Innovation funnel meaning and examples17 min read

There are all sorts of funnels for different purposes — marketing, innovation, hiring, and conversion. All of them have the same goal — to guide or channel something through.

Since innovation is about introducing something new to your organization or customers, then an innovation funnel is a process that will help you bring out and execute the best innovative ideas and make sure they are profitable.

In this article, you will learn about three different methods of using an innovation funnel:

  • The Stage-Gate Method
  • The Lean Startup Method
  • The Design Thinking Method

You will also learn about Accept Mission’s very own innovation stage process and why we think it will help you more than the others.

Let’s start!

What is an innovation funnel?

An innovation funnel is a tool or a process that will help ensure that only the best ideas are executed. It is a type of funnel that will screen innovative ideas for viability and profitability so that only the best products, processes, propositions, or business models are realized.

Generally, as with any other type of funnel, an innovation funnel has three parts:

  • The wide mouth
  • The narrowing section
  • The narrow part

Each of these parts may be further broken down into different stages. As ideas progress through the funnel, they will go through assessment processes to determine which ones are more suitable for your goals.

All of these sections have a common goal — to make sure that only the best ideas are further developed.

By the way, if you’re interested in learning everything related to innovation, we recently published a free ebook about organizing innovation. In that book, you will read more about the specific steps and principles related to innovation.

What are the different models of an innovation funnel?

There are numerous models available. In fact, there are types of models that can be applied in almost any process including innovation, design, marketing, and others. But in this article, we will focus on three main innovation models.

Let’s start with the most popular innovation model:

1. Stage-Gate Method

Stage-Gate, also known as Phase-Gate, is a method for evaluating the business value of an innovation project in the innovation lifecycle.

Though it is usually applied to a new product or service development, it is generally used to stay in control of projects to constantly re-evaluate them and their value before progressing further.

It is called Stage-Gate as there are different gates or phases in the funnel. Between the gates, there is an evaluation to determine whether or not to proceed to the next stage. Mainly, there are three things that are checked during the evaluation before the project progresses through another gate.

These are:

  • Is everything being done in the current stage?
  • Is the innovation project still worthwhile in terms of business value or business case?
  • Is there a clear plan for the next stage?

As for who makes the call whether or not to proceed with the next stage, that responsibility usually lies with the innovation board, innovation manager, and gatekeepers.

What are the phases in the Stage-Gate method?

The Stage-Gate model guides product development through five stages, from scoping up to the launching of the product or service into the market.

Note that in some forms of the Stage-Gate method, there is a pre-scoping phase called “discovery”. This is where opportunities are discovered by means of brainstorming, market research, and investigation.

The stages of this method are the following:

  1. Scoping: At this stage, the innovative idea is evaluated in terms of scope, feasibility, and market competition. In short, the idea is examined on whether or not it is viable and has a profitable or valuable market opportunity.
  2. Business case creation: This is where the idea is turned into a business simulation to determine user or participant requirements and specifications. In other words, the innovation team will build a project plan and product definition.
  3. Development: Once the idea passes the business simulation stage, the team will proceed with building a prototype or a minimum viable product (MVP). In addition, the production and launch plans will be created.
  4. Testing and validation: There are a lot of tests that happen at this stage. First, the prototype will undergo internal testing. After problems are discovered and solutions are applied, the product will then undergo consumer testing (field test). A marketing or validation test will then be held to see the market feasibility of the product.
  5. Launch phase: After feedback and patches are applied, the product will then enter the market. Naturally, there will be ongoing monitoring of the production and quality of the product. In addition, the marketing team will take over in maximizing the product’s exposure on the market.

Innovation funnel

What are the benefits of Stage-Gate?

The Stage-Gate method is normally used in product innovation. However, rest assured that it can also be used with other types of innovation, though you may have to change some of the assessments to fit the specific innovation type.

As you may have noticed from the stages earlier, it is quite clear that there must be a clear schedule for this method to work well. This helps clear out the project lifecycle and eliminate risks that come from not being able to do so.

In addition, the Stage-Gate method will not work if there is no collaboration between the innovation and marketing teams.

2. Design Thinking Method

The Design Thinking method is based on the processes that designers use to solve problems. It is a practical method that organizations use to create innovative solutions to tackle problems that are usually hard to define.

This method is considered one of the most user-centric innovation funnels. It reframes the problem at hand in human-centric ways to determine the most important factors for the users. It forces the team to think outside the box.

Design Thinking follows four rules:

  1. The human rule
  2. The ambiguity rule
  3. The redesign rule
  4. The tangibility rule

With these principles, innovation teams are free to have freedom in coming up with disruptive ideas and solutions and gain invaluable insights. It helps organizations in coming up with better product innovation, prototyping, and usability features, all to meet the needs of the customers.

What are the stages of Design Thinking?

Based on the four principles above, Design Thinking can be broken down into five stages. Note that although we are talking about funnels here, the stages on this method do not need to be sequential, though they are normally done in order as they make more sense that way.

  1. Empathize: This stage deals with gaining a better understanding of the needs and wants of the customers. Since this deals with observation and engagement, it is imperative that the innovation team sets aside its own biases to gain better insights into the subjects.
  2. Define: This stage is all about defining the problem. The insights gathered from observing the customers will be examined here in order to make sense of them and see the underlying problems. The ultimate goal here is to come up with a clear problem statement in a human-centric and user-centric way.
  3. Ideate: The third stage is about coming up with potential solutions for the problem. The innovation team has to come up with as many ideas as possible. This is where various ideation tools and techniques come into play including brainstorming, mind mapping, business simulation, and others.
  4. Prototype: This stage is about converting ideas into products, models, or processes. For product innovations, this is the part where the minimum viable product or prototype is born. Throughout this stage, the prototype may be improved, redesigned, or even rejected. That is why Design Thinking is not sequential, as teams may have to go back to stage two or stage three if the prototype is rejected at this stage.
  5. Test: Although this stage is technically the last one, it doesn’t mean that it is the end of the tunnel. Even if the proposed solution is turned into a prototype, it may still fail at this stage. The team then will have to go back to earlier stages to come up with more ideas, create a new prototype, or even redefine the problem.

Design thinking method

What are the benefits of Design Thinking?

This may seem counterintuitive considering that teams can go back and forth between the stages, but Design Thinking can definitely help in cost-saving, which then increases the return on investment of the organization.

The reason is that products that undergo the Design Thinking model are often successful, and these products will ultimately yield a better return on investment. In addition, since this method is a user-centric approach, it will improve customer loyalty and retention.

Design Thinking also fosters more innovation within the organization. Since this method is all about challenging assumptions and thinking outside the box as well as that of the target group, it will help build a strong innovation culture throughout the organization.

3. Lean Startup Method

Lean Startup is based on a lot of concepts from Design Thinking. Similar to the earlier model, this method relies on capturing customer feedback as early as possible. This will help smoothen the product development cycle and largely increases efficiency.

Some organizations know this method as a good model for either starting a new company or else introducing a new product on behalf of an existing company. The principles behind this method heavily rely on gauging the interest of the customers.

The methodology behind this method has three pillars:

  1. Build. To build is to create a minimum viable product or MVP. The focus here is on quickly putting something out there to see if it captures the interest of the customers. This MVP should be able to provide just enough value to keep the customer engaged without being too complicated.
  2. Measure. To measure is to evaluate the engagement of the customers with the MVP. The aim here is to see if there is a large enough market for the product. This can be done through different engagement metrics such as the number of active users, customer acquisition rate, customer retention rate, and others.
  3. Learn. To learn is to gain more knowledge from the current engagement metrics. The question that should be answered here is whether the product should be improved, pivoted to a new direction, or even scrapped. The beauty of Lean Startup is that it helps startups to validate their ideas quickly and efficiently. This is done by releasing an MVP and then measuring the engagement metrics. If the idea is validated, then the startup can proceed with developing the product further. If not, then the startup can quickly pivot to a new idea and start the cycle all over again.

Lean startup method

When your organization decides to use Lean Startup, you will then need to center your business around your customers. This means that your ideas will not start with a business plan, but rather with creating a minimum viable product for your customers.

What are the stages of a Lean Startup?

In general, organizations may choose to go different paths, though all will be guided by the same three pillars. Furthermore, all who use the Lean Startup method go through three the same stages:

  1. Problem/solution fit. This is the stage where startups validate whether their solution solves a real problem for their target market. This can be done through customer development, which is basically a process of talking to customers and understanding their problems.
  2. Product/market fit. This is the stage where startups validate whether there is a market for their product. This can be done through different engagement metrics such as the number of active users, customer acquisition rate, customer retention rate, and others.
  3. Growth. This is the stage where startups focus on scaling their business. This can be done through different growth hacking techniques such as virality,  paid acquisition, and others.

The first stage is about validating the problem and making sure that it is worth pursuing. Will the product bring value to the startup or to the parent organization? Are customers willing to pay for the solution?

After that, the next stage, which is also the most important part, is finding the product/marketing fit. This is the stage where the prototype is built and the three pillars enter the scene — build, measure, learn. At this stage, you can already make some revenue.

The last stage is all about scaling and growing the startup. To do so, you will need additional funding. More investors can then be brought up to help with that. As the name suggests, the growth stage will be about improving the product even further.

What are the benefits of a Lean Startup?

Because the minimum viable product is brought up earlier and given to the customers, the organization can quickly determine what is working and which parts to improve. The team will be able to learn more from the feedback of the customers.

Plus, it also helps to reduce the risk of failure. The sooner the organization can test its product, the better. If it fails, they will be able to save time and resources.

In effect, organizations are able to push out functioning prototypes into the market because of shorter development cycles. Meaning, organizations will be able to test out their solutions and push better products while consuming only fewer resources.

The focus on the customer also allows startups to create better solutions. They will be able to understand what the customer wants and needs rapidly. This is because they are constantly in communication with them.

Because this method requires teams to continuously test their solutions and assumptions, organizations will be able to stay away from being too comfortable with their current success. Organizations will be able to pursue more ideas right away, at a low cost, and see immediately whether or not it is worth it.

What is Accept Mission’s innovation stage process?

Accept Mission’s innovation stage process is a practical innovation funnel that can be applied to both small and large organizations. It can also be used on both simple and complex innovation projects.

To better understand our process, let us show you its stages:

  1. Problem FindingFinding a problem means identifying an issue that needs to be solved. This can be done through different research methods such as interviews, focus groups, surveys, and others.
  2. Solution Finding. Looking for a solution involves determining potential solutions to the problem. This can be done through different brainstorming techniques such as mind mapping, brainwriting, and others.
  3. Experiment. To experiment is to test the feasibility of the solution. This can be done through different experimental techniques such as A/B testing, usability testing, and others.
  4. Business Plan. This step includes creating a business plan for the solution. This can be done through different business planning techniques such as SWOT analysis, business model canvas, and others. 
  5. Development. Developing a solution to implement means applying different development techniques such as agile development, scrum, and others to create a solution that would solve the problem.
  6. Delivery. Delivery includes deploying the solution. This can be done through different delivery techniques such as beta testing, product launch, and others.

The first three stages are referred to as the Fuzzy Front End. The reason behind the name is that during these stages, the actual solution is still fuzzy around the edges and is not yet thoroughly defined.

That is why the stages here are about problem finding, solution finding, and experimenting. These are important in finding the real problem and managing the process of generating ideas, selecting the best ones, and developing a solid solution that can be executed in the last three stages.

So how does our process differ from the three models discussed earlier?

In the old Stage-Gate method, the business case has to be finalized too soon in the process. It assumes that the best solution has already been found early in the process. Our process ensures that we get to the core of the actual problem first, hence the first three stages focus on finding the problem, the solution, and the proof of concept.

These stages (the first three) are also called innovation sprints. The reason is that you will have to execute them as fast as possible. Stage-Gate is an old model that is usually used in large research and development projects.

The last three stages in our process are project management stages, so most organizations are already familiar with them. This makes it easier for them to adopt these stages into their work processes.

Design Thinking and Lean Startup are both useful methods, which is why a lot of people are using them today. Most of the time, they are executed when the solution is already in sight but still needs a good design or product. These steps can be mapped out in the first three stages of our model.

Gaining a better understanding of innovation funnels is important as it will help ensure that your organization brings out the best solutions for your problems. The key takeaway is to start with one of the models to build your own innovation funnel, evaluate, and adjust.

How about you join us on our regular innovation webinar session? It’s free for everybody. Not only will you be able to learn more about innovation, but since it’s a live session, you can also ask questions to help clarify things.

Published On: February 9th, 2021Categories: Innovation management, Innovation strategy

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