Why Most Innovation Programmes Fail


1 June 2010 Chris Jones


Starting with a blank sheet of paper is one of the more common pitfalls when innovating in business. Chris Jones looks at what companies should be doing to get a return on their investments.


If you've ever wondered why you are not getting good results out of your innovation investments, don't be surprised: you are not alone. Business Week is one of several reliable business journals that recently reported that most company innovation programmes just don't work.

Among the various studies they cited, one from the Doblin Group claimed that nearly 96% of all innovation attempts fail to beat targets for return on investment. Another, from Booz Allen Hamilton, concluded: "There is no relationship between R&D spending and the primary measures of economic or corporate success, such as growth, enterprise profitability and shareholder return."

Business Week went as far as suggesting innovation shortfalls were a key contributor to today's financial crisis. Given these sobering thoughts, should you stop investing in innovation? Definitely not.

The prize of success and the price of not innovating are so big that not investing in it isn't an option. Instead, you should you review how you are investing in innovation. Learning from others' mistakes is the quickest way to get a high-performing programme.

So, where do most organisations go wrong? Here are their common mistakes:

• Starting with a blank sheet of paper – not building new perspectives about their customers, industries and themselves

• Working on the wrong problems – not framing their customers' problems in the right context

• Thinking about products only – not addressing the entire business model.

Starting with a blank sheet of paper

Ask someone to draw an icon of innovation, and you will probably get a light bulb.

Push further and many will come up with a picture of a whiteboard or blank sheet of paper. The cover image of one top business magazine's issue on "the most innovative companies" even had a person doodling on a whiteboard.

"Successful innovators
start by
developing new perspectives about their industries, their customers and themselves."

Starting with a blank white board or paper, however, simply doesn't work very well. It's enormously difficult to generate novel ideas without any stimulus.

That's why companies that install elaborate electronic idea collection software often only gather employee gripes and minor process improvement ideas – and few breakthroughs. Successful innovators start by developing new perspectives about their industries, their customers and themselves.

Whirlpool took a fresh look at the industry trend of focusing on the traditional buyers of home refrigerators – married women – and realised that husbands might have unique needs not served by existing products.

The company followed men into their dens, garages and workshops; it saw messes that needed organising and appliances that broke down in the harsher environments.

Whirlpool looked deeply into its unique strengths and asked itself what it was good at besides making beyond fridges and freezers. The result of this new perspective was Gladiator GarageWorks, a complete line of appliances, workbenches, cabinets, and other garage equipment serving previously unexpressed consumer needs.

But their innovation didn't stop with new products. It also focused on non-traditional retail channels (such as Lowe's Home Improvement stores) and advertising channels (including Sports Illustrated). Gladiator GarageWorks is now the fastest growing brand at Whirlpool.

Working on the wrong problem

Ultimately, innovation is a means to an end – delivering new benefits to the customer.

However, the root of customers' problems is not always obvious, as the winning team of the inaugural Strategos-University of Chicago Booth Innovation Group's Innovation Challenge observed.

"Innovation is a means to an end – delivering new benefits to the customer. But the root of their problems is not always obvious."

The competition challenges students to identify an everyday product that is innovative, explain the source of the innovation, and develop recommendations on where to take the product or concept next.

The team's research showed that while many electric toothbrushes were delivering ever more impressive cleaning capabilities, few were actually addressing an unmet and possibly unarticulated customer problem: using the toothbrush correctly.

So the team selected Oral-B Triumph with Smart Guide as the subject for its report because the array of real-time feedback features that steered the customers toward more effective use of the toothbrush – and ultimately healthier and better-looking teeth.

Sometimes, established players strive to deliver better technical solutions but lose sight of the main problem, a case in point for videogame console manufacturers. While Sony and Microsoft heavily invested in hardware to deliver increasingly realistic graphics, Nintendo's Wii stole the market with substantially cheaper hardware, but a more engaging gaming experience.

Thinking about products only

Studies of innovation conducted by the Doblin Group, IBM Consulting, Boston Consulting Group, and Business Week have found that business model innovation nets a disproportionally higher return. Focusing on business model innovation was also a key recipe for success for the Innovation Challenge's winning team.

Its recommendations for Oral-B went beyond product improvements – the team identified innovation at the level of the business model. Specifically, they uncovered ways to extract value out of the toothbrush's usage data by looking into how healthier teeth could reduce cost for employers and insurance companies.

Another example of business model innovation is CEMEX, the Mexico-based ready-mixed concrete supplier. They didn't alter thier product, but innovated with different delivery and customer benefit models.

"Innovation isn't easy – nothing with such as high potential reward is. But it's not impossible."

At the time, concrete suppliers would demand 24-hours notice to deliver ready-mix cement and charge a hefty penalty to customers who changed their orders. CEMEX believed that there could be real customer value in guaranteeing cement delivery in a much shorter time window.

After plant managers and salesmen visited a 911 dispatch centre in Houston and witnessed how a team of paramedics could be assembled within 10 minutes, they returned to Mexico determined to reduce cement delivery time. By using a GPS dispatch system and GPS equipped trucks, CEMEX can now guarantee delivery of cement within a 20-minute window. Not only are customers willing to pay a premium for a service that is substantially more responsive, but delivery costs have also dropped by 35%.

Your next steps

Learning from others' mistakes is a great way to improve performance. Look at your innovation programme and confirm that you are building new perspectives about your customers, industry, and yourself. Then, make sure you are applying these new perspectives as stimulus for generating ideas for properly framed customer problems and exploring innovation across the entire business model.

Also, don't assume you got it right the first time: you may need to evolve and improve it. Innovation isn't easy – nothing with such as high potential reward is. but it's not impossible. Companies ranging from Whirlpool to Crayola have successfully developed a new competence for it. So can you, if you avoid the common pitfalls.