Innovation

Esther Baldwin of Intel explains how IT tools, applied to the innovation process, can fuel business growth.

Some approaches to achieving innovation work well together — but some don't.

Information technology matters when a company works backward from the value it wants to create.

A new book examines the challenges — and potential benefits — of government programs designed to foster entrepreneurship.

Successful innovation--the kind that leads to customer engagement and profits--is rare and hard to achieve, or so one might conclude from observing the results of many companies' innovation efforts. Some have tried investing intensively in research and development. But the author recently studied public companies representing almost 60% of global R&;D expenditures and found that above a certain minimal level, there is generally no correlation between R&;D spending and financial metrics such as sales or profit growth. For many companies, developing new products is hit-or-miss. But according to the author's research, successful innovation is not magical. It comes from careful attention to a small number of important criteria. The key question isn't how much to spend, but how to spend. The author introduces a "return on innovation investment," or ROI2, methodology that correlates directly with organic growth and links innovation spending with financial performance in ways that can lead decision makers to generate higher, more reliable returns on innovation and R&;D. The ROI2 approach is based on a series of innovation studies conducted during the past seven years with companies in the consumer products, health care and chemical industries. To become more effective, a company needs to diagnose its innovation practices and capabilities. The diagnosis can be quite different from one company to the next, and that is why adopting industry benchmarks doesn't work. The individual innovation profile represents the value and quality of a company's innovation portfolio and can be clearly expressed as an "innovation effectiveness curve." This curve lets companies plot annual spending on innovation projects against the financial returns from those projects--and "solve for growth."

In an interesting book, two Wharton professors analyze the innovation process.

With appropriate processes, virtual teams can even outperform their colocated counterparts.

How does Toyota solve problems, create plans, and get new things done? Company managers credit a tool called the A3.

Clayton Christensen is best known for his ideas about how disruptive innovations can transform markets. In this wide-ranging interview, he discusses topics ranging from the downturn's effect on innovation to opportunities to improve the U.S. health care system. Christensen thinks the economic downturn will be good for innovation, because downturns force innovators to adapt their strategies to the market quickly and inexpensively. What's more, he notes that resource constraints stimulate breakthrough thinking. And, despite the recent problems in the financial markets, Christensen believes that, overall, innovation has been beneficial in financial services. He cites historical financial innovations, such as no-load mutual funds and index funds, as examples of the way disruptive innovations in financial services have benefited consumers. However, he also notes that there are markets in which regulation is necessary--and the securities industry is one. Christensen, who is the coauthor of a new book on health care, The Innovator's Prescription, also discussed how disruptive innovation might improve the U.S. health care system. He explains how disruptive innovation helps make goods and services inexpensive and accessible.

R&;D employees who find intellectual challenge motivating tend to be more productive.