Wednesday, March 08, 2006

Invention Vs Innovation

Knowledge@wharton on Innovation vs Invention:

" Many companies spend a great deal of time and effort on measuring innovation, according to Jim Andrew, senior vice president and head of innovation at the Boston Consulting Group. “While none of these measures individually may be perfect, a suite of measures allows you to get your arms around measuring the progress of innovation,” he said. “It allows you to learn and change as it becomes necessary.”

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According to Andrew, many different ways exist {to measure innovation}. “We have found in our work that companies should measure three main things,” he said. “First, you should track the outputs of the innovation process. Next, you also need a set of measures to track the inputs. This is where innovation can be most precisely measured. People track the amount of money they spend on research, and they also track specific people. In our experience, human capital is in much shorter supply than financial capital. The scare resource is always your best people. The third area is the effectiveness of your process. To sum up, you’ve got to measure inputs, outputs, and process performance.”

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To understand innovation, you first have to distinguish it from invention; too many people confuse them, according to Linda Sanford, an IBM senior vice president. A company’s portfolio of patents reveals its smarts as an inventor. IBM, for example, remains formidable in this regard, racking up record numbers of patents for the last decade. But patents aren’t enough. Their technology has to find its way into products.


Not all innovations are created equal. Paul Schoemaker, a Wharton adjunct professor of marketing, pointed out that many people cite only of “hits” like the Blackberry or Starbucks coffee shops when talking about innovation. “But some companies don’t play that game,” he said. “They play a percentage game of incremental innovation, like Toyota. And some companies aren’t really innovators at all. They play a loss-avoidance game."."

A very interesting read. Innovation is a term much bandied about nowadays, just like TQM or TPM or Six Sigma in the recent past. Fear is that it is not that well understood. At my organisation, an attempt at measuring innovation is there, but again it is not well understood. Ambiguity and subjectivity in measurement, making it impossible to get a bird's eye view in all areas of business for the organization, is another roadblock to effective measurement. Wonder how we can improve in this area?


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