Wednesday, January 11, 2012

Innovation spend Vs. Innovation results – Have you recently given a thought to this?

Is it time you looked at how much you are spending on innovation and what you are getting out of it.

There is a possibility that you are doing great, and there is also a possibility that you are feeding a black hole, or you could be somewhere in between.
Nevertheless, you would benefit from the following thought process.

Spread: How is your innovation spending spread? Try bucketing them as Capital cost of R&D infrastructure, Full time R&D people, Maintenance of R&D infrastructure, Outsourced services cost, Cost of promoting innovation culture, and the likes.

Means: What are you means of achieving innovation? Try bucketing them as Market research led, Perceived customer needs, Customer complaints based, Innovation team driven, Driven by employees who are not part of innovation team, Co-creation using external talent, Open innovation, and the likes.

Types: What types of innovations are you focused on? Try bucketing them as Disruptive or Break though innovations, Significant improvement of product or a service, Small but iterative improvements, and the likes. Additionally irrespective of what you offer, you could surely have service innovation as one bucket. You should try to map your innovation objectives of just being in the game to penetrating the new markets to the type of innovations underway at your organization.

For above 3 categories and the respective buckets, arrive at individual targets for your organization. You metrics could then become to not deviate too much for an extended period from the set targets. Setting the right targets would play very important role, however this would primarily be driven by DNA of your organization.

Tracking sheet could look something like below.

Note: The numbers in the table above are for example purpose only.

The most important thing is you are now thinking your innovation spend Vs. Innovation results, that, by far could be the most important take away from this post.

1 comment:

  1. One of the simplest ways to categorize the innovation area so that budget is identified is to realize that innovation and R&D are completely different, and you want to have both because they will add value to your company in a different way.
    R&D employees add value when they become an authority in their industry science community in such a level to be part of an outside board which may pushes the use of company products or upgrade product codes. They may also add values when developing intellectual property for core business products or processes that will eventually become disruptive innovations in the industry or will be part of the future market trends. Usually R&D should be self-sustainable (when possible) by earning grants and creating partnerships that may bring extra cash to the company.
    Innovation employees on the other hand, add value when know the products value chain and know exactly where in said value chain the company may add value, they must lead new product developments processes as project managers converting them in sales as fast as possible in order to achieve yearly new product sales objective. Innovation area brings money to the company with revenue from new product development.
    Both areas are indispensable but should be measured in goals and budget separately.