In today's environment of constant change, companies must stay on top of their markets, know their customers and maintain a real-time knowledge of the latest available technologies. In addition, they must know how to use the information they have to identify new markets, create an ongoing stream of valued products and services, prioritize their product, licensing and acquisition opportunities and optimize products for specific market segments. This is the essence of managing innovation.
To effectively manage this vital process, a firm must be able to effectively execute the underlying activities that are associated with managing innovation. These activities include:
Uncovering and prioritizing what customers value
Gaining agreement on what customers value most
Uncovering areas of opportunity
Defining and prioritizing the metrics that predict success
Segmenting the market into groups of customers that value the same solutions
Defining a unique and valued competitive position desired by the firm
Defining new, breakthrough product concepts
Evaluating the potential of alternative concepts and solutions
It is commonly agreed that if a firm can effectively execute these activities, it will be successful in its attempts to manage innovation. Conversely, firms that fail to effectively execute these activities will likely falter at managing innovation. Becoming competent at these activities is a prerequisite for success, but unfortunately, companies investing in many of today's innovation management tools and concepts are not guaranteed that success. In fact, many firms are making substantial investments in attempts to master these activities, but by-and-large are struggling in their efforts to manage what has become a seemingly elusive process.
In a recent survey conducted by The Total Quality Group, a Florida-based consulting firm, it was shown that although firms make annual investments in attempts to manage innovation, most are dissatisfied with the results of those efforts. In general, firms are using commonly accepted approaches to managing innovation, but find themselves involved in ongoing, inconclusive and ineffective attempts to execute many of these fundamental activities.
Interviews with Fortune 1000 firms, conducted as part of that research, gave insight into the reasons why firms are dissatisfied with their ability to execute these activities. The following statements describe what many of those firms go through when attempting to manage the critical elements of innovation.
"Our customers are always changing their minds about what they value. They simply do not know what they want - capturing requirements is a frustrating experience."
"Marketing, R&D, Sales, Engineering and Management rarely agree on what our customers value most. We often compromise our views for the sake of moving forward - and do so with a level of uncertainty."
"Uncovering areas of opportunity is difficult, because opportunity is hard to define. Without an agreed on method for defining opportunity, ongoing debate prevails."
"We spend a good amount of time defining and prioritizing metrics, but they are not predictive of success, they are more reactive in nature."
"Our markets are typically segmented by number of employees, price point, industry or some other statistical classification that is convenient for us. We do not know how to segment in ways that will yield a competitive advantage."
"Our products and services rarely allow us to occupy the competitive position that we desire. We do our best to position our products after they are developed, but by then it is too late - the marketplace has already positioned them."
"We have no method for consistently defining breakthrough product concepts. As a result we typically create products and services that deliver incremental improvement rather than breakthrough improvement."
"We have a lot of great ideas, but can't agree which are best. To some degree, we rely on gut-feel and intuition when deciding which to pursue."
If this describes the frustration felt by many firms as they attempt to manage innovation, then why don't they make stronger attempts to overcome these obstacles to success? Two reasons dominate. First, few methods seem worthy of investment, as most known methods take too much time to implement and do not consistently produce successful results. Second, because existing methods are historically ineffective, it is difficult to financially justify investments in efforts to execute these activities. These factors have hindered the advancement of managing innovation. Amazingly enough, in today's technology-driven marketplace, many firms simply do not budget for, or conduct, the activities required to successfully manage innovation. Because firms are dissatisfied with the typical approaches to managing innovation, they often skimp on or forego qualitative and quantitative research, relying instead on intuition and gut-feel. They move forward hoping they are right, but without the confidence of knowing. They do not have the time it takes to manage innovation - it impacts schedules. They use the information that's available at the time - trusting that it is accurate and complete. Despite the potentially devastating effects of being wrong, many firms have no choice but to quickly move forward with undesirable levels of risk, as they simply cannot justify investing the time and money that it will take to manage innovation. This poses an interesting paradox; many firms are unsatisfied with their ability to manage innovation, yet at the same time they cannot justify the investment needed to better control this seemingly uncontrollable process.
So, let's pose the question. If companies are not making greater efforts to manage innovation, are they saving money - or are they being penny wise and pound-foolish? If companies are struggling to execute the underlying activities associated with managing innovation, then it is fair to say that they are often losing far more than they are saving. These losses are manifesting themselves as missed opportunities and failed efforts. What is the potential cost to the firm? Just ask yourself the following questions:
What is the annual cost of failed product and service development efforts?
What revenue is being forfeited because of failed efforts to discover and pursue new technologies and markets?
What percent of market share is being lost to competitors who are introducing new technologies into existing markets?
Need we go on? Let's face it - the cost of mismanaging product and technology innovation is enormous. The most devastating cost being the potential demise of the firm itself. This far exceeds the cost of any attempt to manage this vitally important process. Years ago, firms could successfully avoid attempts at managing innovation. Industries were stable, changes took place over years if not decades, global competitors were few and decisions to invest in new opportunities could be made over a period of years. Companies had the luxury of waiting for a technology to evolve or for a market to emerge before a decision was made to invest. Those days are over. In today's fast paced Internet economy, decisions to pursue or forego a new opportunity must be made within days - not months or years. Fortunes are being built overnight as ideas and investments are quickly coming together to create value for customers in ways that were previously thought impossible. The luxury of time is now a constraint, an enemy of the firm - one that cannot be controlled - but must be dealt with as a reality that is here to stay. Companies must move forward as fast as possible - making decisions to invest in the right opportunities, technologies and markets - and doing so at the right time. Companies that are indecisive are faced with new competitors in just months.
In today's quick-paced, value-driven marketplace, innovation is emerging as a critical business process. Misguided attempts to cling to old paradigms are sending firms to their early demise. Organizations must face the fact that they can no longer allow product and technology innovation to manage itself. They can no longer afford to view innovation as a random, unpredictable and unstructured process. The cost of neglect has become too great - the risk too severe. It is time to look at new ways to manage innovation - ways that help firms overcome the seemingly insurmountable barriers they face as efforts are put forth to create customer value.