Coaching Tip: The Leadership Blog: The Innovation Payoff

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Does innovation really deliver?

More than half of the Top 25, with histories as public companies, in BusinessWeek-Boston Consulting Group 2006 senior management survey on innovation scored with better profit margins and higher stock prices over the past decade.

The innovators achieved median profit margin growth of 3.4% a year since 1995, compared to 0.4% for the median Standard & Poor's Global 1200 company. And the group's median annual stock return of 14.3% was a full three points better than the S&P 1200 median over the decade.

More than 50% of survey respondents said the CEO or chairman was responsible for driving innovation. Without targeted support from the corner office, innovation efforts will get lost in the corporate culture need to respond to short-term demands.

The survey tells us that the enemies of innovation are: Lengthy Development Times, Lack of Coordination, Risk-Averse Culture, Limited Customer Insight, Poor Idea Selection, Inadequate Measurement Tools, Dearth of Ideas and Marketing or Communication Failure. Ideas are easy. The toughest obstacles, said respondents, are developing speed and coordination. Building creative companies takes synchronization form the center, cross-boundary collaboration, and structural changes in the organization chart.

Tracking innovation results is hard: You can't reduce it to a single ROI number and balancing risk is always part of the equation. Just 30% of survey takers said they measure ROI on innovation investments. Companies frequently use overly broad methods to measure innovation success, including: Overall Revenue Growth, Percentage of Sales From New Products or Services, Customer Satisfaction, Return on Investment in Innovation, Number of New Products or Services, New Product Success Ratio, Higher Prices.

The largest share of time and money goes to incremental innovation: Improving Existing Products or Services, Creating New Products or Services for New Customers, New Products or Services for New Customers, Reducing Product or Service Costs.

Source: BusinessWeek, April 24, 2006