January 12, 1998 Management Strategies Manage Innovation Throughout Your Value Chain Innovation management needs to be an on-going competitive effort woven throughout the entire corporate value chain. While most manufacturing organizations worldwide believe that innovation is a high priority for future success, very few believe their own organizations are effective enough at innovation. As a result, a key strategy for competing into the next century revolves on the concept of "innovation management." Unlike singular past efforts, (e.g., one-time massive reengineering) to leapfrog the competition, innovation management is being implemented as an on-going competitive effort woven through the corporate value chain (i.e., supply chain, customer service, etc.), and aligned with boardroom strategy, according to a global survey conducted by Arthur D. Little Inc. (Cambridge, Mass.; www.arthurdlittle.com), a strategic management consulting firm. Just 25% of organizations, primarily in the manufacturing and telecommunications industries, view innovation as an on-going series of steps tied not only to strategy, but driving corporate business process and functions, technology, and people. Within this group - which Arthur D. Little refers to as "trailblazers" - company size, revenues and market reach were mixed. The remaining 75% of those surveyed fall into the category of innovation "pathseekers" who say that while they recognize the importance of innovation, they still face significant obstacles in deriving value from innovation beyond the product and service areas. "Despite the race to innovate, innovation for a new product's sake is simply not enough," said Ronald Jonash, global practice leader for technology and innovation at Arthur D. Little. "A competitive advantage in the marketplace requires that organizations align on-going innovation management throughout an organization's value chain. In addition, there must be commitments from top management, with significant concentration on benchmarking and incentive programs," he said. The Arthur D. Little Global Innovation Study, which surveyed top level executives of approximately 700 organizations across 10 industries worldwide, identified a shift in global thinking over the past five years regarding the role of innovation in creating value to an organization. Successful innovators have moved from a cost-cutting posture to a growth-oriented strategy. This enterprise-wide strategy being implemented by the trailblazers and aspired to by the pathseekers differs starkly from results of Arthur D. Little's 1991 global innovation survey, in which innovation was tied primarily to product development. According to the survey, the trailblazers were led by companies located primarily in the Asia/Pacific and European regions, followed closely by the North/Central/South American regions. "We have identified some common characteristics that make the small group in our trailblazers category successful innovators: boardroom buy-in, an expanded role of the Chief Technology Officer, benchmarking innovation practices, and program incentives," Jonash said. Boardroom buy-in entails not only bringing in the best and brightest talent (which the 1991 respondents rated as the key to successful innovation) but, equally important, demonstrating the ability to "walk the talk," and to develop and foster innovation efforts at all levels of management. In addition, successful innovators incorporate innovation measures into performance reviews and provide incentives and rewards for initiative and risk taking - much like sales performances. "While most companies employ traditional performance measures to gauge progress, to date relatively few companies specifically measure the effectiveness of their innovation activity, despite enormous investments in technology, marketing and R&D," Jonash continued. "The global survey results support this assertion. Less than 50% of respondents across the globe use product or process measures, and only about a third employ service innovation measures. Those few companies that do specifically employ key innovation measures are much more likely to derive business value over time from their efforts. The implication is clear: applying specific innovation measures to your business can close the loop on deriving business value and an on-going competitive edge from an integrated innovation management program. While resources were cited as the key obstacle to innovation in Arthur D. Little's 1991 survey on innovation, today's business leaders point to obstacles which reflect back to strategy and decision making, according to the study. These obstacles include screening ideas to identify those with promise, effectively gathering intelligence to make decisions on new ideas, and ensuring that innovation activity is clearly executed with company strategy. The Manufacturing Report © Copyright 1997, 1998 by Lionheart Publishing, Inc. All rights reserved. E-mail Editorial Dept: tmr-editorial@lionhrtpub.com Lionheart Publishing, Inc. 2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA Phone: 770-431-0867 | Fax: 770-432-696 E-mail: lpi@lionhrtpub.com Web Design by Premier Web Designs E-mail: lionwebmaster@preweb.com