innevo consulting

Take a lead with better products and processes.

 

Innovation leadership is not the result of coincidences but rather the result of adequate strategic orientation as well as its consistent corporate implementation.

 
 

Key Factors of Successful Innovations


 

Innovations don’t come out of the blue. But a close look at the inner dynamics of innovations processes gives rather straight forward guidelines on how to raise the success rate of the development of new products and processes systematically.

There are a number of stereotypical believes about what makes successful innovators. Some emphasize that small and medium-sized enterprises are motors of innovation because they are agile and flexibly positioned. At the same time some argue, that breakthrough achievements come only from large concerns, which allocate billions to their research and development divisions.
For sure, there is a spark of truth also in these generalizations. However, to whom one’s company’s innovations competence is near to one’s heart will want to look into the subject in more detail. In the following paragraphs we would like to give you a quick-start by discussing some market studies and concepts.
Dynamics of innovations
Dynamics of innovations (based on J. M. Utterback, Boston, 1994, Harvard Business School Press)


  R&D Activities
"Innovation is about R&D, but R&D alone doesn’t equal success." Decisive for successful innovations is not, how much money is spent for developing new products and processes. This is the finding of the annual Global Innovation 1,000 study, which was carried out for the second time in 2006 by Booz Allen Hamilton [1], [2]. The authors unveiled that there was no significant statistical correlation between R&D spending and the primary measures for financial or corporate success – such as sales, earnings growth, gross and operating profitability, market capitalization growth and total shareholder return.
Yet the authors identified again a group of 94 so-called "high leverage innovators", which exceeded their competitors continuously during the past five years. And that even though their F&E spending to sales ration was consistently lower than the median of their respective industry sector. The study showed that "tremendous results can be achieved with relatively modest amounts" of spending, said Barry Jaruzelski, one of the authors, in an interview with The Wall Street Journal [3].
  The big picture
But what is the formula of success that these high leverage innovators apply? The study showed that the most successful companies exhibited strong capabilities across four key areas: ideation, project selection, product development, and commercialization. "It is the culture, the skills and the process more than the absolute amount of money available," commented Kevin Dehoff, co-author and a vice-president of Booz Allen Hamilton [4].
Translating ideas into economic success an enterprise requires having certain knowledge, tools, processes, and structures; an integrated innovations management system combined with R&D and customer needs. Herman D’Hooge, an innovation strategist at Intel, calls this a user-centered innovations process, which has several interdependent components: Usefulness, usability, and desirability. "You can create a simple conceptual model representing business factors, human factors and technology factors as three intersecting circles. Success exists at the intersection of these three domains. Finding the center is a goal of a mixed-discipline process" [5].
Innovations and Risk
Degree of innovativeness as a matter of strategic risk

  Pitfalls
How bumpy this process-road for most companies is has been documented recently by a research report from the Institute for Applied Innovations Research (IAI), a department of the Ruhr-University Bochum, DE. Innovations experts from 1,200 German industrial companies have been interviewed on factors for success and failure in the development of new products. The shocking result: Only every sixteenth innovations project becomes a market success.
Bernd Kriegesmann, Chairman of the Board of IAI, describes the reasons: "One-sided technology- instead of market-orientation, over-engineering, vague responsibilities, and a lack of priorities prolong the developments and make them more expensive. Ultimately, they lead to the failure of a bigger part of ambitiously started projects. At the same time, the really 'big ideas' face severe opposition already in their very early stages" [6].


  Innovations competence
Paying lip service is of little use. To tap the organization’s full potential a proactive approach for systematically improving its innovations competence is needed. As a starting point a farsighted strategy is needed, which fits to the company and can be implemented in a realistic time scale. It is to be based on an honest analysis of present strengths and weaknesses; it is to capture market opportunities and risks identified by a profound analysis of the industry context. Commonly, in this stage leadership skills and determination of senior management is challenged for resisting prevailing short-term market trends and rather pursuing long-term corporate aims.
Implementing active innovations management means strengthening existing competences in accordance with the objectives derived from corporate strategy. It includes further development of both technological and human resources. Special attention should be drawn to the employees’ social competence. Staffing teams consciously with a mix of enthusiast and hesitant members is a proven technique to fuel the creativity process. Finding the right balance prevents from "group thinking", which commonly causes creativity blockades in too homogeneously composed groups.
At the same time receptiveness for customer needs must be fostered across all divisional borders. Each organizational unit’s specific expertise forms one piece of a jigsaw puzzle. Putting them together to the big picture increases distinctly the ability to assess future market needs. Consequently, the company can create an outstanding competitive position regarding its present customer segments. Furthermore, the company is now optimally prepared for sustainable growth by developing new markets.
The innevo-team would be pleased to continue discussions on this topic with you personally. For your first contact, please use our online form. Some general information can be found at the following websites:


References:
  1. B. JaruzelskiB et al., “The Booz Allen Hamilton Global Innovation 1000: Money Isn’t Everything”, strategy+business, No. 41, Winter 2005
  2. B. Jaruzelski et al., “Smart Spenders – The Global Innovation 1000”, strategy+business, No. 45, Winter 2006, p. 47-61
  3. G. McWilliams, The Wall Street Journal, Eastern edition, October 11, 2005, p. A.2
  4. J. Scanlon, BusinessWeek, McGraw-Hill, November 14, 2006
  5. H. D’Hooge, Electronic Business, ReedElesvier, May 23, 2006
  6. Financial Times Deutschland, 10.01.2007, S. 29

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