Turning Innovation into Success: In Recent Years, Many Companies Have Switched Their Focus from Re-Engineering and Downsizing to Innovation-Led Growth. but How Many of Them Really Understand the Process of Innovation and the Factors Which Turn a Good Idea into a Commercial Triumph?
de Moerloose, Chantal, European Business Forum
Senior executives are frequently frustrated by their companies' failure to convert creative innovation into shareholder returns. They become resigned to launching strings of new products in the hope that--by the law of averages--a certain percentage will some day become winners.
Contrary to those who believe innovation is a random 'hit or miss' affair, however, a growing body of research shows that following certain rules can significantly improve the chances of success. Work which has compared successful and unsuccessful new products reveals a hierarchy of factors, many of which are under the control of top management. Companies can alter the odds still further if they distinguish between the various different types of innovation and modify their new product management strategies accordingly.
The insights in this article are based on a combination of previous studies and a previously unpublished survey of a representative sample of European companies. They were enriched by the application of so-called 'structural equations modelling' techniques which throw more light on the causal structure of relationships between the different success factors than previous work based mainly on correlation and factorial analyses.
New product typology
Innovation strategies raise many fundamental questions, but this research deals principally with two. What common success factors can be identified and to what extent are they inter-related? And are these success factors identical for each innovation type?
Many earlier studies have noted that products can be 'new' in a variety of ways. There are fundamental differences, for example, between a washing powder which promises more whiteness, a mobile telephone which transforms human relationships, and an electric car which is environmentally more friendly but less powerful than a petrol driven alternative. Here are four distinct, if not always mutually exclusive, dimensions of 'newness':
* Technological newness springs quickly to most minds when people think of innovation: a new raw material, a new production process or an input replacement, for example. Such newness can represent a radical or disruptive change as with genetic engineering, the first aluminium bodywork for cars, or the dramatically improved lithographic processes and miniaturisation techniques, which enabled Intel to move to greater and greater capacity of the microchip. But it can be modest and incremental.
* Commercial newness mostly concerns the delivery mode (distribution and communication) of a product or service: examples include new payment tools such as chip cards (Proton), new distribution channels (cash and carry), new ownership forms (leasing), new ways of selling (e-commerce), and new communication methods (on line advertising). The virtual bookshop. Amazon.com, is perhaps the most spectacular contemporary example of commercial innovation.
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* Functional newness is about providing a new benefit or performing a new task--products that fall into this category are innovative mainly from the customer's point of view. For instance microwave ovens might be considered primarily as a new technological cooking device, but they arguably gained a large measure of their success because they offered for the first time a solution to the problem of rapid defrosting. In this case, of course, the newness is twofold: technological and functional. Sometimes a functional newness has a negative side: the customer may incur a transfer and/or adoption cost to be able to take advantage of the innovation, such as the investment consumers have to make in new video equipment when switching to DVD.
* Customer group newness. A product can also be 'new' if it attracts a new customer group as happened when, say, facsimiles and PCs were adopted by households as well as by professionals.
The charts on page 31 illustrate how specific products fall into one or more of the four dimensions above. …