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Wednesday, November 22, 2006

Innovation, Effectiveness & Success

A recent Booz Allen Hamilton study finds that in a group of 1000 companies surveyed, 94 “high-leverage innovators,” including Toyota, Apple, Christian Dior, Google and Caterpillar spend less than their competitors on research and development, yet consistently outperform their industry rivals across a broad set of performance measures. The study notes that these “High-Leverage Innovators” use many different models and approaches to outperform their competitors, but are generally noted for their distinctive skill in at least one element of the innovation process and are adept across all of the stages. Google, for example, is known for generating new ideas with blistering speed. Toyota excels at developing its products and processes far more efficiently and effectively than most other companies. And Apple is noted for its well-honed capabilities in project selection and customer understanding. In the list of 1000 companies analyzed, Ford tops the list on R&D spend and everyone will agree that Ford is hardly seen today as an innovative company. The report titled smartspenders finds that the high-leverage innovators distinguish themselves not by the money they spend, but by building strong capabilities in the four principal elements of innovation: ideation, project selection, product development, and commercialization. High-leverage innovators listen closely to their customers across the entire innovation cycle.

As I wrote recently, there is no link between R &D, productivity improvements or innovation. One does not need to spend about five billion in R&D to find that the next big thing does not exist. Its clearly organizational interest, result orientation, quality of leadership and the latitude the research team has and the integration that business and research has within the enterprise that matters a lot. Clearly these are the factors that get severely affected when organization grows. It’s time to look at assessment of new product /new revenue streams coming out of enterprises lot more closely as they begin to grow. innovation today is more about services, process, business models or cultural innovation than just product innovation. As Michael Scrage recently wrote brilliantly, the simple fact is that "R&D spending is an input, not a measure of efficiency, effectiveness or productivity.Ingenuity, invention and innovation are rarely functions of budgetary investment & points to the fact that Wal-Mart, Texco and Dell have miniscule R&D budgets, their quality, procurement and growth requirements have probably done more to drive productive innovation investment than any competing initiatives. Growing market competition, not growing R&D spending, is what drives innovation".

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