At the end of the funnel, its narrowest point, the business is left with the opportunities it must prioritize moving forward.
These are opportunities that make the best use of resources, deliver on project objectives, and align with organizational goals.
Moving through the innovation funnel
Depending on methods, objectives, and project specifics, there are many ways a business can move through the innovation funnel.
Here is a very general look at some of the most important steps:
To begin with, the business must examine customer and market data to determine whether there are opportunities for a new product or product line.
During this step, the business works out whether an opportunity could be monetized.
Further research into the market and target audience should be performed with brainstorming, crowdsourcing, and focus groups used to generate product ideas.
Some organizations will also seek out existing research and access development grants.
Here, the most viable areas are turned into prototypes ready for testing.
Several prototypes may be created for the same product for different features or iterations.
Evaluation and benchmarking
The prototype is then tested on the appropriate end-users, with further tweaks made based on their feedback.
At this point, the business must decide whether to continue investing resources into an idea or cut it loose.
Many organizations have difficulty with this step, either persisting with unviable ideas for too long or discarding potential winners.
At the launch step, the business has reached the narrowest point of the funnel.
The innovative idea becomes a reality once it has been released to the market.
Limitations of the innovation funnel
The innovation funnel does have a few limitations:
Considering that only one in 3,000 ideas is commercially successful, the business may reject innovative and viable ideas considered too risky to pursue.
Short evaluation time
Another limitation that may cause viable ideas to be discarded is short evaluation time.
The innovation model encourages project teams to process and review as many ideas as possible.
This means new ideas may be pruned so early in the process that they never have a chance to be tested.
The consequence of risk-aversion and the rapid evaluation of hundreds of ideas is that creative ideas are discouraged in favor of safe ideas.
Safe ideas are not innovative, which contradicts the premise of the innovation funnel.
- ech Startup – Developing a New App:
- Opportunity Assessment: The startup analyzes market data and identifies a gap in the market for a new productivity app.
- Insights-based Ideation: They brainstorm and gather insights from potential users through surveys and interviews to understand their needs.
- Conceptualization: The team creates a prototype of the app with essential features.
- Evaluation and Benchmarking: They conduct usability tests with target users and make improvements based on feedback.
- Consolidation: After evaluating development costs and potential user base, they decide to proceed.
- Launch: The app is launched, and marketing strategies are implemented to attract users.
- Manufacturing Company – Product Enhancement:
- Opportunity Assessment: The company reviews customer feedback and market trends, realizing the need to improve one of their existing products.
- Insights-based Ideation: They gather suggestions from customers and engage their R&D team to brainstorm enhancements.
- Conceptualization: Several prototypes with different enhancements are developed.
- Evaluation and Benchmarking: They conduct product testing with focus groups and evaluate user preferences.
- Consolidation: Based on manufacturing and marketing costs, they select the most viable enhancements.
- Launch: The improved product is launched with a marketing campaign.
- Retail Chain – Expanding Product Line:
- Opportunity Assessment: The retail chain identifies an opportunity to expand its product line into a new category.
- Insights-based Ideation: They use market research to understand consumer preferences and potential suppliers.
- Conceptualization: They work on product design and packaging for the new category.
- Evaluation and Benchmarking: They conduct surveys and test market the new products in select stores.
- Consolidation: Based on sales projections and supply chain feasibility, they decide to proceed.
- Launch: The new product line is introduced in stores with an advertising campaign.
- Consulting Firm – Service Diversification:
- Opportunity Assessment: The consulting firm identifies a growing demand for a specific type of consulting service.
- Insights-based Ideation: They gather insights from industry experts and potential clients to tailor the service.
- Conceptualization: They develop a framework for delivering the new service.
- Evaluation and Benchmarking: They offer the service on a limited scale to gauge client satisfaction and refine the offering.
- Consolidation: Based on client feedback and resource availability, they decide to add the service to their portfolio.
- Launch: The firm officially offers the new service and updates its marketing materials.
- Software Development Company – New Feature Integration:
- Opportunity Assessment: The software company identifies an opportunity to enhance their flagship product with a new feature based on user feedback.
- Insights-based Ideation: They gather feedback from current users and conduct surveys to understand feature preferences.
- Conceptualization: Developers create prototypes of the new feature.
- Evaluation and Benchmarking: They conduct beta testing with a select group of users, gather feedback, and make improvements.
- Consolidation: Based on user satisfaction and the impact on the product’s overall value, they decide to integrate the new feature.
- Launch: The enhanced software version is released, and users are informed through release notes and tutorials.
- E-commerce Platform – AI-Powered Recommendation System:
- Opportunity Assessment: The e-commerce platform recognizes an opportunity to boost sales and user engagement by implementing an AI-driven recommendation system.
- Insights-based Ideation: They analyze user purchase history and behavior to understand what products to recommend.
- Conceptualization: AI specialists develop algorithms for personalized recommendations.
- Evaluation and Benchmarking: They deploy the AI system on a small scale and track metrics like click-through rates and increased sales.
- Consolidation: Seeing significant improvements in user engagement and sales, they decide to fully implement the recommendation system.
- Launch: The AI-powered recommendation system is integrated into the platform, and users experience personalized product suggestions.
- Telecommunications Company – 5G Network Expansion:
- Opportunity Assessment: The telecom company identifies an opportunity to stay competitive by expanding its network to offer 5G services.
- Insights-based Ideation: They study market demand for high-speed mobile internet and forecast future growth.
- Conceptualization: Network engineers design the infrastructure required for 5G coverage.
- Evaluation and Benchmarking: They conduct pilot tests in select cities to evaluate network performance and customer satisfaction.
- Consolidation: Based on positive results and market demand, they commit to a full-scale 5G network rollout.
- Launch: The company launches 5G services in multiple regions, attracting tech-savvy customers.
- Tech Startup – IoT Device Development:
- Opportunity Assessment: The startup identifies a gap in the market for a specific Internet of Things (IoT) device that can improve home automation.
- Insights-based Ideation: They engage potential users through online forums and surveys to understand desired features.
- Conceptualization: Engineers design the IoT device’s hardware and software components.
- Evaluation and Benchmarking: A limited number of devices are produced and tested in real-world scenarios.
- Consolidation: Positive user feedback and performance results lead to a decision to manufacture the IoT device at scale.
- Launch: The startup releases the IoT device to the market with an online and retail presence.
- An innovation funnel provides a framework for the screening and testing of innovative ideas for viability. In theory, it ensures only the best ideas are executed.
- An innovation funnel takes many forms depending on the end goal of the business. However, some of the key steps may include opportunity assessment, ideation, conceptualization, evaluation, consolidation, and product launch.
- An innovation funnel does have some limitations. Primarily, the framework favors risk-averse ideas that are safe without being creative.
Innovation Funnel Highlights:
- Definition: An innovation funnel is a metaphorical tool or process used to screen and prioritize innovative ideas, allowing only the most viable ones to progress through various stages and eventually be launched to the market.
- Purpose: The innovation funnel aims to ensure that only the best ideas are executed, providing a framework for screening, testing, and prioritizing innovative concepts.
- Innovation Paradigms: Different types of innovation include basic research, breakthrough innovation, sustaining innovation, and disruptive innovation. Business model innovation focuses on crafting compelling value propositions to create lasting competitive advantages.
- Idea-Generation Pipeline: A key aspect of innovation loops is to establish an idea-generation pipeline, which feeds ideas into the innovation funnel.
- Framework of the Innovation Funnel:
- Wide Mouth: The funnel starts with brainstormed innovative projects.
- Screening and Narrowing: Ideas go through screening and evaluation at various stages to determine their worth.
- Prioritization: At the funnel’s narrowest point, viable opportunities aligned with organizational goals are prioritized.
- Steps in the Innovation Funnel:
- Opportunity Assessment: Analyzing customer and market data to identify opportunities.
- Insights-based Ideation: Generating and monetizing ideas through research and brainstorming.
- Conceptualization: Creating prototypes for testing and refining.
- Evaluation and Benchmarking: Testing prototypes with end-users and making improvements.
- Consolidation: Deciding to invest further resources or discard ideas based on viability.
- Launch: Releasing the innovative idea to the market.
- Limitations of the Innovation Funnel:
- Risk-Averseness: The funnel may reject innovative but risky ideas, prioritizing safe options.
- Short Evaluation Time: Quick evaluation may lead to discarding viable ideas prematurely.
- Discourages Creativity: The focus on risk-averse ideas can discourage creativity in favor of safe choices.
- Key Takeaway: An innovation funnel serves as a structured approach to vet and prioritize innovative ideas for execution. While it helps in selecting viable options, it may also limit creativity and overlook potentially valuable ideas due to its risk-averse nature and rapid evaluation process.
Related Case Studies
FourWeekMBA Business Toolbox
Other business resources: