The fittest win in the struggle for survival because they succeed in adapting themselves best to their environment. That's the law of evolution. In the case of present day organizations, the ones that are adaptable have a better shot at making it than the ones that are merely strong or profitable

1. Insights
Maximizing Return on Innovation
- Dr. Martin Lockstrom
Innovation & Survival
The laws of evolution say that survival is for the fittest. In the case of present day organizations, the one that is adaptable
has a better shot at making it than the one that is merely strong or profitable. Learn to adapt, or in other words, exploit the
opportunities of an ever changing environment, and the profits will follow.
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2. Continuous innovation is the direct outcome of organizations striving to stay relevant in the face of
changing circumstances. By challenging status quo and disrupting the done thing, innovative thinking
bridges the distance between static organizations and their dynamic environment. However, creating
new innovations is quite challenging in an era of fast paced technological change and global markets.
Being truly innovative is fraught with great risk, especially since it involves exploring novel technologies,
new geographic markets and untapped consumer segments. In many industries, companies invest
heavily in R&D activities, but still see the performance of such activities decline. Why is it so? After all,
innovation is about generating some cool ideas – of which there is no dearth – and taking them to
market, right? Not quite, unfortunately. In order to ensure that innovation actually yields solid return on
investment, innovation activities have to be carefully implemented, and more importantly, in the right
order. The road to high innovativeness can be long and bumpy – in fact, most innovations don’t make
the cut and are phased out by the market. More specifically, innovation efforts fail because of a lack of
any or a combination of four factors: ideas, commercialization, differentiation and IP protection.
Lack of Ideas
This is usually the least critical obstacle. After all, who hasn’t had a killer idea at
some time or other? Most companies are actually brimming with new concepts;
alas, they don’t back them sufficiently with time and human capital resources.
Our research shows that the ideation process within companies is seldom aligned
with strategic business objectives. As a result, companies all too often take their
existing technologies and go out and look for a problem, rather than the opposite.
It is the responsibility of top management to bring people from different business
units and functions to the same table, in order to achieve alignment.
In this endeavour, they can follow the example of companies like Toyota, which
pioneered concepts like continuous improvement and have incorporated the
same thinking within their innovation processes through measures that are as
simple as rewarding employees making the best suggestions for improvement.
Lack of Commercialization
A statement made by Austrian economist Joseph Schumpeter a hundred years
ago holds good even today. He said, “Innovation is the market introduction
of a technical or organizational novelty, not just its invention”. The inability to
successfully commercialize an innovative idea into a marketable product has
been the downfall of many an organization. On the flip side, an old idea put to
work in a new way can work as well as or better than a new invention that is not
implemented right. Put simply, ideas are only as good as an organization’s ability
to commercialize them. Companies like BMW, despite being very innovative, are
open to outside inventions, as long as they help improve their product. For them,
it is more important to orchestrate an innovation rather than to own it.
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3. Lack of Differentiation
Another problem is that very few companies engage in genuine
innovation management. Looking to make quick profit and relying Although the path to maximizing
Summary
excessively on quantitative business intelligence, they end up return on innovation is clear, following
surveying existing customers and benchmarking against their closest it is not easy. Yet, companies must
competitors, whose return on investment is known. Unfortunately, make the hard journey from ideation,
this results in more of imitation than innovation. Of course, it is through commercialization and
valuable to know one’s own standing among peers, but sometimes differentiation to IP protection, in
this could defeat the whole purpose of innovation, which is to create order to succeed. Failure could mean
differentiation! sunk R&D costs at best, and loss of
competitiveness and market share
If products or services are not differentiated, they can never
at worst. Companies can continue to
command a premium. Companies that fail to realize this will
benchmark and imitate successfully
inevitably become victims of commoditization and subsequently,
for some time, maybe a decade at
fall prey to hungry low-cost manufacturers. There are three ways of
most. But eventually, as we have seen
coping with this challenge, namely, ensuring individual innovations
with the rise and fall (and sometimes
are sufficiently differentiated, ensuring that a number of innovations
the second rising) of companies in
are taken to market, and better still, doing both of the above. The
virtually all industries, reality will
challenge today is that commoditization is happening at a faster
catch up sooner or later. Many times,
rate than ever, even in very complex industries such as automotive,
inferior corporate culture is the culprit
aerospace and telecom.
behind a failed innovation. Having
said that, I conclude that the biggest
Lack of IP Protection threat to innovation comes from within
the organization, and not from the
That being said, ensuring a steady supply of innovations doesn’t do
competition.
the trick. History is replete with innovations that lost out to cheaper,
smarter competition because their IP wasn’t adequately protected.
Like a strong gene, which survives simply because it delivers superior
benefits, a good innovation survives on the strength of its competitive
advantage. And once it has become commonplace, it has to be in
possession in order to avoid competitive disadvantage. The latest
string of IP infringement battles between companies like Apple and
Samsung are manifestations of this phenomenon.
About the Author
Dr. Martin Lockstrom
Principal Consultant, Building Tomorrow’s Enterprise, Infosys Labs
Martin is a specialist in Supply Chain and Operations Strategy, Outsourcing/Offshoring and International Management. During
a six-year stint in China, he established the research and education activities at the SCM, Sustainability and Automotive
academic centers at China Europe International Business School, Shanghai.
He established the first endowed chair for Purchasing and SCM in China at Tongji University, Shanghai, and was also
responsible for setting up Supply Chain Management Institute China, an international network of SCM research and
education hubs.
Martin co-founded Procuris Solutions, an IT company specializing in SCM-related solutions, offering consulting services to
companies like Accenture, Ariba, BMW, Clariant, Dell, Dow, Ernst & Young and Intel, among others.
He has a Ph.D. in Supply Chain Management from European Business School, Germany, a bachelor’s and master’s degree
in Industrial Engineering and Management, from Chalmers University of Technology, Sweden. He speaks Swedish, English,
German and Chinese, has published over 50 articles and papers and presented at more than 60 conferences.
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