What Is An Innovation Funnel? The Innovation Funnel In A Nutshell

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.

Element	Description
Concept Overview	The Innovation Funnel, also known as the Idea Funnel, is a strategic tool used by organizations to manage and filter innovative ideas and concepts at different stages of the innovation process. It helps organizations systematically evaluate, prioritize, and develop ideas into viable innovations.
Key Elements	Key elements of the Innovation Funnel include: 1. Idea Generation: The initial stage where a wide range of ideas is collected. 2. Idea Screening: Evaluating and filtering ideas based on criteria such as feasibility, alignment with goals, and potential impact. 3. Concept Development: Further refining selected ideas into more detailed concepts or prototypes. 4. Testing and Validation: Rigorous testing and validation of concepts through experiments or pilot projects. 5. Implementation: Transforming validated concepts into tangible innovations. 6. Market Launch: Introducing innovations to the market.
Idea Generation	The first stage of the funnel involves generating a broad spectrum of ideas. Organizations often use brainstorming sessions, crowdsourcing, surveys, and open innovation platforms to gather ideas from employees, customers, and partners. Ideas can be related to products, services, processes, or business models.
Idea Screening	In this stage, ideas are evaluated and filtered to identify those with the most potential. Criteria for screening may include alignment with strategic goals, feasibility, market demand, and expected return on investment (ROI). Ideas that do not meet these criteria are eliminated, while promising ones move forward.
Concept Development	Selected ideas are refined and developed into more detailed concepts or prototypes. This stage involves creating business cases, conducting feasibility studies, and designing prototypes to better understand the idea’s practicality and potential impact. Concept development aims to provide a clearer picture of how the innovation will work.
Testing and Validation	Rigorous testing and validation are essential to ensure that concepts are viable and can deliver the expected results. Organizations may run experiments, pilot projects, or small-scale trials to assess the feasibility and effectiveness of the innovation. Validation helps identify and address any issues or challenges.
Implementation	Once concepts have been successfully validated, the innovation is ready for implementation. This stage involves scaling up the innovation, allocating necessary resources, and integrating it into the organization’s operations. Implementation may require adjustments and adaptations based on real-world conditions.
Market Launch	The final stage of the funnel involves introducing the innovation to the market or intended audience. Organizations develop marketing strategies, communication plans, and distribution channels to ensure a successful launch. Customer feedback and market responses are closely monitored to refine the innovation further.
Benefits	– Systematic and structured approach to innovation management.- Efficient use of resources by focusing on ideas with the highest potential.- Increased likelihood of successful innovation outcomes.- Better alignment of innovations with organizational goals.- Continuous improvement of the innovation process.
Drawbacks	– Risk of stifling creativity if too many ideas are filtered out early.- Potential for bias in idea screening and selection.- Resource-intensive validation and implementation stages.- Difficulty in accurately predicting market success.- Adaptation challenges when scaling up innovations.
Use Cases	1. A technology company uses the Innovation Funnel to manage and prioritize ideas for new product features, ensuring that resources are allocated to the most promising concepts.2. An automotive manufacturer employs the funnel to assess and validate innovative manufacturing processes before full-scale implementation.3. A healthcare organization uses the funnel to screen and develop ideas for improving patient care and reducing costs.
Examples	1. Google’s “20% time” policy encourages employees to allocate a portion of their workweek to work on innovative projects, contributing to a continuous stream of new ideas that enter the Innovation Funnel. 2. Procter & Gamble’s Connect + Develop program involves external partners in idea generation, enriching their innovation pipeline. 3. Tesla’s iterative approach to electric vehicle development, from concept testing to market launch, demonstrates effective use of the Innovation Funnel in the automotive industry.

Table of Contents

Understanding innovation

Innovation theory moves along various paradigms.

In general, we can classify innovation into four main types.

types-of-innovation — According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).

That is how business model innovation is achieved.

For innovation loops to kick off, it’s critical to have an idea-generation pipeline.

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:

Opportunity assessment

To begin with, the business must examine customer and market data to determine whether there are opportunities for a new product or product line.

Insights-based ideation

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.

Conceptualization

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.

Consolidation

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.

Viability is determined by assessing manufacturing, marketing, distribution, and advertising costs, among other things.

Launch

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:

Risk-averseness

The innovation funnel is a risk-averse strategy that errs on the side of caution.

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.

Discourages creativity

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.

Case Studies

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.

Key takeaways

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:
1. Wide Mouth: The funnel starts with brainstormed innovative projects.
2. Screening and Narrowing: Ideas go through screening and evaluation at various stages to determine their worth.
3. Prioritization: At the funnel’s narrowest point, viable opportunities aligned with organizational goals are prioritized.
Steps in the Innovation Funnel:
1. Opportunity Assessment: Analyzing customer and market data to identify opportunities.
2. Insights-based Ideation: Generating and monetizing ideas through research and brainstorming.
3. Conceptualization: Creating prototypes for testing and refining.
4. Evaluation and Benchmarking: Testing prototypes with end-users and making improvements.
5. Consolidation: Deciding to invest further resources or discard ideas based on viability.
6. Launch: Releasing the innovative idea to the market.
Limitations of the Innovation Funnel:
1. Risk-Averseness: The funnel may reject innovative but risky ideas, prioritizing safe options.
2. Short Evaluation Time: Quick evaluation may lead to discarding viable ideas prematurely.
3. 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 Framework	Description	When to Apply
Innovation Funnel	– The Innovation Funnel is a systematic approach used by organizations to manage the flow of ideas from initial conception to implementation. – It consists of multiple stages representing the progression of ideas through screening, evaluation, development, and execution. – Successful innovation funnels result in a pipeline of viable projects that align with strategic objectives and drive business growth.	– Utilize Innovation Funnel to align project investments with strategic objectives, optimize resource allocation, and balance risk across the project portfolio. – Use it to prioritize projects based on strategic alignment, resource availability, and potential impact on organizational goals. – Innovation Funnel provides a framework for evaluating, selecting, and managing projects effectively, ensuring that resources are allocated to initiatives that deliver the greatest value and contribute to long-term success.
Stage-Gate Model	– The Stage-Gate Model is a structured innovation process that divides projects into distinct stages separated by decision gates. – Decision gates serve as checkpoints where project teams evaluate progress and make decisions to proceed, modify, or terminate projects based on predefined criteria. – The Stage-Gate Model ensures disciplined project management, risk mitigation, and alignment with strategic objectives.	– Adopt Stage-Gate Model to ensure disciplined project management, mitigate risks, and align innovation initiatives with strategic objectives. – Use it to establish clear criteria for project evaluation and decision-making at key stages of the innovation process. – Stage-Gate Model provides a structured framework for managing innovation projects from ideation to commercialization, ensuring that resources are allocated effectively and projects align with organizational goals.
Lean Startup	– Lean Startup emphasizes rapid experimentation, iterative product development, and validated learning to bring new products to market efficiently. – It advocates for building minimum viable products (MVPs) to test hypotheses, gather feedback, and iterate based on validated learning. – By applying lean principles, organizations can reduce waste, minimize time to market, and increase the likelihood of creating products that meet customer needs.	– Embrace Lean Startup principles to accelerate innovation, reduce time to market, and increase the success rate of new product launches. – Use it to foster a culture of experimentation, feedback, and continuous improvement within the organization. – Lean Startup provides a framework for rapidly testing ideas, gathering customer feedback, and iterating on product concepts to achieve product-market fit and drive sustainable growth.
Design Thinking	– Design Thinking is a human-centered approach to innovation that emphasizes empathy, creativity, and iterative problem-solving. – It involves understanding user needs, ideating potential solutions, prototyping, and testing to arrive at innovative solutions that address real user challenges. – Design Thinking encourages multidisciplinary collaboration and iteration, allowing teams to develop solutions that resonate with users.	– Adopt Design Thinking to foster innovation, empathy, and user-centricity in product development and problem-solving processes. – Use it to gain deeper insights into user needs, identify opportunities for innovation, and co-create solutions with stakeholders. – Design Thinking provides a structured approach for generating and validating ideas, leading to the development of products and services that meet user needs and drive customer satisfaction.
TRIZ	– TRIZ (Theory of Inventive Problem Solving) is a systematic innovation methodology that aims to solve complex problems and generate breakthrough innovations. – It provides a structured approach for identifying contradictions, analyzing root causes, and generating inventive solutions based on patterns of successful problem-solving strategies. – TRIZ helps organizations overcome innovation barriers and find novel solutions to challenging problems.	– Apply TRIZ to tackle complex problems, overcome innovation barriers, and generate breakthrough solutions. – Use it to identify contradictions, analyze root causes, and apply inventive principles to develop innovative solutions. – TRIZ provides a systematic framework for problem-solving, enabling organizations to find creative solutions to challenging problems and drive continuous improvement.
Blue Ocean Strategy	– Blue Ocean Strategy encourages organizations to seek uncontested market space (blue oceans) by creating innovative value propositions that differentiate them from competitors. – It involves identifying and challenging industry assumptions, redefining market boundaries, and creating new demand through innovation. – Blue Ocean Strategy aims to shift focus from competing in existing markets (red oceans) to creating new market space with untapped growth opportunities.	– Embrace Blue Ocean Strategy to identify untapped market opportunities, differentiate products or services, and drive sustainable growth. – Use it to challenge industry assumptions, redefine market boundaries, and create new demand through innovation. – Blue Ocean Strategy provides a systematic approach for organizations to escape competition and unlock new sources of value, leading to increased market share and profitability.
Open Innovation	– Open Innovation is a collaborative approach to innovation that involves leveraging external knowledge, resources, and partnerships to accelerate innovation and create value. – It emphasizes the exchange of ideas, technologies, and capabilities with external stakeholders such as customers, suppliers, universities, and startups. – Open Innovation enables organizations to tap into diverse expertise, access new markets, and drive innovation beyond their internal capabilities.	– Adopt Open Innovation to access external expertise, resources, and opportunities for collaboration. – Use it to leverage the collective intelligence of external stakeholders, such as customers, suppliers, and partners, to drive innovation. – Open Innovation fosters a culture of collaboration, knowledge sharing, and co-creation, leading to enhanced competitiveness and sustained growth.
Agile Development	– Agile Development is an iterative and incremental approach to software development that emphasizes flexibility, collaboration, and customer feedback. – Agile teams prioritize customer value, adapt to changing requirements, and continuously improve through reflection and adaptation. – Agile Development enables organizations to deliver high-quality software products efficiently and respond quickly to market changes.	– Embrace Agile Development to enhance software development processes, increase responsiveness to customer needs, and accelerate time to market. – Use it to foster collaboration, transparency, and adaptability within development teams. – Agile Development provides a framework for delivering value iteratively, mitigating risks, and ensuring that software solutions meet customer expectations and business objectives.
Portfolio Management	– Portfolio Management is a strategic approach to managing a portfolio of projects, investments, or initiatives to achieve organizational objectives. – It involves assessing and prioritizing projects based on strategic alignment, resource allocation, and risk management considerations. – Portfolio Management ensures that resources are allocated to initiatives that deliver the greatest value and contribute to long-term organizational success.	– Adopt Portfolio Management to align project investments with strategic objectives, optimize resource allocation, and balance risk across the project portfolio. – Use it to prioritize projects based on strategic alignment, resource availability, and potential impact on organizational goals. – Portfolio Management provides a structured approach for evaluating, selecting, and managing projects effectively, ensuring that resources are allocated to initiatives that deliver the greatest value and contribute to long-term success.
Business Model Canvas	– The Business Model Canvas is a strategic management tool that allows organizations to describe, design, challenge, invent, and pivot their business models. – It provides a visual framework for analyzing the key components of a business model, including value proposition, customer segments, revenue streams, and cost structure. – Business Model Canvas enables organizations to identify opportunities for innovation, growth, and competitive advantage.	– Utilize Business Model Canvas to design, refine, or pivot business models, products, or services. – Use it to analyze key components of the business model, identify strengths, weaknesses, and opportunities for improvement. – Business Model Canvas provides a structured framework for brainstorming ideas, testing assumptions, and developing strategies to create value and sustain competitive advantage.
Lean Six Sigma	– Lean Six Sigma is a methodology that combines Lean principles and Six Sigma tools to improve quality, reduce waste, and increase efficiency in processes. – It emphasizes continuous improvement, data-driven decision-making, and customer focus. – Lean Six Sigma enables organizations to achieve operational excellence, streamline processes, and deliver products and services that meet or exceed customer expectations.	– Implement Lean Six Sigma to drive process improvement, enhance quality, and increase operational efficiency. – Use it to identify and eliminate waste, reduce variation, and streamline processes to improve overall performance. – Lean Six Sigma provides a structured approach for problem-solving, data analysis, and continuous improvement, leading to increased productivity, cost savings, and customer satisfaction.