Tuesday, February 05, 2008

Booz Hamilton: Innovation Study

In an excellent, incisive and inspiring article, Booz Allen Hamilton Vice President Barry Jaruzelski discusses the findings of their annual Global Innovation Study. Not surprisingly, it offers lessons and ideas for our community.

Jaruzelski makes the point that innovation is not directly tied to R&D spending. In fact, he observes, some of the top spenders achieve some of the worst results. In part, this seems to be the typical problem of 'too many resources make complexity'.
And that issue of broad business culture, attitude and organization recurs throughout the article. If you have complex decision-making processes, with endless reviews and approvals, you are likely to stifle innovation. If you are inward looking and lack market and customer insights, you are likely to be among the lowest (and slowest) performers.
Jaruzelski identifies three business types - and each can be successful. He describes them as "Need Seekers, Market Readers, and Technology Drivers" and explains them as follows:
Need Seekers are focused on understanding their customers’ needs deeply and being the first to market with innovation as a consequence of that deep understanding.
Market Readers are companies focused on monitoring not only their customers’ needs, but also their competitors’ moves. Members of this group tend to be fast followers, taking an incremental approach to innovation. And as a result, although they don’t necessarily have better financial returns than the other two groups, they do spend a lot less on R&D than companies following either of the other two strategies.
Technology Drivers are companies that do not necessarily ignore customers, but have a greater focus on breakthrough technologies. They look to address unarticulated needs of customers, swinging for the fences more than taking an incremental approach to innovation.
"All three models employ customer insight, and it’s important to note that the three produced comparable financial performance. No model was inherently superior financially. The one thing that cut across both industries and models is that the more a company relied on direct customer insight, the better it did", comments Jaruzelski.
The BAH study and interview can be accessed at http://www.strategy-business.com/li/leadingideas/li00057.

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