Generate Higher Returns from Your Innovation Investments: 3 of 10

One way to establish market differentiation is through introducing innovative new products to market. Establishing market differentiation is one thing, maintaining it is quite another. Here we have put together a ten-part series on how businesses can generate higher returns from innovation investments.

From our series of highly informational articles, companies will learn: how to treat innovation as a cross-functional business process, how to align innovation execution and business strategy; how to create sustainable innovation; how to train your senior executives to successfully execute innovation initiatives; how to effectively manage process and project management; how to measure performance of your processes; how to ensure broad stakeholder buy-in; how to understand the importance of product roadmaps; how to provide the tools necessary for successful product innovation; and finally, how to ensure that portfolio management coincides with process management.

Here is one of the ten practices that leading innovators use to increase the payback from innovation spending: Creating Sustainable Innovation by Looking beyond the Financial Data.

Creating Sustainable Innovation by Looking beyond the Financial Data

Innovation does not equal short-term gains. Companies that take a longer view of innovation are more likely to achieve sustainable market differentiation. For instance, Parker Hannifin, the world's leading diversified manufacturer of motion and control systems, wanted to achieve higher levels of organic growth over time by introducing more new-to-the-world or new-to-the-market products. In support of this goal, Parker implemented a single, structured innovation process across its 125 divisions worldwide. It also introduced leading-edge product innovation management software to automate that process. As a result, the company realized a 500% increase in the net-present-value of its product portfolio.

Much of Parker’s success can be attributed to the ability of its cross-functional teams to critically evaluate innovation projects at various stages and gates in the development process. Decisions are based on more than financial considerations.

Parker’s project managers also ask the following questions:
1. Does the product fit with corporate strategy?
2. Is there an attractive market for the product?
3. Will the product’s differentiation and value proposition ensure competitive success?
4. Do we have the resources to produce it?
5. What’s the risk vs. reward ratio?

Another company that is generating much higher than average returns from its investments in innovation is Pall Corporation, a $2 billion supplier of filtration, separation and purification technologies. Recently, Pall deployed a new product innovation process along with software that both automated the process and enabled ongoing measurement of performance. According to the company, these investments paid for themselves in a little more than a year and have increased the net-present-value of its product portfolio by more than $26 million.

So, what is it that sets these companies apart from those that are not realizing returns on their innovation investments?

For more information on the top practices that leading innovators use to increase their returns on innovation spending, look for the next article in our ten-part series: Training Your Senior Executives to Successfully Execute Innovation Innitiatives.