Business Innovation

A common sense approach
Today many companies embark upon ambitious innovation projects. Many of these projects to launch new innovative products and services are successful. But equally some are outright failures. The fact that most failures are not related to a lack of resources allocated to the project highlights both the complexity of the innovation process and the difficulty in defining management approaches to innovation.

Innovation is critical if companies are to remain competitive in an increasingly crowded global market. Bernard Charlès*, chairman of Dassault Systèmes, defines innovation as a means for companies to increase the size of the market and to differentiate themselves from competitors.

Yet while the importance of innovation is broadly accepted in the business world, some commentators have argued the opposite. A recent study found no correlation between increased R&D spending and revenue growth (Kandybin, Kihn 2006). This indicates that either revenue is not relevant as a measure of business innovation or that R&D spending is not the only factor which determines innovative output.

Measuring innovation
In another survey, the US Small Business Administration found that small businesses, often with scant research and development resources, are 13 times more likely to be innovative than large companies. It would seem that the independence and entrepreneurial mindset of smaller firms have a major influence on innovation success. Companies keen to realise their innovative potential have increasingly adopted the practice of conducting “innovation audits” within their firms. However, as yet, there is no real consensus on how to measure the innovation process since innovation is an abstract concept that is difficult to quantify.

Solving this conundrum is a key challenge since nothing can be improved unless it can be measured. Recent months have seen a revival in interest in the subject with the decision by the US Department of Commerce to set up an advisory committee on “Measuring Innovation in the 21st Century Economy”. The committee’s remit was to study metrics on effectiveness of innovation and to deliver a broad measure of the impact of innovation on the economy. In preparing its recommendations, the committee members sought advice and feedback from the public**.

Tried and tested approaches are the best bet
The committee’s findings have come as something of a surprise since the breakthroughs achieved by some of the most pioneering companies in their industries are often the result of very traditional management approaches. It is generally accepted that time-to-market is an important determinant of innovation performance. By reducing the development cycle, companies not only respond better to meet customer needs but also incorporate new ideas into their products and services.

Proven methods are the best way to get positive results in innovation, however the innovation process must have the support of top-level management if it is to succeed. Lack of time of people involved in the project is one of the most common reasons for project delays and cost overruns. In extreme cases, the absence of key people or the emergence of last-minute technical difficulties can send an entire project off course. Business leaders must take a pragmatic approach, ensuring that they assign staff to a limited number of projects, in order to accelerate time-to-market for new products and services.

Another key finding is that replication of best practice makes a key contribution in reducing development cycles. Put simply, by re-using what has already worked in the past, companies have more time to focus on the areas where they can be innovative and are better able to bring new products and services to the market. This approach is commonly used in the automobile industry and enables carmakers to develop innovative features for their cars and differentiate themselves in the marketplace.

The simplicity of this approach means that it can be easily applied to firms in the services sector. As in the manufacturing sector, services firms must be prepared to spend considerable time documenting their innovation processes and ensuring that documentation is adequately archived. Once again, this requires a significant commitment from top management so that it is prioritised across the enterprise.

Philippe Lamboley