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(originally published by Booz & Company)


Innovation’s New Performance Standard

Extended innovation enterprise. Out of necessity, companies are increasingly looking to tap the innovation resources and capabilities of suppliers, partners, and third-party design/engineering houses. The companies we surveyed said improved supplier integration alone could yield improvements in time, cost, and quality of 15 to 20 percent.

So far, though, supplier integration remains a weakness — even a contradiction. Although companies recognize the potential benefits, they rank supplier integration 11th of the 14 most common innovation improvement priorities.

The contradiction persists in one area of particular interest: giving suppliers more product-design responsibility. Survey respondents aspire to have suppliers perform almost 40 percent of design work, up from an average of 10 percent today. But fewer than half the companies surveyed said they had integrated suppliers into their product-development process in more than a periodic or ad hoc fashion. The fear of losing essential expertise or skills, and worries about protecting intellectual property, were cited as the main hindrances to greater supplier integration.

To accomplish their ambitious goals, companies must undertake new innovation-improvement initiatives and overcome significant barriers to innovation success. We believe superior innovation improvement is built on three platforms:

  • Product strategy: Consistently making the right bets on defining new products.
  • Product architecture: Leveraging product platforms and establishing technology leadership.
  • Product development: Bringing more new products to the market — at target costs — with speed and efficiency.

We are confident that many companies will be able to unlock the innovative thinking within their organizations and reorganize to utilize that thinking effectively. They will then be able to realize the goals they have set, and reap the rewards of increasing growth and profitability.

Author Profiles:

David Neely ([email protected]) is a principal with Booz Allen Hamilton in McLean, Va. Mr. Neely specializes in innovation and product-development performance across a variety of industries that include aerospace, automotive, technology, and consumer products.
Kevin Dehoff ([email protected]), a vice president with Booz Allen Hamilton in New York, is the global leader of the firm's innovation service offering. He has spent more than 13 years helping clients improve efficiency and effectiveness in new product development.
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