The document discusses common myths about innovation that discourage companies from innovating. It addresses five main myths: 1) that innovation does not impact profits, 2) that innovation only applies to new products not services, 3) that innovation is only relevant for certain industries, 4) that innovation requires large investments in new technologies, and 5) that only small companies can innovate. The document argues that these are false beliefs and provides examples of how large companies from many industries successfully innovate to gain competitive advantages and improve financial performance.

1. Innovation Leadership Rene A Rosenthal Microsite Mobile Founder & CEO Part 2

2. Innovation Leadership Key characteristics of innovation leaders Five core characteristics of today’s innovation leaders are described. These are not the only differentiators of enhanced innovation performance, but they are perhaps the most commonly applicable that can be considered in all sectors: 􀂉 In-depth customer insight; 􀂉 leading-edge technical awareness; 􀂉 inspirational leadership; 􀂉 motivational organizational rewards; 􀂉 sharing knowledge.

3. Innovation Leadership Other capabilities such as the exploitation of partnerships, the personalization of products and services, the use of collaborative networks and the flexible work processes that are also being leveraged are all having significant impact. However some of these issues are currently being seen to be applicable in only a few sectors. Summary Despite evidence to the contrary, many companies hold uninformed opinions about innovation and how it relates to them. These include, for example, that innovation only applies to small companies, or to products not services, or that it cannot be managed or measured, or always requires new technologies. These are myths. 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.

4. 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. 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. Innovation also influences the external environment. Through the impact on customers, suppliers and subcontrators, 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).

5. Innovation Leadership Introduction Organisations fearing the impact of innovation or believing that innovation does not apply to their arenas of activity frequently cite a number of justifications for not embracing it. They create excuses and do this, not from the perspective of what it is about their company that is preventing innovation, but as opinions about innovation itself. These views are used to refuse investment in new ideas, maintain a conservative status quo, dispel arguments supporting organic growth and, in effect, become one of the primary barriers to innovation and progress. These innovation myths are killers of creativity, diluters of organisational capability development and often obstructions to substantial progress. Before addressing how organisations have and continue to successfully innovate, it is therefore pertinent to first dispel these myths for what they are – myths.

6. Innovation Leadership Innovation – the myths “ Innovation does not impact the bottom line” Yes it does. Companies that use innovation as a core part of their strategy and as a key driver of new product and service development have been proven to be more successful than those that do not. Study after study has shown that firms that use innovation to differentiate their products are more successful, that innovative companies grow faster, and that the most innovative firms provide returns in such hard measurable areas as shareholder value many times those of non-innovators. Innovation, whether focused on new technologies, new products, new business models or new customer relationships, not only fuels top line growth but also has a direct and positive impact on the bottom line. Companies as diverse as American Express, Honda and eBay all use innovation as a key part of their business strategies, not because it sounds good and will make the CEO stand out from his peers, but because it has a direct, positive effect on profitability.

7. Innovation Leadership “ Innovation only applies to products not services” Federal Express, UPS, Cantor and Sprint are all US-based organisations that are continually developing and offering new innovations into the marketplace. First Direct, Egg, Rentokil and Direct Line are similarly innovative companies in the UK. Likewise, across the rest of the world, from News International and AMP in Australia, HSBC and Hutchinson in Asia to Deutsche Post and Swiss Re in the heart of Europe and Skandia in Scandinavia, leading companies are using innovation as a core growth driver. Although innovation is often associated in the media and hence the ‘business mind’ with product-based firms such as Sony, the companies mentioned above are innovating in services across the board from financial services and delivery services to telecommunication services. Moreover there is an increasing array of firms from Amazon and Dell to Shell and Zara that are using innovation in both products and services to sustain growth, increase market share and improve margins. Although this report only reviews companies that provide products, it is in no way a reflection on the status and importance of innovation in product-providers and service-providers.

8. Innovation Leadership “ Innovation is only relevant to a few industries” The noise that is generated whenever new products are released in some areas makes it is easy to believe that innovation is only applicable in industries such as consumer products, retailing, banking, aerospace, pharmaceutical and telecommunications. However, innovation is certainly not restricted to these sectors. It is just as relevant in education, insurance, real estate, distribution and construction industries. Companies as varied as BOC, Dow, EF, Lloyds, CGNU, Pilkington and Amec are all keen innovators in their own fields. They and their innovations from new chemical solutions to online house-selling and fast-track construction techniques may not be as famous in the consumer mindset, but they are all testament to the power of innovation across all industries. In fact, in these sectors where innovation is not as expected, the ability to use it and apply it as a key source of gaining competitive advantage is, in many ways, more impacting.

9. Innovation Leadership “ Innovation requires high investment in new technology” If a bookstore is improving service quality by introducing a slimmed down order intake process or doubling home deliveries, it is innovating. Where is the new technology here? Innovation can be enabled by new technology but it is not a prerequisite. For many industries, innovation is technology independent. Quicker production processes, more accurate customer targeting, reduction in component cost, faster order turnaround and improved brand awareness are all components and consequences of innovation and can all be achieved without investment in technology. Many of the companies studied in this report do actually invest a large amount in technology by virtue of their industry sector, for example, Software, IT, Electronics, Automotive. In general, however, although technology has to be used to enable innovations resulting in improved microchip manufacture or automated voice recognition software, these are actually in the minority. Less than 20% of innovation involves technology investment, for the majority is focused on the improving the processes, strategies and organisational structures delivering new products and services, none of which are implicitly linked to technology investment.

10. Innovation Leadership “ Only small companies can innovate” An understandable but again false perspective, for innovation is a capability that can and is successfully utilised across organisations large and small alike. This is often more evident in the success of a small company entering into a new market or developing a new technology specifically because the success of the firm itself is probably highly dependent on how successful and therefore how well promoted is the associated innovation. In large companies innovation is just as prominent as in small ones. It is because large companies already have an established market position, product portfolio and customer base on which a good proportion of the organisation and revenue generation is focused, that innovation is sometimes less apparent. There are many large companies that can be characterised by successful innovation. Canon, Sony, Du Pont, Adobe intel and Microsoft are clearly some of the exemplars in their respective sectors but other, less innovation-renowned companies such as Exxon, Corus, Nestlé and Bank of America all have active new product and service development activities driving and supporting corporate growth. Innovation is not unique to any size of company, it is a capability that applies and can be adopted by all.

11. Innovation Leadership Rene A Rosenthal Microsite Mobile Founder & CEO Part 2