Smart Innovation
Clear Metrics Are Critical to the Innovation Process
In this dialogue, Gregg Zank, vice president and chief technology officer,
Dow Corning Corporation, and Padmasree Warrior, executive vice
president and chief technology officer, Motorola, Inc., discuss ways to
evaluate innovation and its impact on a company's success.
Does innovation success automatically translate into increased
revenue?
Gregg A. Zank
Vice President, Chief Technology Officer and Executive Director of Science
& Technology | GZ: That's a natural goal, however, I would add that
margin growth, even if it does not immediately translate into revenue growth,
is also an important outcome of innovation. Typically, when this happens,
revenue builds over time; it's not automatic. The most common types of
margin-boosting innovations are those targeted at reducing costs and opening
new markets for products. For this reason, at Dow Corning, innovation
extends far beyond research and development to how we do business, and
sustained revenue and margin growth are our priority objectives. |
Padmasree Warrior
Executive vice president and chief technology officer, Motorola,
Inc. | PW: A successful innovation should lead to increased
revenue, either directly or as a component of a larger business strategy. At
Motorola, we realized that we needed a faster way to commercialize innovative
ideas. So, in 2003, we created the Early Stage Accelerator program as a
disruptive innovation engine for the company. The goal was to invigorate
technology commercialization across the corporation, particularly at research
labs where many of our innovations are developed. The program incubates new
technologies that either advance current Motorola technologies or disrupt and
replace existing ones. Successful results lead to hot-selling new products or
licensing, which do, in fact, ultimately lead to increased revenue. |
Q. What systems can companies use to measure
their innovation levels?
GZ: All companies need to have systems in place to evaluate the
impact of their innovation activities across a wide range of areas. These range
from innovative new business models, brands, or products to innovative
financial offerings or processes. In many cases, these activities are
incremental, not radical changes, so they don't necessarily require the
creation of entirely new processes or business models. As such, a company can
afford to take on a number of incremental innovations at one time. Due to the
broad scope of innovations often included in a company's portfolio, systems to
track and evaluate activities are critical. Monitoring progress and return on
investment is necessary to ensure that the innovation portfolio is
balanced.
PW: Systems to measure the effectiveness of innovation are important,
but so is a critical eye for nurturing innovation wherever it exists within a
company. Research shows that companies that excel at true innovation outperform
those that simply focus on incremental product improvements. Without active
senior executive involvement, there is a tendency to invest disproportionately
in incremental improvements rather than breakthrough innovation due to the
disruptive effect that true innovations may have on the core business.
Information systems are necessary to integrate a wide portfolio of projects and
provide real-time data. However, senior leaders must be directly involved to
ensure that decisions are made free from the concerns about disruptive
innovations that sometimes befall individuals or the business because of their
impact on the status quo. Back to top
Q. How can an organization's structure
contribute to (or detract from) innovation competence?
GZ: The structure and culture of innovation must stem from the top of
the organization, with the CEO, and it must be clear that innovation is an
important part of the company's overall growth portfolio. This sets the tone
and can prevent many of the negative feelings and concerns within an
organization. Unfortunately, radical and disruptive innovation can be
prematurely hindered by the actions of management and the culture of the
organization if the company is not structured with innovation in mind. Avoiding
this requires keeping a barrier between innovations and the current business to
ensure the company delivers on its promises and customers' needs are met. At
Dow Corning, we've established a business and technology incubator,
creating an environment for these types of innovation to nurture. There are
instances where innovation needs to occur closer to the current business to
ensure the project is adding value to the product and it meets necessary time
requirements.
PW: Innovation is not the result of an individual's work but a result
of diverse thinkers working together…sociologists, technologists, marketers,
lawyers, and others. At Motorola, any employee can submit ideas to our
innovation board. They may not always be working in perfect harmony, but they
are generally moving in the same direction. Their collective technical,
business, and entrepreneurial IQs support an agile, self-sustaining,
collaborative environment of experimentation under which innovations are
fostered and grown. Back to top
Q. What criteria best evaluate the performance
of one particular innovation?
GZ: I believe that three criteria work for understanding the
performance of innovation activities. The first is “impact,” which is measured
by revenue and margin growth. The second is “return,” which we measure as
return on the investment made in terms of revenue and margin years after the
innovation activity starts to produce revenue. The third is “success rate,”
which involves evaluating the portfolio and activities and gauging the actual
impact versus predictions made at different points throughout the project's
evolution process. This is more of a real options look, not a net present value
analysis of the portfolio.
PW: Early on, we look at the value proposition, business function,
and need in the market. We ask questions such as, “What solution does this
technology provide? Is it relevant to our market? Is it a disruptive technology
that will change the way people do things? Does it represent a significant
business opportunity? Is it the right time in the market for this innovation?”
This process continues through the different development and funding stages to
ensure the innovation is in line with the company's business strategy. For more
information about Dow Corning, please visit www.dowcorning.com. For more information about Motorola, Inc.
please visit www.motorola.com. Back to top
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About Dow Corning
Dow Corning Corporation (www.dowcorning.com) provides
performance-enhancing solutions to serve the diverse needs of more than 25,000
customers worldwide. A global leader in silicon-based technology and
innovation, offering more than 7,000 products and services, Dow Corning is
equally owned by The Dow Chemical Company and Corning, Incorporated. More than
half of Dow Corning’s annual sales are outside the United States.
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