why we need to invest in innovation ...

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Brief history of PIMS The PIMS project was started by Sidney Schoeffler working at General Electric in the 1960s, then picked up by Harvard's Management Science Institute in the early 1970s, and has been administered by the American Strategic Planning Institute since 1975. It was initiated by senior managers at GE who wanted to know why some of their business units were more profitable than others. With the help of Sidney Schoeffler they set up a research project in which each of their strategic business units reported their performance on dozens of variables. This was then expanded to outside companies in the early 1970s. The survey, between 1970 and 1983, involved 3,000 strategic business units (SBU), from 200 companies. Each SBU gave information on the market within which they operated, the products they had brought to market and the efficacy of the strategies they had implemented. The PIMS project analysed the data they had gathered to identify the options, problems, resources and opportunities faced by each SBU. Based on the spread of each business across different industries, it was hoped that the data could be drawn upon to provide other business, in the same industry, with empirical evidence of which strategies lead to increased profitability. The database continues to be updated and drawn upon by academics and companies today. What Pims have shown is that the impact of innovation is not immediate. mostly takes place 2 years after investment. This is why really successful companies never stop innovating (look at cisco) and don’t handle innovation as a 6-year cycle which only lasts for 2 years. It must be a continuous effort or it mustn’t be ROCE: Return on Capital employed: ROCE is a measure of how productively a company manages its refining, marketing and transportation assets. ROCE is the ratio of operating profits generated to the amount of operating capital invested. www.marathon.com/News_Center/Marathon_News/Glossary/