Monday, July 30, 2007

Innovation - Measuring Success

Globalization has forced many small & medium companies to look for innovative products/services/solutions in order to be competitive. In India, several large and medium sized organizations are commiting serious money for innovation. Several senior managers and executives are seriously concerned about the effectiveness of their investments for innovation. Many managers are looking for the business link between innovation and performance metrics.
BSI Global Research Inc conducted a survey covering 355 firms in the USA. The results of this survey will be a good pointer for other managers.

Nearly half of the 355 private-company CEOs queried make an effort to link innovation to metrics. They measure the success of their innovation effort by:

Its impact on overall revenue growth - 78%
Customer satisfaction - 76%
Growth in revenue from new products or services - 74%
Increased productivity - 71%
Earnings/profit margins - 68%

Much smaller percentages examine its impact on recruitment and retention 34% and market capitalization 17%.

Companies have to use multiple measures to track success. Use of multiple paramters enables cross-analysis as well as period-to-period comparisons.

Innovation has had a positive impact for these companies in many areas, with the greatest impact being felt in new product and service development (83%), followed by revenue (80%), earnings or profit margins (77%), and efficiency (72%).

Innovation is more valued during lean times.

The survery also shows that during lean times, despite cutbacks and shrinking revenues among technology companies, innovation is still highly valued. The survey of CFOs and managing directors found that 81% of top technology industry executives say innovation has been made an organization-wide priority in their businesses. And of that group, 54% rate their business' level of innovation as superior to that of their one or two strongest competitors -- 17% say "much better," and 37% say "somewhat better." Also, this group expects to grow revenues over the next year 25% faster than their peers who have not embraced innovation.

The rational for this investments during lean times is that:- Today's continuous, rapid advances in technology make innovation critical not only for individual businesses, but also for our entire economy. Fresh ideas lead to new and better products and services that are worth a premium to customers. Moreover, innovation is freeing workers to do their jobs more efficiently, creating additional value for their employers.

The survey was conducted by BSI Global Research Inc.

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