The document discusses innovation leadership and why innovation is important for competitive advantage. It states that innovation is significant both during economic growth and recession as it allows companies to stand out from competitors and drive new growth. It also positively impacts company culture and the external environment. The document then evaluates different ways to measure innovation performance, stating that the Innovation Index which accounts for patents, employees, R&D spending, and revenue is the most effective approach. Company size and geography can also influence innovation success, though do not guarantee it. Finally, it outlines three phases in the evolution of innovation capabilities over the past 20 years.

1. Innovation Leadership Rene A Rosenthal Microsite mobile Founder & CEO Part 1

2. Innovation Leadership Why innovate? Innovation provides a source of competitive advantage. Whether through incremental new developments to a product or a big leap forward, innovation involves the creation, selection and efficient delivery of new ideas to allow companies to outperform their competitors by being the quickest and smartest to grasp new technological opportunities, create unique propositions and deliver compelling new products and services .

3. Innovation Leadership Innovation is significant in both good times and bad. In times of economic growth, new ideas, products and services are the lifeblood of sustained increases in revenue and profitability. In a recession, innovation is no longer an option to add value and deliver competitive advantage, but a core means of survival in an increasingly selective market.

4. Innovation Leadership Innovation affects the organization as well as financial performance. A company with a creative culture and a motivated workforce sends a positive message to the outside world and attracts the best people.

5. Innovation Leadership Innovation also influences the external environment. Through the impact on customers, suppliers and sub contractors, innovation success within a firm promotes and encourages more innovation outside (e.g. founding new companies by ex-employees, new ventures, relocation of a partner or supplier into the local area).

6. Innovation Leadership Innovation performance There are many ways of comparing the performance of one company (growth in share price, market capitalization, price-earnings (P/E) ratios), but few are reliable indicators of corporate growth derived from innovation. Number of patents granted per annum, or new product output is one way of assessing innovative performance, but this measurement means that large multinationals tend to dominate.

7. Innovation Leadership Annual research and development (R&D) expenditure as a percentage of company revenue is a second means of evaluating innovativeness, but this carries with it a sector bias (e.g. pharmaceuticals invest more than automotives). Innovation Index™ is the most effective approach using an input/output ratio. It takes into account company size, revenue, R&D investment and patent output. Innovation Index™ = number of patents per employee/R&D as a percentage of sales.

8. Innovation Leadership Innovation Index implications There are clear commonalities across sectors in the influences that apply to help one company be a more effective innovator than another. The level of investment correlating with higher innovation performance is a defined band of R&D intensity differing from sector to sector. Being within the bands does not guarantee innovation leadership but is clearly a contributing factor. Being outside, whether above or below, certainly seems to have little benefit .

9. Innovation Leadership Company size. With the exceptions of Microsoft and Unisys in the software sector that both pay specific attention to creating the small company feel, the larger companies do seem to find it more difficult to be a top innovation performer than their smaller competitors. Being smaller does not imply that a company will be a more effective innovator, but it can be a positive influence.

10. Innovation Leadership Home geography. Again this does not guarantee success but is certainly a potential driver. Where they all compete on largely equal terms such as in the automotive, chemical and life science sectors, Japanese and Korean firms are better innovators than US and Canadian companies who are, in turn, more effective in their use and leverage of R&D investment than their European counterparts. Relatively poor performing companies show that this is not a clear division, but geography does generally seem to have a more significant impact than both level of investment and company size.

11. Innovation Leadership Evolution of innovation capability Over the past 20 years there have been three main waves of innovation, each identifiable by a differing strategic emphasis. These have impacted all aspects of a company’s operations. Phase 1: 1980–1986. Putting the basics in place. 􀂉 A rise in the number, range and type of new products available, through consumer demand, new technologies and market growth, demanded formulating a product strategy as an element of the overall corporate vision. 􀂉 Technology transfer. A need arose for companies to access specific new technologies that could give them competitive advantage through networking and partnering with external sources or recruiting of experienced employees.

12. Innovation Leadership Evolution of innovation capability Phase 2: 1987–1993. Globalization and acceleration. 􀂉 Identifying and exploiting a company’s core competences to the full for creation of new business became a key issue for many. 􀂉 Supplier partnerships – improving alliances with vendors and customers improved the efficiency of both development and production processes. Phase 3: 1994–1999. Focus and integration . 􀂉 Successful integration of R&D with overall business strategy helped improve technology application. 􀂉 Competitor collaboration – short- and long-term strategic alliances for information sharing came into place.

13. Innovation Leadership Rene A Rosenthal Microsite mobile Founder & CEO Part 1