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Published: January 8, 2008

 
 

Making Innovation Strategy Succeed

The third one is what we call Technology Drivers, companies that do not necessarily ignore customers, but have a greater focus on breakthrough technologies. They look to address unarticulated needs of customers, swinging for the fences more than taking an incremental approach to innovation. All three models employ customer insight, and it’s important to note that the three produced comparable financial performance. No model was inherently superior financially. The one thing that cut across both industries and models is that the more a company relied on direct customer insight, the better it did.

S+B: Did you also find three corresponding business strategies?
JARUZELSKI:
Clearly there has to be a relationship, and some of it is implicit in the innovation strategy. For example, both Need Seekers and Technology Drivers must figure out how to make an innovation a market success. So they have to focus their resources on channel and market development and education as much as on technology (or whatever the source of the actual innovation). Need Seekers have to be first to market in order to capture maximum value, so the strategy should account for speedily ramping the entire institution, including product development, obviously, but also suppliers and channel partners. They need to remember that Market Readers are out there gauging how successful the innovation is and how soon they can imitate it.

S+B: Did you pick up on innovation capabilities that every company ought to have?
JARUZELSKI:
It’s all a matter of degree, but every company should have a robust portfolio management process and a process for gathering customer insight. They should also have a way to manage and provide visibility into the end-to-end product development process. The level of breadth and depth for each of these capabilities will vary according to the nature of the industry and the innovation strategy.

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Amy Bernstein (bernstein_amy@bah.com) is executive editor of strategy+business.
 
 
 
 
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Resources

  1. Kevin Dehoff and John Loehr, “Innovation Agility,” s+b, Summer 2007: How to follow Toyota’s example to create your own versatile product development process. Click here.
  2. “How Companies Turn Customers’ Big Ideas into Innovations,” strategy+business / Knowledge@Wharton, January 12, 2005: Practices for customer-conscious product development. Click here.
  3. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: The latest installment of Booz Allen Hamilton’s annual study of the world’s largest corporate R&D spenders finds two primary success factors: aligning the innovation model to corporate strategy and listening to customers every step of the way. Click here.
  4. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Global Innovation 1000,” s+b, Winter 2005: Lavish R&D budgets don’t guarantee performance. The 2005 Booz Allen Hamilton study reveals the value of an innovation dollar — and the basics of a better strategy. Click here.
  5. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Smart Spenders: The Global Innovation 1000,” s+b, Winter 2006: Booz Allen Hamilton’s 2006 study uncovers a small group of high-leverage innovators that outperform their industries. Click here.
  6. 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.
  7. W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (Harvard Business School Press, 2005): This book shows how companies can use innovation to lead them to unclaimed “blue oceans” of profits and growth. Click here.
  8. Eric von Hippel, Democratizing Innovation (MIT Press, 2006): Demonstrates the value of “user-centered innovation” and shows how to incorporate the customer into the innovation process. Click here.