Corporate Innovation

Deep Dive
The Revenue Growth Gap and the Danger of Hurdle Rates

Imaginatik News

Upcoming Events

Books & Links

Partner Focus
Debra Amidon
Entovation International

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Upcoming Events

** SHRM Global Forum - Los Angeles, CA - Mar 31 - Apr 2 2003 - Make sure you catch Imaginatik partner Rene Rupert delivering his talk entitled "From Behavior and Global Mindset to Performance".

** Entovation Knowledge Innovation Practitioner Certification Course - Asynchronous Delivery - Apr 2 2003 - New Imaginatik partners, Entovation International offers an e-learning & coaching course:
Certified Knowledge Innovation Practitioner. Learn why innovation is the one competence needed in the knowledge economy. Create an actionable innovation proposal for your workplace. Recommended for middle management and senior individual contributors.

** Infotoday -KnowledgeNets 2003 - New York City, NY - May 6 -8 2003 - Catch Imaginatik's Mark Turrell and Boris Pluskowski at this premier conference on Electronic Information and Knowledge Management. Mark will be leading a presentation on "Establishing ROI from Idea Management Programs" which will include a host of practical examples and case studies from Imaginatik clients and details how the lessons learned in Idea Management can be used to improve other KM-type initiatives.

**Imaginatik Open Forum Day - Boston, MA - May 27,2003 - This free event will discuss various aspects of innovation, and bring together corporate innovators from around the world. Strictly limited to a small group, for more information, please contact Boris Pluskowski at +1 617 275 7143 or research@imaginatik.com

** Managing The Fuzzy Front End of Innovation - Cambridge, MA - May 28-30 2003 - One for the diaries, this is the first conference specifically about what has been coined the "Fuzzy Front End" of Innovation processes. An effective Front End continuously feeds the product development process with high quality concepts, and is widely regarded as the greatest opportunity to improve innovation and enhance sustainable growth. A great line up of speakers is already confirmed including Imaginatik's Mark Turrell who will be co-presenting with Hallmark's Carol Ann Kobza - don't miss out!

If you know of any speaking events that should be on this list or would be appropriate for someone from Imaginatik to speak at - to discuss research findings or Imaginatik products - please contact Imaginatik Research at: research@imaginatik.com

Things at Imaginatik continue to heat up as innovation climbs up the ladder of corporate interest. More and more companies are starting to see the importance of competing through innovation and are realizing that they need tools and processes to support innovation, and these tools are already successfully in use at leading edge companies.

One such tool, Idea Central from Imaginatik's software arm, officially launches a new version (4.0) tomorrow (March 20th 2003), introducing a whole bunch of new features that once again raises the bar for Idea Management software. We're all really thrilled about it - and once you see the new version for yourself, you'll see why! Have a look at the full press release for more details.

We also have a great issue of the newsletter ready for you this month - of particular note is the first part of a series of White Papers detailing "The Innovation Pipeline" - a new concept being pioneered by Imaginatik Research.

Finally, this month's Deep Dive explores the ways in which companies overcome their revenue growth gap through innovation - and the subsequent dangers of establishing hurdle rates for ideas.

Many kind regards,

Mark

CEO, Imaginatik

http://www.imaginatik.com

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Deep Dive: The Revenue Growth Gap and the Danger of Hurdle Rates

To achieve growth targets, most companies need to find new sources of revenue, either through expansion into new markets or developing new products. This can be a challenging task. 30 - 50% of commercial launches fail to reach their expected revenue and profitability goals, and only one in four development projects succeed (Source: R. G. Cooper (2001) "Winning at New Products: Accelerating the Process from Idea to Launch").

At the same time, industry consolidation has led to the creation of mega-enterprises who struggle to maintain the same growth rates as their smaller, more nimble competitors. The absolute numbers are staggering. A 5% target growth rate for a $400m company is $20m - high, but not unrealistic depending on the market. Companies like Procter & Gamble, however, face a more daunting task. With $40bn in 2002 revenue, they would need to generate $2bn in new revenue each year, equivalent to creating a company the size of Williams-Sonoma or Siebel Systems.

The Growth Gap (see Research Note on "The Innovation Gap") can be closed partially through standard business operations, such as expanding distribution, and through mergers and acquisitions (for example, P&G's recent agreed purchase of Wella AG will add $2.57bn annual revenue). However, studies conducted by Imaginatik Research have found that 25% and 50% of a company's target growth will need to come through innovation.

Apart from acquisitions, the main innovation-related approaches to closing the gap are either:

a) The Big Win - A company embarks on a search for high impact winners that will cover the bulk of the growth target. P&G calculate that their very best new products typically generate $200m - $250m in the first year, which would mean that their 2003 goal would involve finding 2 large scale winners.

b) Portfolio of Smaller Winners - A company creates a basket of opportunities with a mix of expected return, risk, resource requirement and timescale. The portfolio is optimized to deliver the highest overall return on investment, with an outside hope that at least one project in the portfolio will become a big win.

Companies tend to blend the approaches. The returns from a big win are significantly larger than a basket of small-scale successes. The pharmaceutical industry in particular has shifted its approach through the 1990s away from generic drug manufacture to the search for $1bn blockbuster drugs, with a fair degree of success.

The key to both concepts are hurdle rates: are the products or markets large enough for warrant serious consideration. Companies therefore put in place framing activities to spot large potential markets, and use the tools within the Innovation Pipeline (see this month's White Paper) to develop offerings to meet these needs.

However, the hurdle rate can create some perverse effects. A market may appear too small initially, and often companies cede such niche markets to competitors who are sometimes able to grow the small market into a much larger one (See "The Innovators Dilemma" by Clayton Christensen). Companies also tend to forget their history, and fail to appreciate that the leading products often took years before they gained market traction.

Companies need a range of approaches to closing the Revenue Gap and innovation plays a large part, particularly in organic growth. Fortunately there are many methods to help companies find these large scale wins, and develop a portfolio of opportunities that can potentially become the successes of the future.

For more information, or to request a consultation, please contact research@imaginatik.com or call +1-617-275 7141

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Books & Links

Reading List:

Blueprints for Innovation: How Creative Processes Can Make You and Your Company More Competitive (MA Management Briefing) - Charles W. Prather and Lisa K. Gundry ; Amacom ; ISBN:0814423590

Although this is a relatively short book (at all of 96 pages) the authors have packed it with lots of easy to use and practical tips and techniques to help you and your organization become more innovative. Dr. Charlie Prather is one of the true thought leaders in this area, having spent over 30 years in the field - and he outlines his highly successful Bottom Line Innovation Process in this book.

Featured Web Site:

The KnowledgeBoard is a mainly European focused forum for Knowledge Management practitioners which has expanded through the active participation of many top global KM practitioners. Reflecting KM's continuing trend towards embracing Innovation as a core knowledge function, the KnowledgeBoard has a formalized Special Interest Group (SIG)  which addresses issues on Innovation. Facilitated by well known practitioners Edna Pasher and Jacques Souillot this forum isn't heavily trafficked with new content, but occasionally some real gems are exposed here. Certainly worth keeping an eye out for.

Featured News Articles:

VNU.net - March 10 2003  - "Innovation Stressed for Business Success" - Gartner Group's Michael Gubbins announced the result of Gartner's annual EXP study which interviewed 600 CIOs and found that despite budgetary pressures, companies are seeing the ability to bring fresh ideas to market faster than competitors as increasingly important.


HBS Working Knowledge - March 2003 - "Six Keys to Building New Markets by unleashing Disruptive Innovation" -  Clayton Christensen and his co-authors take a look at how to create new-growth businesses that last after the initial innovation spurt has passed. He comes up with 6 "lessons":
1) Disruptive innovations spur growth
2) Disruptive businesses either create new markets or take the low end of an established market
3) Disruptive opportunities require a separate business planning process
4) Don't try to change your customers - help them.
5) Integrate across whatever is not good enough
6) Be patient for growth but impatient for profitability.

Although the article pushes his book "The Innovator's Dilemma" a fair bit - this is still an interesting read for those of you dealing with emerging markets/businesses.

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Imaginatik News

**Idea Central v4.0 released!! - Imaginatik are proud to announce the release of Idea Central v4.0 - the latest update to what is already the most successful Idea Management product in the world. This new landmark release features a significantly redesigned user interface, which include many features to improve user and administrative navigation through the software. Administrative control over the program has also been increased allowing unparalleled flexibility in customizing Idea Central Events to individual needs. Combine that with Security and Performance upgrades and you'll see straight away why we're so excited about this new release!  - Go to the full Press Release