By Louis Nastro, December 30, 2011

Are companies spending enough on innovation?  Here are some recent innovation statistics and comments that might be cause for concern.

  • 51% of all patents in the USA are granted to non-US companies and the USA lags far behind China and South Korea when it comes to patents granted (an overall measure of innovation).
  • The Boston Consulting Group’s Report on Innovation indicates the majority of firms polled sought to introduce only marginal improvement in existing products and services (80% of respondents).
  • In a survey of 400 CFOs 80% stated ‘they would reduce discretionary spending on potentially value creating activities (such as R&D) in order to meet short term earnings targets’.

Investing in innovation is dilemma, particularly for SME’s.

Your company needs to keep growing but financial uncertainty makes you hesitant – and there is always the ever present threat of the competition taking that one gamble which pays off and makes you irrelevant.

What are the right innovations to invest your capital on?

This really depends on your core markets and which markets you are looking to sell into.

1. Find segments that aren’t averse to change

If your core market segments have tried and true methods which are relied upon, significant leaps forward in technology are not going to get adopted quickly.

Therefore, you need to look for segments which are not so averse to change.  While you cannot ignore your core, satisfy that demand with the incremental improvements, acquire new non-traditional segments by focusing on those who do adopt new technologies, and grow them by channeling your new found domain expertise back in the product development pipeline with those early adopters defining and delivering the technical innovations strategically.

2. Understand your markets’ (or new markets’) value drivers.

We all know what a phenomenal success Apple has been, however, when one looks at their R&D spend they rank 81st on Booz & Co’s list comparing R&D spend to revenue!!!

Apple’s innovations really come from breakthrough design, understanding the user experience and building user centric functionality into a core product then marketing it better than anyone else.  Solving a customer problem through your product offering better than the competition need not require a radical transformation of your business to spur innovation.  Concentrate on the fundamentals, make sure everyone in your organization understands a user centric definition of the value you offer and think of new ways to market those solutions.

 

3. Explore new business models.

  • If you sell components can you go up-market and offer solutions?
  • If not in your immediate markets what about in parallel or new markets?
  • Can you transform part of the business into a service entity taking work your clients perform and adding value through your capabilities?

Again, there is nothing wrong with re-packaging existing technology into new offers for new segments – this is innovative thinking if it solves a customer problem profitably.

In summary the innovator’s dilemma presents opportunity for those who understand how to form complex linkages between the problems your current product offering solves and the problems faced by customers in non-traditional segments.