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How to Get a Better Return on your Innovation Investment
 

How to Get a Better Return on your Innovation Investment

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So you’re convinced that investing in Innovation is a good thing to do but you’re not sure that you are getting good value from your investment. You’ve seen over a dozen articles on innovation ...

So you’re convinced that investing in Innovation is a good thing to do but you’re not sure that you are getting good value from your investment. You’ve seen over a dozen articles on innovation in the last year alone. These often look at a few iconic examples (e.g. Apple, eBay, or P&G) but some of the advice is conflicting and you wonder if you can really replicate Apple’s business model in your industry! You think that some of your innovation management practices need improvement but there seems to be little empirical evidence about what really works in terms of managing the innovation process.
We’d like to share some findings from Arthur D. Little’s 8th Global Innovation Excellence Study – a detailed cross-industry benchmark – and invite you to benchmark yourself against your industry peers.
The study is based on looking at the relationship between innovation success (based on impact of innovation) and innovation performance on a comprehensive framework which breaks down innovation activity in different areas and looks at adoption of best practice in each area.
What you will learn
This webinar will provide some hard evidence on which innovation practices separate top innovators from others within and across a wide range of industries, including four key cross-industry innovation management practices which are most consistently linked to strong innovation performance:
• Understanding important technologies in terms of their contribution to corporate goals.
• Using external sources of business intelligence in a structured way.
• Reacting to changes in targeted segments by reviewing the product/service portfolio.
• Mobilizing the whole organization to develop new ideas.
To view this webinar in its entirety, please visit: http://budurl.com/fwwd

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  • What I thought we would do is Explain how we think about innovation excellence and measuring innovation – and how we have used these concepts in a recent Global Innovation Excellence Study. I’ve brought a few copies of the report – it can also be downloaded from the website.Then i’d like to share some of the findings of the study about how well we innovate – you will see there is still a lot of room for improvementThen we will cover some of the major insights.Finally, I’d like to invite you all to participate – participation is free, and it provides a benchmark against global best practice and peer performance.
  • We ran it in 2009-2010 and then again in 2012.Fundamentally we have trends across time which means we have previous empirical evidence for study design. It also means we can look at what has changed over time in different sectors.We have a broad spread of responses – they broadly match ADL presence.
  • There are lots of ways to think about innovation. In ADL we use a structured framework that has worked for us for quite a while, It was initially introduced in 1995 based on Arthur D. Little’s consulting experience in the area of Technology and Innovation Management and has been gradually refined through extensive caseworkand the evolving Global Innovation Surveys.The model provides a structure to examine the different components of theinnovation system and which also sets out a range of best practicescompanies can adopt to achieve high innovation performanceInnovation Strategy: Corporate strategic & innovation priorities (how is organisation organised, who has responsabilities how are targets set).Business Intelligence: Tools and techniques used to identify, extract and analyze business dataTo more classical parts of the process of ideation, product and technology portfolio, idea management and development and post launch. For each of these the benchmarking process looks at the addoption of best practices.
  • It’s important to realise that not all industries are the sameWe can see that the importance of different parts of the model varies by industry – as we saw yesterday in ABB’s presentation the energy sector (upstream and power generation) emphasise the importance of resources.ONE OF THE THINGS THAT WE TOOK A DEAL OF CARE WAS TO NORMALISE ACROSS INDUSTRIESEach of the 8 component gets a score and these are weighted based on industry importance.
  • It’s important to realise that not all industries are the sameWe can see that the importance of different parts of the model varies by industry – as we saw yesterday in ABB’s presentation the energy sector (upstream and power generation) emphasise the importance of resources.ONE OF THE THINGS THAT WE TOOK A DEAL OF CARE WAS TO NORMALISE ACROSS INDUSTRIESEach of the 8 component gets a score and these are weighted based on industry importance.
  • How do we measure innovation success?It’s difficult… studies after studies have struggled to link it to profitability.Our approach is to look at things we can attribute to innovation so increased “new” revenueIncreased new share of EbitImpact of Cost reductionTime to marketAnd some measure of satisfactiion (weighted by the relative spending on Product & Service / Process / or Business Model innovationThe footnote is important, we did our best to normalise responses by industry category – we can do this because we have data on spread of performance by industry from previous studies and this study.
  • As I said One of the key trends we are happy to see is a relationship between innovation management processes and
  • 1 – there is a good relationship between adopting best practice processes and innovation success (that’s a relief for those of us who believe in processes).2 – There is a real pay off from innovation. And real pay off from being better at innovation3 – There is a shocking relationship between tracking innovation performance and innovation success. And a lot of respondents are not doing it very well. It’s something that we’ve talked about for years, 4 – We have pile of data and we’ve identified four things that really appear to have real impact across all industries.5 – Finally – this year we had a specific module on innovation and growth and we’ve identified some of the best practice for high growth high innovation companies.
  • So what do the results look likeThe first thing is that we see a relationship between innovation success and use of the types of best practice processes we cover in the Global Innovation Excellence Study.The good news is that the relationship is statistically significant.There is a spread – it isn’t a perfect line (but if I showed you a straight line you’d be rolling on the floor).
  • We found a strong and positive correlation between companies’ assessment of their own capabilities in innovation measurement and the innovation success achieved. This underpins the long-accepted maxim supported by our own experience in working with clients, namely “If you can’t measure it you can’t manage it”. We see a clear correlation between use of innovation metrics and innovation success with decreasing performance in innovation metrics capabilities, innovation success also decreases significantly (dropping monotonically with each successive drop in quartile). This underlines the inherent difficulty companies have in measuring innovation and the significant potential for companies to improve their capabilities in this area.In general, we see best practice as beginning with innovation strategy and objectives, focusing on a small number (less than 10) of innovation metrics which cover innovation, inputs, process, output and impact.
  • Mobilizing the whole organization to develop new ideasA common mistake in idea generation is to let a single R&D Group or an Innovation Unit solely lead the process. The whole organization (one could even say the whole world) has to be mobilized in order to improve:a) the chances of coming up with a great original/new idea and;b) the opportunity to enrich and get feedback on “new ideas” from a wide range of business functions early on.A growing number of companies realize that they have failed to make innovation the business of everybody and that this is costing them dearlyReacting to changes in targeted segments by reviewing the product/service portfolio This practice is concerned with reviewing the product/service portfolio frequently, and in a structured manner, in order to meet potential changes in targeted segments. This is about optimizing resource allocation in line with changes in their target segments, removing “waste” from the portfolio of projects.
  • There are lots of ways to think about innovation. In ADL we use a structured framework that has worked for us for quite a while, It was initially introduced in 1995 based on Arthur D. Little’s consulting experience in the area of Technology and Innovation Management and has been gradually refined through extensive caseworkand the evolving Global Innovation Surveys.The model provides a structure to examine the different components of theinnovation system and which also sets out a range of best practicescompanies can adopt to achieve high innovation performanceInnovation Strategy: Corporate strategic & innovation priorities (how is organisation organised, who has responsabilities how are targets set).Business Intelligence: Tools and techniques used to identify, extract and analyze business dataTo more classical parts of the process of ideation, product and technology portfolio, idea management and development and post launch. For each of these the benchmarking process looks at the addoption of best practices.

How to Get a Better Return on your Innovation Investment How to Get a Better Return on your Innovation Investment Presentation Transcript

  • How to Get a Better Return on yourInnovation InvestmentJune 20th 2013Live tweet with #ROInnovation
  • Rick EagarPartner, Arthur D. LittleEagar.richard@adlittle.com+44 7710 536471
  • 4Three discussion topics What is Innovation Excellence in practice? How well do we innovate? How can you benefit?
  • 5We have responses from 600 companiesacross two time periodsIndustry Cluster0% 10% 20% 30%OtherPharmaceutical and Bio-…Logistics, Transport and TraveOil and GasAerospace & DefenceWhite goods and consumer electUtilitiesFood and Beverage (incl. SupplMedical Technology and MedicalElectrical Engineering and EleAutomotive Manufacturing and ATelecommunications, IT/SoftwarChemicals (including SpecialitIndustrial and ManufacturingGeographyEuropeAsiaAme-ricasSource: ADL GIES 2012
  • 6What is Innovation Excellence? Zoom in on “How” (Process quality) 8 critical sub-processes/capabilitiesUpstream capabilities(Doing the right things)Downstream Capabilities(Doing things right)
  • 7Some real differences across industriesHighest importanceLowest importancehttp://www.adlittle.com/3906.html
  • 8Some real differences across industriesHighest importanceLowest importancehttp://www.adlittle.com/3906.html
  • 9Innovation Success Measures “New” share of Revenues* “New” share of EBIT* Impact of Innovative “Cost-Out” Processimprovement* Time-to-Market* Innovation satisfaction (weighed by product,service, process or business model innovationactivities)* Normalised across industries
  • 100.200.300.400.500.600.700.800.901.00200 300 400 500 600 700 800Average score of 6 / 10Note: R2 = 0.33. The relationship is significant at p<0.001 – there is less than a 1 in a 1000 chance that this relationship is due to random effectsSource: ADL GIES 2012 (N=273)Top innovators OthersNatural innovatorsDormantsWorld class innovatorsStriversWorldclassInnovatorsAchieve significantly better innovation successthan others, and have developed andimplemented sophisticated, modern innovationmanagement approaches to support successNaturalInnovatorsAchieve high levels of innovation success – yetthey seem to do so without having all the bestpractice innovation management mechanisms inplaceStriversAre working hard on developing sophisticatedinnovation management practices. Achievinggood performance, but have not yet reached thelevels of success of World class innovatorsDormantsTheir innovation success is limited but they havealso not yet implemented the best practicesneeded to improve, and so generally havesignificant improvement potentialScore on Arthur D. Little InnovationExcellence IndexInnovationSuccess= Average acrosssample
  • 11Five Major Insights:Decoding innovationsuccessDriving growth 4 practices stand outand have a high impacton innovation success(regardless ofindustry, size orinnovation focus)4 high impact practices There is a clearcorrelation betweencapability in innovationmeasurement andinnovation success Top quartile innovatorsobtain 13% more profitfrom new products &services and 30%shorter time to break-evenPerformance & financialresultsMastering the KPIs There is strongevidence thatexcellence ininnovationmanagement leads tohigher innovationsuccess When managinggrowth, top innovatorsoutperform others by15-20% – In particularin identifying unmetneeds, building cultureand competence12354 “If you can’tmeasure it youcan’t manageit”Innovation Excellenceconclusions
  • 121: A good capability delivers!0.20.30.40.50.60.70.80.91.0200 300 400 500 600 700 800InnovationSuccessScore on Arthur D. Little Innovation Excellence Index= Average across sampleR2 = 0.33Note: R2 = 0.33. The relationship is significant at p<0.001
  • 132: Top Quartile Innovators get nearly twice theEBIT from Innovation and much fasterNew products/services share of total salesNew products/services share of total EBIT35 %15 %16 %6 %≤ 3 years on market***≤ 1 year on market***15 %29 %16 %7 %≤ 3 years on market***≤ 1 year on market***OthersTop innovatorsAvg. time to break-even for new products/services1522No. months tobreak-even**Impact30%13%
  • 143: Good Innovation measurementcorrelates with success“If you can’t measure it, you can’t manage it” Clear correlation between companies’capabilities in innovation measurement andthe innovation success achieved Less than 20% of companies believe theyare better than average in innovationmeasurement capabilities This underlines both the inherent difficult ofeffective measurement of innovation, andthe significant potential for companies toimprove their capabilities in this areaReport % of people in each category.Companies really need to get a handle on measuring their innovationperformanceSelf-ratedinnovationmetricscapabilitiesAverage innovation success-10%**Don’t measureBottom 25%Below averageAbove averageTop 25%-25%***-20%***-14%***
  • 154: Four high impact practices identified4. Reacting to changes intargeted segments byreviewing of theproduct/service portfolio2. Using external sourcesof business intelligence ina structured way1. Understanding eachtechnology in terms of itsquantified contribution tocorporate goals3. Mobilizing the wholeorganization to developnew ideas
  • 16POLLQUESTION
  • 17Which of the high impact practices is yourorganization weakest in (choose one)?1. Understanding each technology in terms of itsquantified contribution to corporate goals2. Using external sources of businessintelligence in a structured way3. Mobilizing the whole organization to developnew ideas4. Reacting to changes in targeted segments byreviewing of the product/service portfolio
  • 185: Growth accelerator frameworkClear, shared vision and strategy for growthCenters of excellenceInterfaces & processesPartnerships & open innovationPilotingImplementation planningCorporate improvement /innovation programCapability developmentTool development & hand-overGrowth vision & missionTeam buildingEntrepreneurshipChange managementSegmentation & profilingTrends & scenario’sCompetitor analysisBusiness models & value chainInnovation benchmarkingCore competencies assessmentEmerging technology heatmapsAdjacencies mappingAPilots & roll-outOrganization &processesCulture & changeCapabilities &toolsUnmet needs SolutionsValue proposition & value sellingGo-to-market strategyFeatures & modularizationInnovation platforms & roadmapsFindinggrowthDeliveringgrowthCustomers & markets1Competencies & technologies25 6 7 8Growth roadmap4Opportunity spaces3Feasibility assessmentOpportunity evaluationOpportunity scoutingBusiness case developmentImplementationBCSource: Arthur D. Little
  • 19FindinggrowthDeliveringgrowthPilots & roll-outOrganization& processesCulture &changeCapabilities& toolsUnmetneedsSolutionsCustomers & marketsCompetencies &technologiesGrowth roadmapOpportunity spacesImplementation123Clear, shared vision and strategy for growth5: Top Innovators do up to 25% better inadopting best practices in accelerating growthWhat do top innovatorsdo better?Correlation betweengrowth practices and innovation success20%10%0%Average: 16%Megatrends impactDedicated functionApproved roadmapOpen innovationPilot and roll-outSelect opportunitiesCompelling propositionGrowth strategyLeverage competenciesEntrepeneurshipUnmet needsNote: Percentage indicates percentage-point differenceDifferences in usage between top innovators and others123
  • 205: Top Innovators have overcome importantinternal challenges that are keeping back others No problem for top-innovators :1. Obtaining top managementsupport2. Alignment towards a commonstrategy for growth3. Establishing cross-functionalrelationships4. Enabling fast decision-making5. Minimizing internalbureaucracy Font sizes are proportional tofrequency of mentioning Similar answers were clustered tofacilitate interpretationChallengesYellow topics are indicated by most innovators but not by top innovators
  • 21How can you benefit? Get the overall results (website, card, mail, …) Participate (at no cost):– Answer calibrated questionnaire (± 1 hour)– Enjoy the output !: Position relative to peers and the world My strong and weak points Recommended improvements Toolkit access:http://www.adlittle.com/survey_toolkit.html
  • 22Overall position relative to sector peersand the worldInnovationSuccess2Innovation Management Approach1Innovation performance overview Company ABC is sophisticated inits Innovation managementapproach, and has a top quartileinnovation success Innovation success could beenhanced by upgrading:1. Technology portfolio mgmt2. Resource & Competence mgmt3. Post-Launch capabilities4. Business IntelligenceCommentsInnovation managementapproachBasic Inter-mediateSophisticatedLowQuartileMediumQuartileGoodQuartileTopQuartileYour COIndustry peersOther industries800720640560480400320240160800499ScoreYour co . Industry avg Top companies*648*567
  • 23Position relative to PeersProduct /service port-folio mgmt.BusinessintelligenceDevelopment&LaunchPost-LaunchResource & Competence ManagementIdea managementTechnologyportfoliomgmt.Inno-vationstrategyCompany ABC’s capabilities based on survey resultsThe strategic importance of the model as reported by industrypeersStrategic importance: Industry averageInnovation management approach:Company ABC*Product /service port-folio mgmt.BusinessintelligenceDevelopment&LaunchPost-LaunchResource & Competence ManagementIdea managementTechnologyportfoliomgmt.Inno-vationstrategyHighestimportanceLowestimportance* Scores reflect Company ABC’s positioncompared to the rest of the industryBottomQuartile3rdQuartile2ndQuartileTopQuartile
  • 24Improvement areasInnovationstrategyModel partBusinessintelligenceIdeamanagementProduct/serviceportfolio mgmt.TechnologyPortfolio mgmt.Development &LaunchPost LaunchBDApproach level(based on max. score)Improvement areasEGHResource &CompetencemgmtInnovation ManagementApproachCompany ABCIndustry averageTop companies20% 40% 60% 80% 100%800720640560480400320240160800695*474Score374o Develop and leveragetechnology roadmapo Articulate goals & targetso Further formalise technology &IP intelligenceo Specify roles and processo Provide better strategicguidanceo Strengthen processeso Align roadmapso Structure make/buy decisionso Structure and share approach toaccommodate different projecttypeso Improve as Company ABCexpands beyond current coregoing forwardo Improve competence and IPmmnto Improve portfolio managementprocesses and toolsCFI= Major improvement areas
  • 25In conclusion Good progress with understandingExcellence 6/10  work to be done! Excellence gives much higherPerformance Some things matter more than others Quick Excellence Health Check availablefor you
  • 26Stay up to date on upcoming webinars by following us @sopheonRick Eagar, Partner, Arthur D. Littlehttp://www.adlittle.com/Eagar.richard@adlittle.comQuestions? Email alise.houserman@sopheon.comThank You for Attending