Studies have shown that companies’ return on innovation (ROI) or hit rate is somewhere between 2-10%. That is another way of saying that around 90% of all innovation efforts are never commercialised or used in general. If Nordic companies could raise the ROI with just 10-20% this would give them a significant competitive advantage in global competition.
It seems, however, that innovation is still in its infancy as a management discipline, and it seems that if companies start approaching innovation in a more systematic way – e.g. through the application of measured and managed innovation they could increase their ROI at no or small additional costs.
Secondly, the Nordic nations top the global league in terms of public-and private investment in innovation. (Government, business expenditure on R&D combined GBERD). Productivity is the standard measure for a nation’s well being, and productivity is largely driven by innovation – especially the adoption of new technologies incl. business models and organisational changes in the individual enterprise.
Because of better agricultural technology and production methods, for example, four U.S farmers could feed 10 people in 1900; now the same number of farmers can feed 388 people. Public innovation programmes have hitherto focused mostly on business framework conditions – for example supporting clusters, networks, science parks, technology transfer mechanisms etc.
However, consider two companies within the same industry and within the same Nordic country operating under the same business framework conditions. How do we explain that company A outperforms company B? Business framework conditions are important, but more recent studies indicate that a company’s innovation performance is ultimately a result of the company’s internal capabilities and culture for risk and innovation.
We therefore looked for tools that could address the issues of measured and managed innovation, that could give us a better understanding of how public innovation programmes in the future can address innovation based on the needs of companies and not vice versa.
In pursuit of launching a pilot project dealing with the issues of raising companies’ ROI through measured and managed innovation we scanned the global market for articles and references for tools dealing with innovation in a structured organisational way.
We singled out two tools, namely the Innovation Radar and Five Disciplines of Innovation
From this desk-research we singled out two tools, namely the Innovation Radar developed by (Mohanbir Sawhney, Robert C. Wolcott and Inigo Arroniz: ‘The 12 Different Ways for Companies to Innovate’, MIT Sloan Management Review – Spring 2006 Vol. 47 No 3) Kellogg School of Management and Five Disciplines of Innovation developed by (CEO Curtis Carlson) Stanford Research International.
The Innovation Radar was partly chosen because it had already been tested and been statistically documented among 40 companies in the US. More importantly the Innovation Radar was chosen because it gives a holistic view of innovation, and it supports the empirical evidence of companies that take a business model perspective on innovation outperforms companies’ that focus more narrowly on only product or process innovation.
Finally the Innovation Radar provides a tool for measured and managed innovation, and it is easy for a company to answer the on-line questionnaire on which the profiling is based.
Figure 1: The Innovation Radar
Stylized company innovation radar is shown below with the example of Starbucks.
|Visualize and Brainstorm: Explore dimensions of innovation in a systematic and holistic manner|
|Diagnose: Identify the gaps in innovation performance of firms/business systems|
|Benchmark: Benchmark the innovative capabilities of firms within and across industries|
|Design New Ventures: Design and track the development of complete business systems|
|Manage across the Portfolio: Enable a holistic view across the firm’s innovation initiatives|
Source: Rob. C. Wolcott: Innovation Radar – Kellogg School of Management
The second tool selected for our pilot project InnoTools was SRI’s Five Disciplines of Innovation, which is shown below.
SRI’s Five Disciplines of Innovation was chosen for some of the same reasons as the Innovation Radar: i.e. it had been tested and proven successful in many projects and received international acclamations. But most importantly, the tool puts strong focus on the Needs of customers in the way it works with individual innovation projects.
Five Disciplines of Innovation shifts the traditional technical focus of innovation towards the business value proposition
Many innovation projects are biased towards the technical attributes of a product or service. Yet, by forcing people, teams or companies to work with the customer NEED per se of a new product or service, and make them convincingly develop their value proposition in both qualitative and quantitative terms, the Five Disciplines of Innovation shifts the traditional technical focus of innovation towards the business value proposition. As such the Five Disciplines of Innovation ultimately forces innovation projects to ‘think more like a venture capitalist than an engineer’.
The pilot study was in essence very simple and comprised the following steps. A number of companies did the Innovation Radar questionnaire and had consequently a company innovation radar profile mapped. Each innovation radar profile was followed-up by a deep-dive workshop, where around 5-8 managers from the various company departments had their profile presented. In the workshops each company went through the exercise of:
Given that both innovation tools for measured and managed innovation have been developed in the US and mainly tested there, it was decided to make a test of their robustness in view of a Nordic setting. The test of application in a Nordic setting meant that 8 Nordic-Baltic companies of different size, from 7 different business cultures and from 8 different industries were selected for the pilot study.
In addition, a number of success criteria were stipulated for the pilot study. The main success criterion was that:
Both the Innovation Radar and the Five Disciplines of Innovation proved to be very relevant and valuable tools according to the companies’ own evaluation
Based on the evaluation among around 56 CEOs and senior managers from 7 countries and 8 companies both the Innovation Radar and the Five Disciplines of Innovation scored above 4.
NICe wants to use the results of the case study in a follow up dialogue with national Nordic stakeholders for innovation. Both the Innovation Radar and the Five Disciplines of Innovation proved to be very relevant and valuable tools according to the companies’ own evaluation. This is also underlined by the fact, that 3 of the pilot companies have chosen to use the Innovation Radar as their company innovation strategy tool, and 2 companies have chosen to apply the Five Disciplines of Innovation in their future work with innovation projects.
A possible future full scale project might entail the following:
The following results from a full-scale follow up on the pilot study could be envisaged:
By Jørn Bang Andersen, senior advisor, NICe
About Nordic Innovation Centre (NICe):
The Nordic Innovation Centre initiates and finances activities that enhance innovation. We cooperate primarily with small and medium sized and large companies in the Nordic region. We aim at developing a smoothly functioning Nordic region without national barriers. Nordic Innovation Centre is an institution under the Nordic Council of Ministers. The centre is located in Oslo, but has projects in all the Nordic and Baltic countries.