Developing a Product Innovation

and Technology Strategy
for Your Business
BY SCOTT J. EDGETT AND ROBERT G. COOPER

A framework for developing a product innovation strategy includes defining innovation goals
and objectives, selecting strategic arenas, developing a strategic map, and allocating resources.

OVERVIEW: Many companies lack a clearly articulated and well-communicated product innovation and technology
strategy. Such a strategy is essential and is strongly linked to positive performance in product innovation. A framework
for developing a product innovation strategy is presented, and the various steps of strategy development are described,
from best-practice ways to define innovation goals and objectives through to the selection of strategic arenas and the
development of the strategic map. Defining attack plans and entry strategies are also described. Finally, methods for
resource allocation and deployment using strategic buckets and strategic roadmaps are outlined.
KEY CONCEPTS: innovation strategy, product development strategy, strategic arenas, strategic buckets, roadmaps,
entry strategies

I
n the late 1990s, two large firms were growing by leaps The result was a renewed innovation strategy and a
and bounds, driven by the boom in fiber-optic three-pronged strategic attack that called for the company
communications. They were Corning Glass, which to grow current businesses via product-line extensions,
manufactured fiber-optic cable, and Nortel Networks, exploit market adjacencies, and create totally new
which produced the boxes at each end of the cable to opportunities. The latter two thrusts required a heavy
convert the light signal into an electronic signal. Then emphasis on exploratory research and new business
came the crash of 2000; overnight, both firms’ sales development, and thus, in spite of financial difficulties, R&D
plummeted, and their share prices plunged from over $100 spending was maintained at 10 percent of sales revenue. A
to about $1. Ten years later, Corning is thriving, whereas number of new opportunities and strategic arenas were
Nortel is bankrupt. Why? How did two great and identified and assessed, and the most promising were
innovative companies, facing the same crisis, end up so exploited. The results were impressive: By 2008, major
differently a short decade later? One reason for Nortel’s innovations had been realized in each of Corning’s
demise is that the company lacked direction and an businesses, including the creation of four new business
innovation strategy after the crash; instead, it limped along platforms and exploitation of three major market
from one ad hoc decision to the next. By contrast, Corning’s adjacencies. New product sales had rocketed to 70 percent
senior management took charge, developed a strong of annual sales, and profits moved from minus $500 million
product innovation and technology strategy for the firm, to plus $2 billion after taxes.
and provided leadership and direction to see that strategy
through (1). Corning’s management took a hard look at the The example of Corning offers some important strategic
lessons for today, as we emerge from the current re-
company’s previous 100 years of successes in innovation
cession. As the Corning case illustrates, an innovation
and what drove them. They concluded that the “repeatable
strategy is an essential tool for product development and
keys” to success—the elements in Corning’s culture and
continued growth even in difficult times.
history that they could draw on to face this new
challenge—were a leadership commitment, a clear
understanding of the company’s capabilities, a strong
connection to the customer and a deep understanding
An innovation strategy is an
of major customer problems, and a willingness to take big
but well-understood risks. Strongly committed to breaking
essential tool for product
out of the crisis through innovation, management development and continued
assessed Corning’s core competencies, determined what
they could leverage, and matched those strengths to growth, even in difficult times.
emerging and adjacent market opportunities.

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Indeed, our research has shown that top-performing
businesses have in place a product innovation and
technology strategy driven by the business leadership
team and a strategic vision of the business (2). As it does
at Corning, this strategy guides the business’s product
development efforts and helps to steer resource allocation
and project selection. A comprehensive product innovation
strategy must include, among other elements, clearly
defined objectives and defined strategic areas of focus;
it must have a widely understood role in broader business
goal. Further, the innovation strategy implemented in best-
performing businesses is more than just a list of this year’s
development projects; it has a much longer-term
commitment. Companies with effective product innovation
programs rely on a number of tools to implement them,
including strategic buckets for resource allocation and
strategic product roadmaps. Across the board, top-
performing businesses build these elements into their
product innovation strategy; poorly performing businesses
do not. For example, on average, only 27.6% of businesses
develop a product roadmap, but best performers are about
In Corning’s case, the goals were ambitious: to innovate
twice as likely to use road- maps as poor performers
their way out of a business crisis and to double the rate of
(Figure 1). There is an even greater discrepancy in the use
creation of new businesses per decade. These goals were
of strategic buckets, a resource allocation strategy that
supported by specific sales and profit objectives for
ensures availability of resources for critical products, with
product innovation. Note that goals are broad and give
41.4% of top performers and only 15.4% of poor
general intentions, whereas objectives are narrow,
performers using strategic buckets.
concrete, and precise.
The message for senior management is that if your
Like Corning’s, your business’s product innovation
business lacks a product innovation strategy that includes
strategy should specify the goals and objectives of the
these key elements, this deficiency is likely hurting your
business’s total product innovation effort and indicate the
business’s performance. The time is ripe to develop and
role that product innovation will play in helping the
install such a strategy, an effort that should be led by the
business achieve its objectives (3). Your product innovation
business’s leadership team. Developing a product
strategy must answer the question: How do new products
innovation strategy requires sustained, high-level effort;
and product innovation fit into the business’s overall plan?
the work can be facilitated and guided by the use of a
framework. The strategy development framework we
developed based on observations from our study of best-
performing businesses can be a helpful tool (Figure 2). This
guide serves as a useful starting point to develop your own
product innovation strategy.

Begin with Goals and Objectives

Strategy begins with the goals for the business’s product

innovation effort and a clear understanding of how these
product innovation goals tie into the broader business
goals. Many businesses lack product innovation goals, or
the goals are not articulated and communicated well.

Strategy begins with the goals for

the business’s product innovation
effort and a clear understanding of
how these product innovation goals
tie into the broader business goals.
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Define Strategic Thrust: Identify Arenas of Focus for
R&D Efforts
Focus is the key to an effective product innovation
strategy. Your product innovation strategy specifies where
you’ll attack, or perhaps more importantly, where you
won’t attack. Thus, the concept of strategic arenas—the
markets, industry sectors, applications, product types, or
technologies on which your business will focus its new
product efforts—is at the heart of a new product strategy.
For example, Corning’s decision to focus on flat screens for
LCD TVs was a bold move at the time, yet in hindsight, it
was a brilliant maneuver, marrying the company’s
technological competencies with an emerging, albeit
adjacent, market opportunity.
The specification of strategic arenas—what’s “in
bounds” and “out of bounds” for product innovation—is
fundamental to spelling out the direction or strategic thrust
of the business’s product development effort. It is the result
of identifying and assessing product innovation
The most popular objective (and metric) is percentage of opportunities at the strategic level. Without defined
the business’s annual sales generated from new products. strategic arenas, the search for specific new product ideas
Here a “new product” is usually defined as one that has or opportunities is unfocused. Over time, the project
been on the market three years or less and that is visibly portfolio for new products is likely to accumulate a lot of
different to the customer from previous offerings, for unrelated projects, in many different markets,
example a product with new features, functionality, or technologies, or product types. The result of such a
performance characteristics. Some firms include only scattershot effort is predicable: a not-so-profitable new
additional sales from products launched in order to dis- product effort.
count replacement and extension products. The first task, then, is identifying possible arenas, areas
Another key best practice is to ensure that the role of that offer the business some new and profitable
new products in achieving the business’s overall goals is opportunities. Many firms use the product-market matrix
clearly communicated to all. The whole point of having (Figure 3) as they try to define new but adjacent areas in
goals is so that everyone involved in the activity has a which they can operate profitably. Each cell in the matrix
common purpose, something to work towards. What we represents a potential strategic arena that offers a number
observe here are typically very mediocre practices, with of new product opportunities.
less than half of all businesses defining and Next comes the task of evaluating these arenas,
communicating the role of product development in selecting the battlefields. Usually two dimensions are used
achieving their business goals (see Figure 1). for this evaluation:
1. Arena attractiveness: This is an external measure that
captures characteristics such as size and growth of
markets in the arena, intensity of competition and margins
earned, and the potential for developing new products (for
example, the technological maturity of the area, or where
on the technology S-curve the arena lies).
2. Business strength: This involves assessing the
business’s core competencies and strengths and asking
whether these competencies could be leveraged if the
business chose to enter the new arena.
Usually, a set of 6–8 questions is developed for each
dimension, which senior management then uses to rate the
various arenas under consideration (Table 1). The necessary
due diligence must be undertaken on each candidate arena,
gathering the necessary information for management to use in
completing ratings. (Sample rating schemes are provided in [3]).

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being a low-cost provider versus a differentiator versus a
Criteria Used to Rate Strategic Arenas niche player or on emphasizing certain strengths, core
The questions that might be used to assess potential competencies, or product attributes or ad- vantages.
strategic arenas address a range of issues and factors: Attack strategies usually specify the globality of the
innovation effort, as well, defining whether innovation will
1. Arena Attractiveness be guided by a series of domestic or regional initiatives,
The market take a more global approach, or be “glocal” in nature
 Size of the market in the arena (global product concepts and platforms, locally tailored
 Market growth rate in the arena products). An understanding of the business’s core
 Intensity of competition and strength of competitors competencies (unique strengths that can be leveraged to
in the arena advantage in the marketplace) coupled with knowledge of
 Margins earned by others in the arena industry success drivers (what it takes to succeed in the
industry, sector, or arena) are key factors in the selection of
Technological opportunities the appropriate attack strategy.
 Rate of change of technology in the arena
 Technological elasticity: where on the S-curve is this
Additionally, entry strategies should be defined for new
arenas. The strategy might be to “go it alone” via internal
technology (steep vs. flat)? product development or to seek alliances through
2. Business Strength licensing, partnering, joint venturing, and open innovation
Technology leverage as a way to enhance product development capabilities in

 Ability to leverage development skills in this arena

new arenas.

(technology, IP, R&D, or design engineering)

 Degree of fit between production processes required
Make Deployment Decisions: Spending Commitments,
Priorities, and Strategic Buckets
to succeed in this arena and company’s production
processes and skills Strategy becomes real when you start spending money.
Any good product innovation strategy must deal with how
Marketing leverage much to spend on product innovation, and it should
 Ability to leverage sales force and/or distribution indicate the relative emphasis, or strategic priorities,
channel system in this arena accorded each arena of strategic focus (see Figure 2).
 Ability to leverage customer relationships in this Thus, an important facet of a product innovation strategy
arena is resource commitment and allocation. Earmarking
 Ability to leverage marketing communications, brand resources (funds or person-days targeted at different
name, and image in this arena strategic arenas, project types, or major development
Competitive advantage initiatives) helps to ensure the strategic alignment of

 Would new products be unique (differentiated from)

product development with business goals (4).

current competitors? Top-performing businesses are much more likely than poor
 Would new products meet customer needs better performers to have an effective portfolio management
than competitors? system that helps the leadership team allocate resources to
the right areas and to the right strategic projects. Effective
portfolio management means that development projects
The result is the strategic map, with each arena plotted are aligned with business strategy, and there is the right
(Figure 4). Arenas in the upper left quadrant—the “good balance of projects in the portfolio; strong portfolios
bets”—are those designated as the most promising. These contain high-value projects with few low-value, trivial
are where the business should focus its product projects. In best-performing businesses, projects are
development resources. With strategic arenas selected, correctly prioritized, and there is the right balance between
idea generation becomes more directed and productive, available resources and numbers of projects.
specific projects within each strategic arena can be
funded, and the entire R&D effort gains focus. Many best performing companies use strategic buckets
to help in resource deployment decisions. The strategic-
Develop Attack and Entry Strategies bucket method is based on the concept that translating
The issue of how to attack each strategic arena should also strategy from theory to reality is about making concrete
be part of the product innovation strategy (see Figure 2). decisions about where resources should be spent.
For example, the strategy may be to be the industry Strategic buckets help management define where the
innovator, the first to the market with new products, or to development dollars should go, by project type, by market,
be a “fast follower,” rapidly copying and improving upon by geography, or by product area (5). Each project type or
competitive entries. Other attack strategies might focus on market or geographic area is represented by a bucket.

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Instead, strategic buckets build firewalls between
categories; earmarking specific amounts to “new
products” or to “platform developments” ensures a much
more balanced portfolio. Followed rigorously and over the
longer term, the strategic-buckets method ultimately
results in an optimal portfolio of projects, one that mirrors
the strategic priorities of the business.
A good way to begin working toward strategic buckets
is to gather data to reveal the current portfolio situation,
including the current split in projects, resources, and
expected sales by project type (Figure 6). From such
charts, management can then begin the debate on the
optimal portfolio and make strategic bucket choices.

Define the Strategic Product Roadmap

A strategic roadmap is an effective way to plot a series of
major initiatives in the attack plan. A roadmap is simply a
management group’s view of how to get where they want
to go or achieve a desired objective (6). Although growing
in popularity, especially in high-technology businesses, the
use of roadmaps is far from common, with only 27.6% of
businesses in our study developing product roadmaps (see
Beginning with the business’s strategy, senior manage- Figure 1). About twice as many best performers use
ment makes strategic choices about how many resources product roadmaps as worst performers.
go to each bucket, for example, in a scheme allocating When employing roadmaps, senior management maps
resources by project type, to “new products” versus out the major new product initiatives required in order to
“improvements and modifications” versus “sales force succeed in each strategic arena, and their timing (7). The
requests” or “cost reductions” (Figure 5). roadmap lays out major development initiatives over time,
With resource allocation firmly established and driven by often as far out as five to eight years (Figure 7). It may also
strategy, projects are categorized by bucket. Then projects specify the platform developments required for new
within each bucket are ranked and funded in rank order products. Placemarks are established for development
until that bucket runs out of resources. This establishes initiatives and resources tentatively earmarked for them. In
project priorities. In this system, projects in one bucket, this way, senior management is able to translate its view
such as “new products,” do not compete against those in of the future and its strategy into resource commitments
another bucket, such as “improvements and and concrete actions. Additionally, the development or
modifications.” If they did, in the short term, simple and acquisition of new technologies can be planned in the form
inexpensive projects would always win out in the of a technology roadmap (8).
competition for resources, as they do in many businesses.
Conclusion: No Pain, No Gain
Corning’s story and our own research offer concrete
evidence of the importance of a product innovation
strategy and the strong positive impact such a strategy
has on performance (see Figure 1). Through the steps laid
out in this article, we’ve mapped a pathway for developing
such a strategy for your business.

The pathway to an effective strategy

begins with business goals and
objectives, and culminates with
resource deployment decisions
and strategic roadmaps to put the
strategy into practice.
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Robert G. Cooper is a professor emeritus in McMaster
University’s DeGroote School of Business, ISBM
Distinguished Research Fellow at Penn State University’s
Smeal College of Business Administration, and a Crawford
Fellow of the Product Development and Management
Association. A thought leader in the field of product
innovation management and developer of the Stage-
Gate® new product development process, he has won two
IRI Maurice Holland awards and has published over 120
articles and ten books. He received his PhD in business
administration from the University of Western Ontario and
Bachelors and Masters degrees in chemical engineering
from McGill University.

References
1. Kirk, B. 2009. Creating an Environment for Effective Innovation.
Presentation given at the Stage-Gate Innovation Summit 2009,
Clearwater Beach, FL, February.
2. Cooper, R.G., Edgett, S.J., and Kleinschmidt, E. J. 2004.
Benchmarking Best NPD Practices—2: Strategy, Resources and
The pathway begins with the business’s goals and
Portfolio Management Practices. Research-Technology
objectives and culminates with resource deployment Management 47(3), pp. 50–60.
decisions using strategic buckets and strategic roadmaps 3. Parts of the remainder of this article are taken from R.G. Cooper
to put the strategy into practice. and S.J. Edgett, Product Innovation and Technology Strategy
(Hamilton, ON: Product Development Institute, 2009).
If you’re thinking that your business lacks such a clearly 4. For an outline of portfolio management methods, including
articulated innovation strategy, and that maybe now is the strategic buckets, see R.G. Cooper, S.J. Edgett, and E.J.
time to lay the groundwork for developing such a strategy, Kleinschmidt, Portfolio Management for New Products, 2 ed.
you’re probably right on both counts. But a word of (Reading, MA: Perseus Books, 2002) and R. G. Cooper, S.J. Edgett,
and E.J. Kleinschmidt, Optimizing the Stage-Gate® Process: What
caution: this does take considerable time and effort. Senior
Best Practice Companies Are Doing—Part II, Research-
management (and support staff) must be prepared to
Technology Management 45(6), pp. 43–49.
make the time available and commit to the hard work
5. This section is taken from R.G. Cooper, Your NPD Portfolio May
involved. But the reward is worth the effort, as evidenced Be Harmful to Your Business’s Health, PDMA Visions 29(2), pp.
by the results achieved by those businesses that have 22–26; for a more in-depth discussion on strategic buckets see
developed a product innovation strategy. Portfolio Management for New Products, pp. 123–136.
6. For more on roadmaps, see R.E. Albright and T.A. Kappel,
Roadmapping in the Corporation, Research-Technology Management
46(2), pp. 31-40; A. McMillan, Roadmapping—Agent of Change,
Research-Technology Management 46(2), pp. 40–47; and M.H.
Myer and A.P. Lehnerd, The Power of Product Platforms (New
About the Authors York: Free Press, 1997).
7. The term “product roadmap” has come to have many
Scott J. Edgett is CEO and co-founder of Stage-Gate meanings. Here we mean a strategic roadmap, which lays out the
major initiatives and platforms the business will undertake well
International. He is also a faculty scholar with ISBM at
into the future, as opposed to a tactical roadmap, which lists each
Penn State University’s Smeal College of Business
and every product, extension, modification and version.
Administration. A specialist in new product development
8. The term “technology roadmap” also has several different
and portfolio management, he received his PhD in marketing meanings. Here we use the term to denote a plan for the
from Bradford University. He has consulted and written business’s expected technology developments or acquisitions; by
extensively in the field, with over 60 published articles and contrast, the term “technology roadmap” is sometimes used to
seven books. His latest book (co-authored with Robert describe an industry technological forecast laying out what new
Cooper) is Product Innovation and Technology Strategy. technologies are anticipated in an industry.

This article appeared in Research Technology Management, May-June 2010, Vol 53, pp. 33-40.
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