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What is an innovation funnel is?

An innovation funnel is an incredibly useful tool for transforming pie-in-the-sky innovative ideas into actionable strategies that will drive growth and development.

Barrie Dowsett

Chief Executive Officer


8 minute read

Executing a ground-breaking, innovative idea that’s never been done before, involves a huge amount of risk and demands equally huge amounts of resources, time and capital: Especially if the idea fails. But, the only way for businesses to stay competitive in a constantly changing marketplace is to continuously innovate. So how do you choose which innovative ideas to implement? How do you know which ideas to back, and which to leave behind? You use an innovation funnel. 

What is an innovation funnel? 

Put simply, an innovation funnel is a process that helps businesses whittle their R&D ideas down into a shortlist of actionable, innovative solutions that have the potential to drive development and growth, with a reduced risk of failure.   

How do innovation funnels work? 

The innovation funnel process works by prioritising, screening, selecting, eliminating, refining and testing innovative ideas, allowing businesses to remove impractical ideas that have a high risk of failure, and only add the best, groundbreaking ideas in their R&D roadmap.  

Eliminating ‘bad’ ideas, as they make their way through the funnel, is the most crucial part of the process, as removing dud ideas will save the company time, money and resources, freeing them up to focus on the ideas that will transform their business: those ideas that make it all the way through the funnel. If these ideas make it to the end, they should emerge as strong contenders for success as they’ve been thoroughly questioned, tested, rationalised and developed. 

Why are innovation funnels useful? 

The business landscape is constantly shifting. To ensure a competitive edge, businesses need to stay relevant and up-to-date with changing customer needs.

The innovation funnel will enable your business to align the right innovative opportunities with unmet customer needs and prioritise them so you can dedicate time, money and resources to the most promising ones, that have the highest chance of success, contributing to a successful, sustainable, future-forward business model.

How do I build and manage an innovation funnel?  

Building your innovation funnel starts with strategic thinking. To make sure your innovative ideas add value to your business, you need to make sure they align with your strategic goals. So before you begin to build your funnel, start by getting a clear idea of what your business objectives are. 

Then, follow the below six stages of the innovation funnel. After each stage, you must make a decision about whether to progress an idea to the next stage, or whether to leave it where it is, and move on to the next.  

The different stages of an innovation funnel 

Innovation funnel stage 1: Ideation 

The first stage of the innovation funnel is where a range of ideas are collected. In this stage, customers' needs should be researched and market trends analysed and this intel needs to be fed into brainstorming sessions and open innovation platforms to gather ideas from employees, customers and stakeholders to generate a wide, diverse range of innovative ideas, big and small: no idea is a bad one, at this stage. 

Innovation funnel stage 2: Evaluation

Once you have a plethora of ideas, next comes the evaluation stage, where you can start to critically assess ideas and filter them based on criteria like feasibility, market demand, risk, alignment with goals, ROI and potential impact. The ideas that don’t meet these criteria should be eliminated, and promising ones should be moved on to the next stage. It’s not always about getting the best ideas, it’s more about getting the most actionable ones that align with your business objectives.

Innovation funnel stage 3: Concept development/prototyping

Once you have a set of core ideas that meet your business objectives, you can start to further refine these ideas into more detailed concepts. At this stage, you might want to develop business cases, conduct feasibility studies and design prototypes so you can see how the ideas will work, in reality. 

Innovation funnel stage 4: Testing

But the only way to establish if an idea is truly viable is to test it. So, these prototypes need to be tested and validated through experiments, small-scale trials or pilot projects. Set up feedback mechanisms such as focus groups, to identify and address issues or challenges, and further refine the concept, making sure it's watertight and ready to launch.

Innovation funnel stage 5: Implementation

Once the prototype has been tested and refined, it’s time to implement it. This stage involves scaling up the innovation, allocating resources, and integrating it into your operations. During this process, you might find you need to make adjustments based on ‘real-world’ working conditions.

Innovation funnel stage 6: Launch 

Once the concept has been implemented and adapted for the real world, it’s time to take the innovation to market or your intended audience. At this stage, you’ll want to develop a route-to-market strategy, including marketing campaigns, communication plans, and distribution channels to ensure a successful launch. 

A word of warning: Although an innovation funnel is a systemic way of generating new, innovative ideas that have a high chance of success, the methodical, structured approach can sometimes stifle creativity and filter great ideas out, too early. Try and approach innovation funnels with an open mind, whilst also considering the practicalities. 

What can I use an innovation funnel for? 

To get an understanding of how you might use the innovation funnel to channel new ideas into the market, it’s useful to see how other businesses are using it. 

In this case, we’ll look at Procter & Gamble (P&G), a consumer goods company that manufactures laundry and cleaning products, cosmetics and personal care items. The company faced significant challenges in 2000 because it failed to innovate and bring out new products to keep them competitive. They turned to the innovation funnel to turn things around, and now, they’re a multi-billion dollar, global company that operates in over 180 countries.  

How P&G used an innovation funnel to successfully bring new products to market. 

Innovation funnel stage 1: Ideation

P&G began by generating ideas from internal and external sources, which ranged from independent inventors, research institutions, and competitors. This exercise gave them a range of new ideas and solutions from a wide range of diverse sources.

Innovation funnel stage 2: Evaluation

Once they had their ideas, P&G then used specific criteria to review and evaluate these ideas, making sure each idea aligned with an unmet customer need. From this, they exited several ideas that failed the criteria test and took the best ideas forward to the next stage. 

Innovation funnel stage 3: Concept development/prototyping

P&G then took these ideas and developed them into working prototypes. One of these ideas was a new mascara, which they worked with an external inventor to develop. 

Innovation funnel stage 4: Testing

Once they were happy with the mascara prototype, P&G tested it with market trials and collected feedback which they used to iterate and improve the mascara. 

Innovation funnel stage 5: Implementation

Once the testing was complete, they were ready to scale the new product and include it in their wider product portfolio. 

Innovation funnel stage 6: Launch

Once the mascara was integrated into their portfolio, they came up with an effective marketing and go-to-market strategy to launch the product into the market.  

The innovation funnel enabled P&G to relaunch, not just its mascara product, but it's entire product lineup which led to substantial growth.

Now I’ve got my innovation funnel ideas, what’s next? 

It’s one thing having a set of solid innovative ideas, but prototyping, testing and commercialisation take money. Money that you might not necessarily have readily available. 

So what’s the solution? R&D Tax Credits

What are R&D Tax Credits and how can they help me execute my innovative ideas? 

R&D Tax Credits is a government-backed scheme that allows UK companies to claim up to 18.6% of their R&D expenditure back, either as a cash lump sum or a reduction in their Corporation Tax bill (if the company made a profit).

To be eligible for this type of tax relief, you must show that your innovative project is groundbreaking, high-risk and makes an advancement in science or technology that will benefit the wider field it operates in, as well as your business. 

Find out more about the R&D tax credit scheme, and discover how to apply, read our R&D Tax Credits page, or get in touch with our R&D tax credit specialists at Myriad Associates.

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