Managing Innovation

Managing Innovation: Start Here Countless studies have shown that, in most companies, the odds are stacked against successful innovation. For example, research found that for every 100 new development projects, only 1 succeeds in the market­place. But, according to innovation expert Gary Hamel, who was recently ranked the most influential business thinker in the world by The Wall Street Journal, the percentage of winners is actually lower — much lower. He estimates, “For every 1,000 ideas, only 100 will have enough commercial promise to merit a small-scale experiment.  Only 10 of those will warrant a substantial financial commitment.  Of those, only a couple will turn out to be unqualified successes.” Why are there so few “unqualified successes”?  Part of the problem is that most companies fail to approach innovation systematically.  McKinsey & Company’s 2010 Innovation and Commercialization Global Sur­vey of more than 2,200 executives found that 84 percent of executives say innovation is extremely or very important to their companies’ growth strategy.  Yet, despite the critical need for innovation, the survey also revealed that:
  • Only 29 percent of the executives say their companies set formal priorities for innovation.
  • Only 26 percent say their companies are good at killing bad ideas before it’s too late.
  • Just 39 percent say their companies are good at commercializing new products or services. But the biggest reason why most new products fail, and why so many companies are so inept at innovation, is that too many executives and entrepreneurs suffer from a basic misunderstanding of what innovation really means.  Innovation is not the same thing as invention.
  • Invention means creating something that didn’t exist before.  It means coming up with a totally new idea for a product, a service, a process, a marketing effort, or a business model.  This is a daunting challenge, because very few truly new ideas have yet to be discovered.
  • Innovation, on the other hand, means applying existing ideas in new ways, or in new markets.  It means finding a practical use for inventions by turning them into new products or services, adapting them to existing products or services, marketing them in new ways, or building new business models around them.
Clearly, innovation is not nearly as daunting as invention.  And there’s another often-misunderstood distinction that...