Innovation: what is it worth?

The search for the next big idea always seems to be on the agenda. Companies have been spending big to facilitate innovation in their organisations with a view of growing the business. With spend on innovation averaging 4% of network turnover and ranging between 0.5% to 20%, return on investment is a significant issue.   What has become evident is that innovative ideas leading to growth are few and far between. When one considers the relationship between research and development (R&D) spend, two alarming trends emerge; a) there is little relationship between R&D spend and measures of success such as growth and profitability and b) R&D spend has only been linked to better gross margins. The relationship between R&D spend and achieved growth falls over in two primary areas:

• The innovations being developed are not in line with the companies core competencies 
• There is a significant gap in the ability to develop new ideas and taking them to market

 Ultimately, most innovation fails to meet organisational goals. Figures vary considerably depending on the research. Some research quote failure rates of fifty percent, while other research quote as high as ninety percent of innovation has no impact on organisational goals and the bottom line of the business.

The good news is that organisations do not need to suffer. It is important to remember that innovation is an output of the people and processes of an organisation. The answer lies in providing a system that not only generates ideas that are in line with company objectives, but more importantly develops a defined process of taking ideas to market. By measuring and defining the contribution to various stages of this process, innovation moves from simply “ticking the box” of providing an idea to developing a pipeline that delivers these ideas to the marketplace.

 

John Varvarigos

John Varvarigos is a Senior Consultant at DC Strategy.

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact John Varvarigos at john.varvarigos@dcstrategy.com