Which Innovation Efforts Will Pay? by: Alexander Kandybin

25 03 2010

“For many companies, developing new products is a hit-or-miss proposition.  Some businesses with successful innovation practices are relying on a new analytic tool to ensure that the hits are much more likely.”

The goal of innovation practices leads to customer engagement and profits.  To reach this goal, some companies spend a fortune on research and development, but studies have shown that there is not a direct correlation to growth.  Other companies also pursue the strategic tactic of benchmarking.  However, companies can be quite different from one to the next, so innovation efforts are not as successful as they could be.

Organizations must form their own innovation practices based on their competencies to identify their short and long-term innovation opportunities.  The “innovation effectiveness curve” is a metric that will help companies achieve this task.  It contains data about every active project to see the overall returns on innovation investments and to help make beneficial changes.  There is much emphasis on improving the curve rather than just increasing the R&D budget.  It is important to not ask how much to spend, but how to spend.

The effectiveness curve allows a company to build on its current innovation approach and identify new capabilities or long-term opportunities that need to be exploited.  “In the past, projects had very rarely been canceled; they limped along for years, consuming scarce resources.”  The company must reallocate resources from areas that are underperforming to more potential areas that will increase returns.

As you can see in this diagram, the company's resources were reallocated to new areas that increase returns.

Company efforts are focused on building a competency of innovation and scout the world for new ideas and technologies that can be adapted to your products and services to achieve strategic goals.

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