inKNOWvations: November 2011

Three Reasons Why You Should Not Start Innovation with an Idea

Gijs van Wulfen

The fuzzy front end of innovation confronts you with a lot of questions. In my new book Creating Innovative Products and Services, I try to answer the questions raised with the FORTH innovation method.

Innovation is synonymous for getting ideas. Sure! But there are great risks in starting product or service innovation with an idea for three reasons.

Business model innovation is the new strategic imperative—by now, this is becoming more generally acknowledged. But companies routinely fail at self-reinvention because they are so busy pedaling the bicycle of their current business models they leave no time, attention, or resources to design, prototype, and test new ones. Even where investments are made in innovation, those efforts are focused on new products and services delivered through today's business models and on making the current models operate more efficiently. These are important to do, without doubt. But they are hardly sufficient in the highly networked 21st century, when business models don't last as long as they used to and incumbents increasingly face the risk of disruption.

For the past seven years, management consulting firm Booz and Company has identified the 1,000 public companies who have spent the most on research and development in the previous year. And in that near-decade of research, Booz has consistently shown that there is “no statistically significant relationship between financial performance and innovation spending, in terms of either total R and D dollars or R and D as a percentage of revenues,” as reported in the forthcoming Winter 2011 issue of Strategy and Business, a quarterly magazine published by Booz.