Earlier this year, an Accenture study found that just 18% of CEOs have seen their investments in “innovation” pay off. That’s fewer than one in five — and frustrating. According to the Doblin Group, a startling 96% of all innovations fail to return their cost of capital.
The Challenges of Measuring Return on Innovation
When it comes to innovation, most companies lack a predictable, pervasive, repeatable innovation process that produces a powerful return on investment. Economic changes, shifts in consumer behavior, and marketplace noise further erode innovation success rates.
As part of Boston Consulting Group’s 2005 “Spurring Innovation Productivity” Study, BCG Chicago office partners James P. Andrew and Kermit King identified three broad options for boosting net present value on innovation: (1) increasing the potency of ideas, (2) lowering the cost of commercialization, and (3) IMPROVING THE SUCCESS RATES.
So How Do We Improve? Four Tips…
Last week, Bruce Nolop, former chief financial officer of Pitney Bowes Inc. and E*Trade Financial, offered these four tips in a WSJ blog post titled, “How to Improve the Odds that an Innovation Will Pay Off“:
- Bet on people, not projects. Rely on the track record of the sponsor more than the specifics of the business plan.
- Fulfill unmet customer needs. Focus on the customer to prioritize the allocation of resources.
- Take an incremental approach. Concentrate on bite-size rather than seismic improvements to products and processes.
- Diversify, but prioritize. Find the sweet spot where the projects are manageable, but not too dependent on any one idea.
…and Eight MORE Tips
Bruce’s four tips are a good start (despite his recommendation that we all watch Shark Tank). Ummm. Aaack. 😉 Here are eight more tips from RE:INVENTION to help jump-start your innovation success rates:
- Develop a market ready offer. Translate your demand-driven concept into concise goals and messages. Market-ready products and services meet the following criteria: they understand the customer as a person; understand the problem they solve; define a clear value proposition; communicate unique product positioning; establish competitive product pricing; set program priorities; and include high impact promotion plans.
- Improve innovation launch economics. Evaluate your upfront investments and opportunity costs and make sure that your launch budget includes a multiyear plan for sustaining growth with marketing/merchandising and customer promotion, knowing that competition for assets is likely to increase. Be sure to evaluate factors like pricing, competitive response, distribution channel development or retailing, success, taxation, co-pack penalties, trade support, and media costs — all of which vary across industries, categories, channels, and countries.
- Focus on scaling customers. The quicker you can find your most profitable customers and win their loyalty, the better. Numbers count. Just be sure your expected lifetime gross profit for customers is A LOT more than your cost to acquire them. RE:INVENTION enabled Genworth Financial, an industry leader in insurance and investment-related products, to do this as part of their efforts to increase market share and awareness among women. Check out the case study.
- Automate what can be automated and leverage technology. New technologies — social intelligence tools, social intranets, real time digital dashboards, ideation and crowdsourcing platforms — can help companies scale innovations and implement ideas rapidly.
- Create an integrated experience for customers. Enable customers to engage in the creation of value through delightful interactions and remarkable customer service from beginning to end of the sales process…and beyond.
- Prioritize inbound marketing over outbound marketing. Interesting, informative content is more cost-effective than selling or advertising. Snag some new ideas from Hubspot’s Inbound Marketing Report: http://www.stateofinboundmarketing.com. Webinars and other forms of user education teleconferencing, such as those which RE:INVENTION set up with Deal Current, raised national awareness and demonstrated thought leadership to customers rather than explicitly telling them that your product is the best through advertising.
- Collaborate creatively. Use your employees and network of business partners to identify unmet market needs and develop new product ideas; leverage their collective insights and support to reduce time to market; support commercialization tactics; leverage supply chain synergies and capabilities; and ultimately, accelerate scale. Consider sharing a percentage of sales.
- Measure it to manage it. Innovation can be unpredictable, but if you can’t measure it, you can’t manage it. Innovation management and commercialization require smart KPIs, benchmarking, and deployment milestone tracking. Set clear success criteria and goals for your teams – then get the heck out of their way so that they can achieve them.
There are many more high impact tips that can be added to this list — as always, we ask our readers to contribute their insights based on their experiences. So: what would YOU add to this list? How did YOUR COMPANY improve your innovation success rates? Share your thoughts and stories in comments below.