The Innovation Circle

A Process for Introducing New Products and Services

The Innovation Circle - A Process for Introducing New Products and Services

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Develop and implement your innovation effectively.

When you're innovating, it's easy to charge ahead enthusiastically, only to discover later that you could have been more successful if you had taken a more measured approach.

The Innovation Circle is a useful step-by-step model that defines the major steps that happen during the creation and deployment of a successful innovation (which can be a new service, product, or process).

As such, it serves as a reminder of some of the things that you should do along the way to make sure your innovation is a success.

In this article, we'll look at the Innovation Circle, and we'll see how you can use it when developing and implementing a new product, service, or process. We'll also review some of the tools and resources that you can use at each stage.

The Innovation Circle

The Innovation Circle (see figure 1 below) is a model that helps you manage the development, implementation, and ongoing use of an innovation.


The Innovation Circle

© "Key Management Models: The 60+ Models Every Manager Needs to Know" by M. van Assen, G. van den Berg, and P. Pietersma. Published by Pearson Education, 2009.

The outer part of the Innovation Circle identifies the three main phases that you need to go through to manage an innovation effectively. These are:

  1. Creation.
  2. Implementation.
  3. Capitalization.

The inner part of the circle then identifies the steps that make up each of the main phases. For example, the second step of the Creation phase is "Idea Generation."

The most useful feature of the Innovation Circle is that it acts as a checklist to make sure that you don't overlook an important part of the innovation process. The model also helps you ensure that your innovation adds value to customers, and to your organization.

The model is represented as a circle because this shows that innovation should be a continuous process, and should not stop once the innovation has been introduced.

We'll now review each major phase – Creation, Implementation, and Capitalization – and discuss how to use each step when you are developing a new product, process, or service.

1. Creation

The creation phase has three steps: Incentive Identification, Idea Generation, and Function Creation.

Step 1: Incentive Identification

In this step, you identify the problems that you need to solve, and explore the reasons why you need to innovate.

For example, have you identified a problem that your organization could solve for its customers? Is your organization losing market share (and do you need a new product to gain it back)? Are customers dissatisfied with part of your offering? Or are your people frustrated with one of your organization's processes?

The following resources will help you to gain more of an understanding of your problems and issues:

Step 2: Idea Generation

In step 1, you identified why you need an innovation. Now you need to generate ideas to solve the problems that you identified.

Remember to focus on the people whom this innovation will serve. What will give them the most value? Also, identify the resources that are available to make sure your ideas are feasible.

Our creativity section introduces you to a variety of techniques that can help you generate ideas, and our article on brainstorming points you toward some useful creativity processes.

Step 3: Function Creation

In step 3, you now need to identify which of the ideas you'll develop, and think about how you'll run the projects needed to deliver them.

See our decision making section for a range of decision-making techniques that you can use for deciding which ideas to pursue. In particular, Decision Matrix Analysis is a great technique to use for choosing between ideas, while our article on Go/No-Go Decisions helps you decide if any of your ideas are good enough to run ahead with.

If ideas are simple and easy to realize, then you may be able to plan them using simple Action Plans.

For larger ideas, and, in particular, for situations where you need to deliver your solution to a tight deadline, formal project planning and management is very important. (If you're running big projects for the first time, don't underestimate the scale of the challenges that you'll face!)

2. Implementation

The next phase is Implementation. Here, you develop your innovation and introduce it to end users or customers. There are two steps in this phase: Product Creation, and Market Introduction.

Step 1: Product Creation

Here, you use the specifications you developed in the Function Creation segment to move forward on development.

A good way of doing this is to create a prototype or sample, and test and refine it repeatedly.

You'll find it much easier to manage this stage if you have good project management skills. In particular, risk management, benefits management and scope control are important, and, where this is appropriate, it's essential that you put robust business testing into place.

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Step 2: Market Introduction

Now you need to think about how you'll introduce your innovation to the people who are going to use it.

If you're creating a project or process for internal use, identify who will use it and who will be affected by it (see our article on Stakeholder Analysis for more on this). How will you let these people know it's available? How will they know how to use it, or how to get involved? What objections might they have about your innovation, and how will you overcome those objections? What extra training will they need?

If your innovation is for external use, this is where you need to think about how you'll market it. Clearly, there's a huge amount that goes into marketing a product, and this is beyond the scope of this article. However, our article on business planning will get you started, and will point you towards other resources that will help you.


You may want to do a lot of this marketing thinking much earlier in the process. You're likely to get a more successful end-product if you involve customers right from the start. What's more, the way that you intend to sell the product should shape the product itself.

3. Capitalization Phase

In this last phase, you begin to create value with your innovation, and ensure that it continues to deliver value.

There are three steps to Capitalization: Order Realization, Service Realization, and Utilization.

Step 1: Order Realization Process

Here, you focus on the logistics of bringing your innovation to your target market, and you work to ensure that you deliver a good quality product in a reliable way, while minimizing cost. (Here, it's often best if you use processes and channels that you already have in place.)

See our articles on the request for proposal process and The Kraljic Portfolio Purchasing Model for useful ways of sourcing resources cost-effectively.

Step 2: Service Realization

In this step, you develop any additional services needed to make your product rollout successful.

For example, you may need to put into place new support staff or IT systems; or you may need to deliver services that support your innovation. Again, you'll benefit from good project management skills at this stage of the process.

Step 3: Utilization

This last step covers the value that your innovation creates. This is where you must work to increase the revenues that your innovation generates, reduce costs, and enhance the innovation's competitiveness. This is where kaizen (continuous improvement) is particularly useful.


To find out about another approach to innovation in product development, see Teece's Win-Lose Innovation Model.

Key Points

The Innovation Circle acts as a checklist to help you to identify and manage every step of the innovation process.

It's divided into three main phases – Creation, Implementation, and Capitalization – each of which has several steps, which include different tasks and responsibilities.

The model is represented as a circle because innovation should be a continuous process, and should not stop at the end of a product or service's lifecycle.