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 / Winter 2007 / Issue 49(originally published by Booz & Company)


The Customer Connection: The Global ­­­Innovation 1000

In deciding whether to approve a new product, Plantronics applies a particularly rigorous program of measurement. In addition to such metrics as revenue from new products, the company has begun to track market response against early sales forecasts. Says Margerum: “There are a number of strategic filters — potential return on investment, sales forecasts — we’re going to use to grade each of our products under development, and that will help us line up in a rationalized way what products we should bring to market.” It’s a complicated process, but in Margerum’s view, it’s a critical component of successful innovation. “The more metrics you have, the more able you are to assess performance, and the better you can become.”

Can companies stifle innovation by paying too much attention to the market and trying to measure everything? Not according to either Maxwell or Margerum. Maxwell succinctly sums up the innovation philosophy of all the Market Readers: “I don’t have a problem with [our] people searching for new technol­ogy, but I want them to be able to understand and articulate the value in the eyes of the customer. If they can’t do that, we make it no secret that we won’t support it and we won’t tolerate it.”

Technology Drivers
Technology Drivers, in generating product ideas, lean toward deploying their own technological skill and relying on unarticulated customer needs for product inspiration, rather than following the market and focusing on direct customer input. This stance has served many of these companies well, particularly those that temper their own design creativity with a rigorous, strategically oriented view of potential customer needs.

Siemens AG, the German engineering and electronics leader with $111 billion in 2006 sales, exemplifies the future-needs-focused approach to innovation developed by successful Technology Driver companies. Like Parker Hannifin, Siemens is a highly diversified, global company. Its business lines include health care, electronics, and power generation. Each of the business units has its own innovation and product development team, and regular internal studies have demonstrated that the company’s highest-performing businesses are also the ones with leading technical positions in their markets.

Meanwhile, Siemens Corporate Technology sits on top of the structure, absorbing about 5 percent of the company’s total R&D budget and helping to guide long-term, cross-disciplinary research and planning. “We have very clear relationships with our business units,” says Paul Camuti, president and CEO of Siemens Corporate Research, the U.S. arm of Siemens Corporate Technology, “and the measurement discipline in place, so that we know that the work we’re doing is relevant to them. While they look out into their markets and derive needs from their customers, we’re looking out there as well, but with a sharp eye on technologies that will impact the future.”

To that end, at the corporate level, Siemens has begun to align its innovation portfolio with such long-term trends as the rise of personalized health care. The company, which has historically been a leader in medical devices (developing the first implantable pacemaker in the 1950s), recently began expanding its innovation portfolio in diagnostic technologies. Says Camuti, “That decision is a good example of how we work hand-in-hand with the business units, and across several units at a time. Our medical business has deep expertise in the needs and the drivers of the health-care industry. And thanks in part to work we’ve done in large, dynamic power systems, we have a deep understanding of some of the enabling technologies, such as grid computing and large integrated data systems, that can be applied to the health-care domain.”

Making such decisions at Siemens involves a twofold planning process. Shorter-term technology road-mapping efforts are carried out primarily in the business units and typically lead to incremental innovations. Meanwhile, Camuti’s group helps develop broader scenarios at the corporate level. Called “pictures of the future,” these scenarios explore technological trends and other driving forces, such as urbanization, demographic change, and the growing demand for security, mobility, and environmental protection. Then the two levels are joined together through a process Camuti calls “retrapolation” — a play on the word extrapolation. “We work back from those future-use case scenarios to highlight technologies, business models, and processes that could be developed that would shape what those future scenarios look like,” he says. “And then we link that into the road maps.”

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  1. Kevin Dehoff and John Loehr, “Innovation Agility,” s+b, Summer 2007: How to follow Toyota’s example without copying its specifics, and create your own versatile product development process. Click here.
  2. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Booz Allen Hamilton Global Innovation 1000,” s+b, Winter 2005, Click here, and “Smart Spenders: The Booz Allen Hamilton Global Innovation 1000,” s+b, Winter 2006, Click here: Predecessors to this year’s study established the importance of quality, not quantity, in innovation investment.
  3. Alexander Kandybin and Martin Kihn, “The Innovator’s Prescription: Raising Your Return on Innovation Investment,” s+b, Summer 2004: Introduces the innovation effectiveness curve, another tool for raising performance throughout the product life cycle. Click here.
  4. W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant (Harvard Business School Press, 2005): Cited by executives interviewed for this article, this book shows how companies can use innovation to lead them to unclaimed “blue oceans” of profits and growth. 
  5. Knowledge @ Wharton and s+b, “How Companies Turn Customers’ Big Ideas into Innovations,” 1/12/05: Practices for customer-conscious product development. Click here.
  6. Eric von Hippel, Democratizing Innovation (MIT Press, 2005): Demonstrates the value of “user-centered innovation” and shows how to incorporate the customer into the innovation process.
  7. For more articles on innovation, sign up for s+b’s RSS feed. Click here.
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