We define Idea-to-Revenue (I2R) Cycle Time as the time it takes from the moment an idea is born within a company to when it is out in the market fully supported and ready to be sold. Revenue cycle times can be unnecessarily long, partly due to lack of best practices, and partly due to limitations in organizational structure. Concepts never become products for one reason or another; Products take a long time before they are out of Development; or it takes a long time to put together the necessary marketing and selling tools and campaigns. While each of these reasons can cause significant delays, most often all three are present in making the matter a real challenge.

In this article, we will start by discussing the anatomy of Idea-to-Revenue Cycle Time. Then we will see what makes C2R cycle times longer than they should be, and finally what companies can do to cut their cycle times in half or more.

The Anatomy of Revenue Cycle Time

Products have three levels of readiness: Development Ready phase, which is the phase in which an idea becomes first a project and then a product; Operations Ready phase, which is where the product becomes a fully documented, supported, trainable, and usable product; and finally, Market Ready phase, which is the phase responsible for launching, marketing, and selling the new product.

Development Ready

We define a product as anything that is made pretty much the same way from customer to customer and not tailor made for each customer. A BMW 750, Microsoft Word, a business checking account in a specific bank, a business class seat in Delta airlines, a Big Mac, and a 30-year fixed mortgage loan from a specific lender are all products, since there is very little variation between what one customer receives and another, or what the same customer receives this time versus the next time he/she purchases the same thing.

When Product Development talks about how long it took to develop a product, it is typically looking at the time it took from concept to Development Ready.

Typically, concepts go through the following steps before they become working products:

1. Kicking around an idea – typically the originator(s) of the idea or concept kick it around with others to see if anyone can punch a hole in it. At this point, the concept is not even on paper and mostly in the heads of those in the discussion of the concept.
2. Validating key underlying assumptions – once the idea seems to be solid, the next step is to validate some underlying assumptions, especially on the market side. Is there a sufficient size of potential customers for this if it ever becomes a product?
3. Defining the Requirements – this is likely the first time any document is produced, and the goal is to specify and document what the product is supposed to do. For the most part, this document specifies “what” needs to be done without going into any discussion of “how” it will be done.
4. Proof of Concept –The purpose here is to find out what the big hurdles are and if they can be overcome within a reasonable time frame.
5. Design – the proof of concept phase provides highly useful insights into how the product should and should not be designed. Armed with such insights, the task here is to design products that are easy to make, sell, support, learn, and use.
6. Production –the final step of the Product Development phase is to make the product according to the design specifications

Operations Ready

Most customers will not buy a product that is not ready to be “used”, as they use it within their own context. For example, consumers will not buy an electric car until they are sure there are charging stations found conveniently located; there is a place where they can get it services, that their insurance company will insure the electric car, and so on.

Operations Ready means that the product is ready to be fully supported by the company so that the average end user can fully utilize the product. It includes all of the supporting or peripheral products, training, installation, configuration, and more.

In order for this to happen, the service side of the company has to be done with its part, not just Product Development. Documentation has to be prepared, trainers have to be trained so they in turn can train the product. The Customer Service and Support Team have to be trained and have the necessary tools they need to support customers, and so on.

The Support or Field Organization that is actually responsible for the customer’s end result should be brought in very early in the Product Development phase, typically by step #2 (Validating Assumptions), but no later than step #4 (Proof of Concept). If that is the case, not only is the product design better (it is easy to support and learn), the support organization will be ready to support the new product at the time, or shortly after, the product development team is done with the product.

Market Ready

Products are market ready when everything necessary to market and sell the product is ready. It includes the preparation of the necessary campaigns to drive awareness of the product; content to educate the market on the product; generating warm leads to be passed on to the Sales Organization; and ensuring that the Sales Organization has the necessary training, tools, and resources to sell the product.

Ideally, the company will bring in Marketing and Sales early into the product development–both to receive valuable feedback and to get the Marketing and Sales ready to rapidly launch the product into the intended market segment and reduce revenue cycle times.

The ideal time to do this is at Step #2 of the Product Development phase when validating underlying assumptions. Both Marketing and Sales have valuable feedback and insights to bring to the product development phase.

Why Revenue Cycle Times are Long

Having described the three levels of readiness that make up Idea-to-Revenue time cycles, we will now examine why most companies experience unnecessarily long C2R time cycle.

Typically, companies conduct their product development, operational readiness, and market readiness in serial or 1-2-3 format.  For example, if it takes twenty (20) months to develop the product, four (4) months to make the necessary preparation for the support organization, and another two (2) months to get Marketing and Sales ready, the total C2R cycle time is at least twenty-six (26) months. In actuality, the C2R cycle time is even longer since it is unlikely that the company will have perfect timing of handoff from one to the next phase.

What would happen most often is that the head of Product Development announces that product “P” is now ready and that the company should move fast to bring it out to market. At this point, it is highly unlikely that anyone outside Product Development knows much about this product.

In order for the various departments to do their job and support this product as well as market and sell it, they must know what problem it solves, how it solves it, and why it is the best alternative. That information typically comes last after the product is developed. Ideally, there should be significant overlaps of when each team starts and finishes its part so they are all learning and sharing feedback to improve the overall product. Not only does this overlap significantly cut the C2R cycle times, but it also improves the quality of the product due to strong feedback from various sources early in the development process where it matters.

Strategies for Shrinking Revenue Cycle Time

So, how do we shrink the total Idea-to-Revenue Cycle time so we can begin realizing revenue as early as possible? And how can we, at the same time, make a better product?

Below, we have outlined a number of strategies that companies can implement to improve their C2R cycle times. The more of these strategies companies implement, the shorter their C2R cycle times will be.

A. Defining & Managing C2R Process

The first thing that companies can do is to implement a more reliable and formalized process for reviewing and managing Concepts to Products process. The company should have a system and process in place where ideas can be submitted from any corner of the company. These ideas will be reviewed, and if found to be viable, will go to the next step until either rejected or completed.  The entire process should be as automated as possible to remove unnecessary delays.

1-Submit New Concept for review

Any employee that has a great idea should be able to submit an idea under a specific “reason for doing” such as increase revenue, lower costs, improve customer experience, etc.

This should typically be no more than one page long and should briefly describe the problem to be solved, how this concept would solve that problem, who would benefit, and what the expected impact would be to the company and potential customers.

2-Go/No Go

The originator of the idea will then present his/her idea in 10 min or less to the Concept Review committee. This should be done on designated days, say the last Friday of each month. The review committee should ideally include the CEO so that the idea is either passed or killed quickly.

This is where a lot of ideas go nowhere because of lack of decision to go or not to go to the next level.

3-Form the Concept Development Team

If the Review Committee gives its thumbs up for the concept to move forward, the next step is to form the Concept Development Team. The Team should include: the concept originator; one or two top sales reps; one or two top engineers, one or two marketers; a product manager; and anyone else that wants to join the Team for this concept.

4-Brainstorm market potential

The Team will then meet for a 3-4 hour session and hash out the concept in order to arrive at answers to the following questions, among others:

1. What is the compelling need that this product concept would address?
2. Who is the targeted end user for this product concept?
3. What would be the “before” and “after” scenario of using this product?
4. What would make the “after” so much more compelling than the “before”?
5. What will need to happen to make this work?

Once the session is over, the member of the marketing team should prepare a short product marketing plan for the product concept based on the brainstorming session’s outcome. The product manager should do the same and build a requirements document for the product.

5-Validate Assumption

The next step is to use the product marketing and product requirements documents as background to do some research and validate key assumptions. At this point, what the company wants to find out are:

1. How is the problem that this product concept is expected to solve currently addressed?
2. What is the cost of the current solution?
3. To make the ROI compelling to the buying prospect, what should the ideal price be?
4. What will it cost the company to product the product?
5. How many units will the company have to sell in order to break even?
6. Is there a sufficient user base to significantly exceed the breakeven point?

These are the basic questions that need to be answered before moving forward. These questions could have been asked before the brainstorming and documenting efforts, but now the company can answer the questions more confidently.

6-Go/No Go

The answers to the above questions are incorporated back into the Product Marketing Plan and are submitted to the Concept Review Committee for Final Go/No Go Decision. At this point the business decision has been made and what is left is primarily departmental level decisions.

7-Design the Product

The Product Design team now has everything they need to get started. They know both the business and user requirements as objectives for their design such as: total and unit costs; time lines; user requirements; and manufacturing and support requirements. This stage would correspond to #3 of the Concept to Product section discussed above.

The Design Team can now build a proof of concept and flesh that out into one or more prototypes to show and get feedback from the Concept Team formed at the Brainstorming stage.

All along, each department is fully informed of the product progress, and the documentation is becoming more and more complete as the product concept matures into reality.

8-Make the Product

By the time the product is completed out of the Product Development group, so is the documentation for it. All departments including Training, Support, Marketing, and Sales are fully ready to market, sell, and support the product.

B. Coherent Strategy: The Focus –Leverage Dichotomy

When companies face difficulties in executing their strategies, it is almost always a result of lack of coherence in the strategy. A coherent strategy is one that is both logical and consistent. This can only be achieved when the two sides of the strategy coin—leverage and focus—are in full balance and alignment.

Leverage and Focus are opposites.

Internally, Leverage tries to maximize return on the company’s resources and assets by “generalizing” the use of the asset or resource. Focus tries to do the opposite and specialize the use of the resource.

Externally, Leverage tries to broaden the base for a given product by selling it to as large an audience as it can, while Focus does the opposite by finding a tight niche where the product becomes the only viable alternative.

Each has its advantages and disadvantages—its upsides and downsides. And getting this right is the real work of strategy development.

In the particular discussion of Idea-to-Revenue Cycle Time acceleration, the choice of how the company groups its assets and resources to create both Leverage and Focus at the appropriate level will make huge difference in cutting the C2R time. As we have outlined above, each department has a focus but can be leveraged across products and markets. Additionally, each product group is focused on a particular product, while best practices are leveraged across the entire department and made available to different product groups.

This is a deep topic on its own and we will have more to say on this in later articles.

C. Redesigning the Company

We have described the Concept t Revenue Process above. However, it is difficult to implement the process unless the organizational structure allows for easy team formation around new product concepts.

While it makes sense to group similar activities such as Support, Marketing, Design, etc together to increase and facilitate the sharing of professional skills and best practices, it is equally important to accept that there is a second layer that sits across all departments that forms around a given product or market segment.

Which grouping to choose—whether to group by product or by market—is a decision made by examining both internal and external constraints and opportunities. This is a significant topic in and of itself and we will reserve it for another article.

D. Using Product Platforms

The concept of Product Platform is easy to understand, but difficult to implement. Not because it is complex, but because it requires a patient and diligent approach.

At its essence, it is about factoring out the common denominator and making it available for all products so that they automatically benefit from it. Once a company makes more than one product, it can examine the common elements in these, factor that out, and make the following adjustments to it:

• Make it a more general purpose so other products can make use of it
• Make it simpler and cheaper to make
• Make it more robust and more reliable

From then on, all products that use this platform “inherit” its reliability, simplicity, low cost, and any other attributes.

Furthermore, the company can dedicate a team of designers and developers to work on the platform, making it increasingly more capable, simpler, more reliable, and so on.

In addition to lowering the cost and complexity of new products, a product platform dramatically reduces the Idea-to-Revenue Cycle time of new products, since only what is different or new needs to be designed and built. Everything else is already there.

For example, when Toyota launched its hybrid car Prius, it only designed and built the new technologies and parts it needed. The rest was built on the Camry platform, thereby significantly reducing the revenue cycle time for the Prius. It also helped that Toyota is one of the best practitioners of product platform, using it not only in Toyota brands, but also across brands with Lexus.

Product Platforms are also deep topics where volumes of books and articles have been written, yet few companies seem to take advantage of them.

What we can do To Help

So far, we have outlined some very powerful and effective principles for shrinking Idea-to-Revenue cycle times, some of which you may already be implementing.  When companies are not taking advantage of these principles, it is primarily due to lack of time or expertise.

SOMAmetrics has the resources and expertise to: help you assess where you are and where you need to be; work with you to develop a viable plan for bridging the gaps; and helping you execute the plan to reduce your Idea-to-Revenue cycle time.

Read about predicting revenue with the four funnels framework.