The Gap Between Innovation and Investment

“People consider innovation extremely important. But do they think it’s urgent? Does it dominate their day-to-day activity? Usually not,” said Colm Foley, ’98, vice president, Boston Consulting Group. Yet when innovation management is deemed urgent, and tackled with the same discipline as other business practices, there can be much greater return on investment.
 
Foley was among panelists who discussed managing innovation May 11 at the Charles M. Harper Center at the TechVision Conference, hosted by the student-led led High-Tech Group. A separate panel covered marketing and technology, while C. S. Park, ’82, a member of the board of directors of Seagate Technology, gave the afternoon keynote on private equity.

“Innovation is a buzzword. We hear it all the time. The issue is how do we create innovation in companies?” asked Linda Darragh, adjunct associate professor of entrepreneurship. “It’s becoming more and more understood that innovation is really built around people and processes and structures.”

Forrest Danson, ’92, principal and global IT strategy practice leader, Deloitte Consulting, said in financial service industries right now, innovation is  “getting a lot of lip service, but not a lot of action.” As a consultant, Danson said, he can often go into a company and reduce its product spend 15 to 40 percent in the first week because he looks for places where a company has gone lax on its innovation aspirations. “It’s about having the discipline to look at what investment got driven into these projects? Are we actually tracking against that investment and achieving the metrics that we wanted to achieve? And then, once the project’s, done are we making sure we’ve made the business case?”

Foley has been “amazed” by the number of companies “that can’t really link their innovation objectives to their overall business objectives.” There is often an “innovation gap” between shareholder return and financial objectives and the value created by new products, he said. Business executives should “fight the urge to think about innovation as something that is fundamentally different at a strategy level than anything else. It’s a lever that you should be using in order to implement an overall strategy to achieve an overall set of objectives for your shareholders.”

Innovation should be attached to a hard value proposition, Foley said. “You always have to explain whether the product creates value, for whom, and what impact will that have at market,” he said.

Rajni Aneja, ’92, vice president of corporate development at zuChem Inc., agreed, although she pointed out there is a different perspective on innovation in small private companies. “Every single dollar we get drives us to be incredibly pragmatic about how we make decisions and when we make decisions, so we’re not wasting this money.”

Chris Smith, ’88, senior director at Gartner, said innovation is a tough balancing act of trying to encourage new ideas while always keeping revenue-generation in your sights. “The trick is staying focused,” he said. “You want ideas coming in, but at the same time you’ve got to get the product out. Otherwise you’re just randomly trying things all over the place and you’re not going to get to revenue.”

Asked to identify best practices creating an environment breeding innovation, the panelists suggested it comes down to picking, and being internally consistent in applying, an innovation model, and success rests on the people in the company. 

“I don’t think you can say ‘Hi, I’m going to have a corporate culture that is innovative. It just doesn’t work like that.’ Innovative cultures vary so much,” Aneja said. “You just hire the brightest and the best people you can find.”

�Jenn Q. Goddu