Having a great idea is just the beginning

Feb 05 2008 by Nic Paton Print This Article

Companies that focus on improving not just their innovation but also their innovation management tend to be better overall performers than those firms that simply see the success or failure of an innovation as something best left to chance.

Research by management consulting firm Arthur D. Little has argued that the reason why some firms are more successful at harnessing the power of innovation is simple Ė it all comes back to management.

The success of firms such as clothing chain Zara, electronics giant Phillips and car firms Scania and Volvo is not just because they are great innovators, although they are, but because they also go out of their way to identify the type of value they want their innovation to create.

Once this has been agreed, they then ensure the innovation process is closely linked to their business and their specific marketplace, argued Arthur D. Little.

This harnessing of innovation has to come right from the top, from the chief executive, as well as beyond, it emphasised.

Many CEOs and business leaders were frustrated at the fact that they throw wads of cash at research and development and yet fail to get the return they expected, it added.

It cited the example of Ford, which spent $8bn on research and development in 2005, an investment that was not reflected in bottom line improvement.

Of 1,000 companies studied fewer than a tenth produced significantly better performance per R&D dollar over a sustained period compared with others in their industry, it said.

"Successful innovation is not about how much you spend, but why and how you spend it. In other words, about knowing what kind of value your business is aiming to

create, and then managing innovation in the most appropriate way given the context in which your business actually operates," the report stated.

The right choice for how to run innovation within an organisation depended crucially on industry sector, competitive environment and where the company was positioned in the value chain, argued Per I Nilsson, director of the consultancy's technology & innovation management practice

"Maintaining an innovation strategy based on specific goals and with an eye to one's own industry landscape is vital to improving the overall value that a business gains from its innovation efforts," he added.