How to succeed in innovation – part 2

[Deutsche Fassung]

Innovation is essential in order survive in the global competition. One of the most important drivers is minimizing the “time to market”, the time period between the product idea and its launch. Due to the limited resources it is vital to be successful with the product launch and to generate a positive cash flow. And limited resources are not only money, but very often special know-how.

Discussing this issue with colleagues, one of the frequently asked questions is how innovations should be managed in order to be successful. Subsequently, the discussion quickly shifts to topics like existing structures and departments, necessary budgets and cost calculations, who is the decision maker within the group and how innovations should be financed.

But a key item of innovation is that it does not fit with existing things and that it should expand into new areas. Even in unknown domains it is common to plan for contingencies and to evaluate them upfront, balancing risks and opportunities. As we talk about the future, there is always the lucky chance that it will be different than planned.

Innovation as a team spirit

How to drive innovations? Beside the fact that a learning organization is key, the team spirit is essential! Teams, especially inhomogeneous teams, do need more time and effort to get to a common solution – and this is great! This discomposure is the germ cell for creativity. The thought of one leads automatically to the response of another team member and so on. To avoid “harmony and peace” right from the beginning, the team members should represent opposed characters like sales and production or customer and supplier.

To underline the innovative character in the organization, the innovation manager should be a different person than the R&D Manager. R&D is only one field of innovation, even if it is the most important one. And this innovation manager should report directly to the board to avoid any single optimizations or other single interests.

Innovation with limited resources

Each organization has limited resources. How to decide which innovation should be continued and which one should be stopped? The financial department generates an enormous amount of key figures for the future. So which one to use as we talk about feasibility of success? My personal suggestion would be:

  • NPV / TtC (Net present value / Time to complete) and
  • NPV / BNR (Net present value / Bottleneck Resource)
Formula to calculate NPV

Formula to calculate NPV

It is important to evaluate two different projects and to compare their impact for the organization – independent from the area of innovation or the target application later on. Projects which are close to product launch are more attractive than those which just started. And predevelopment projects should be separated anyhow, as their financial benefits are too difficult to be calculated reliably.

Finally, innovation projects are projects. In other words they have to be limited in time, with a clear start and end. That means they have to be managed like any time-limited project and classical project management (who is doing what till when) as well as project financing applies. This concept is usable for internal or projects and for those with 3rd party involvement like customers or suppliers.

Once the project is kicked off, classical project tools (project plans, milestone plans etc.) help to manage it accordingly together with the original key figures (KPIs). The NPV/TtC and NPV/BNR do help to stay on track.

2 Gedanken zu „How to succeed in innovation – part 2

  1. Pingback: Wie Innovationen gelingen können (Teil 2) | BeyssOnManagement

  2. Pingback: How do new ideas get into companies? Managing innovation projects | BeyssOnManagement

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