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Published: May 11, 2004

 
 

Raising Your Return on Innovation Investment

A similar success story appears to be unfolding at the Hershey Foods Corporation. For decades, the legendary candy maker was riding its perennial Reese’s, Hershey’s, and other brands on a path to obsolescence. But starting in 2001, new president Richard Lenny launched a sweeping new product initiative. In addition to slashing overhead and making operational changes, Mr. Lenny instituted a radically stepped-up innovation program. The result was a stream of new products — 30 in 2003 alone — including the FastBreak snack bar, Reese’s and Hershey’s Kisses Limited Editions, and Sugar Free lines. Sales were up 3 percent in the second quarter of 2003. Yet all this innovation was accomplished without any change in the company’s R&D budget.

As Apple and Hershey demonstrate, a wide range of companies can realize better returns on their spending for growth. It is only after they do the hard work of improving effectiveness that they should spend more to earn more.

Authors


Alexander Kandybin (kandybin_alex@bah.com) is a principal with Booz Allen Hamilton in New York. He specializes in developing innovation strategies for clients in the consumer products and health-care industries.

Martin Kihn (kihn_martin@bah.com) is a senior associate with Booz Allen Hamilton in New York. He has worked in the consumer products, retailing, and media industries. His articles have appeared in the New York Times, New York, and Forbes.

Also contributing to this article were Booz Allen Hamilton Senior Vice President Cesare Mainardi, Principal Minoo Javanmardian, and Senior Associate Kolinjuwa Shriram.
 
 
 
 
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Resources

  1. Costas Markides and Paul Geroski, “Colonizers and Consolidators: The Two Cultures of Corporate Strategy,” s+b, Fall 2003; Click here.
  2. David Neely and Kevin Dehoff, "Innovation's New Performance Standard," s+b Resilience Report, 3/15/04; Click here.
  3. “Why the Pace Has to Pick Up: Special Report on Innovation,” Business Week, August 31, 1998
  4. Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Business School Press, 2003)
  5. Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and Sustaining Successful Growth (Harvard Business School Press, 2003)
  6. Charles I. Jones and John C. Williams, “Measuring the Social Return to R&D,” Stanford University Department of Economics Working Paper Number 97-002; Click here.
 
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