A Product Innovation Charter Guide and Template

Highlights

  • A Product Innovation Charter helps steer a team toward what is known to be effective. It provides both principles and parameters to help guide the new product development process in a more purposeful and orchestrated fashion.
  • It also aids tactics. For example, it advises how to set clear goals and the actions to achieve them. It clarifies the measures of success and focuses company resources to those measures. It helps staff understand their roles so that the team is aligned, and their efforts are both efficient and effective.
  • Most of all, it lowers risk and increases the likelihood of successful innovations.
Johnny Grow Revenue Growth Consulting

Over four decades ago, professor Merle Crawford of the University of Michigan demonstrated hard evidence that a product innovation charter (PIC) increases the likelihood of successful new product development.

His research also found that without this essential working document, teams were more likely to pursue vague objectives, aimless explorations, repeated stop-and-start execution, protracted debates, diluted investments and frequently shifting priorities.

Johnny Grow doesn't claim to have the brilliance of Merle Crawford. However, we do have the experience to pick up on his work.

So, this post will share our experience in how to create a PIC that helps staff focus on prioritized activities that advance ideas to measurable outcomes and monetized commercial goods.

The 5 Components of a Product Innovation Charter

A minimum of five constructs are used to effectively chart the company's new product development strategy and guide the team.

Product Innovation Charter Components
1

Clear Goals

The purpose of a new product must be to solve a problem that matters and measured in customer value.

The value may be measured in terms of quality, economic value (price or cost), time to value, ROI, or risk reduction. Sometimes value is measured in more qualitative terms such as design or convenience.

Most charters first specify macro level goals. For example, 3Ms PIC has a longstanding goal that 30% of products sold must have been released within the last four years. That's been key in the company's ability to mitigate product commoditization and maintain financial margins. This measure is also called the Vitality Index and is popular among highly innovative companies.

2

Target Market

A proposed product must be directed toward a measurable customer audience.

This may include designating a new product's highest and best fit pursuant to criteria such as company firmographics (i.e., target company size or geographic location), customer demographics (i.e., employee role or objectives) and market characteristics (i.e., industries or sectors).

It's sometimes defined by behaviors or technographics, but these are not as common.

3

Market Potential

New product development can be a high-risk venture. Forecasting market potential is needed to ensure the reward offsets the risk.

The goals referenced above should be measured in quantitative terms so they can be translated to financial targets.

This part of the PIC may advise how to measure financial feasibility or the market monetization thresholds needed to fund new concepts. It may also specify minimum profitability requirements. It may even identify how the team should define acceptable risk for new concepts.

It should also include a competitor analysis. This is essential to verify the proposed customer problem or business opportunity is not already satisfied by other companies. In fact, failure to vet competitor analysis objectively and fully is a common mistake that wastes significant time and resources.

4

Program Operations

The PIC will identify the major activities needed to achieve slated goals.

For example, it will suggest the preferred sources for ideation. This might include Voice of the Customer, market research and trends, crowdsourcing or alliance partner co-creation.

It will suggest methods to manage scope and mitigate risk.

It will advise how to assess proposed product progress with market potential and when to nix concepts. That's difficult but critical. Removing lesser ideas, concepts or prototypes saves enormous time and money. It also creates more space to double down on more promising concepts.

All of these operating activities should be expanded upon in an Innovation Methodology.

5

Culture & Teamwork

The PIC should provide guidance for team roles and structure. For most companies it will likely recommend a relatively small number of cross-functional, multi-disciplinary team members.

When seeking out team members, put less focus on skills and more emphasis on behaviors. Things like passion, curiosity and perseverance. In fact, if you want to identify the best team members, learn why startups out innovate big companies every time.

Most companies struggle to find the balance between guardrails that keep projects on track and the freedom to explore novel thinking. This balance will be most determined by the company's corporate culture and proximity of staff. Decentralized teams benefit from more guidelines while centralized teams benefit from fewer. Also, boundaries are not meant to stifle creativity but to prevent actions learned to be unproductive.

Product innovation research found that the highest growth companies staffed their new product teams will full-time and dedicated resources 2.3 times more frequently than lower growth companies. The research advised that permanent staff were more effective in harnessing lessons, building expertise, and maintaining institutional knowledge.

The illustrative and high-level charter below shows the above constructs.

Product Innovation Charter Template

These are not the only five components but are generally recognized as essential.

Also note that while the above example is quite brief, many leading innovators opt for a one-page PIC in order to bring focus to the most significant points.

The Point is This

The PIC helps shift an important function from an informal or loosely organized process to a systemic and guided progression. That shift reduces risk and significantly improves the likelihood of creating breakthrough products.

Industry research backs up these points.

A study by the Product Development Management Association (PDMA) revealed a PIC directly impacts the success of developing new products. The data found that, on average, 50% of companies that managed PICs succeeded in new product developments. That figure fell to 21% for companies without these operating guidelines.