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The road to innovation success

Nov 22, 2012

Innovation is one of those words that, although much used, is not always well understood.

At its most basic level, innovation is a systematic value chain process that has two core components - invention and exploitation. Invention normally has two aspects, ideas and technical development while exploitation involves market development and penetration.

It is the successful utilisation of inventive ideas that is central to the concept of innovation. As the great innovator Edison himself noted: Anything that won't sell, I don't want to invent. Its sale is proof of utilisation and utility is success."

Innovative ideas can occur right across the value chain. They are not simply the domain of R&D alone, nor is R&D in itself representative of activity that is necessarily inventive.

It is possible to enter the innovation value chain at any point with an inventive idea one that in some way is novel or unique in the context of the market or competitive environment in which it has the potential to be applied. There is considerable upside too in entering the value chain at a later point, with time to market, investment and technical/R&D risks reduced or, at the very least, able to be better managed.

Both Charlie's and Trade Me are examples of companies successfully entering the innovation chain at a later stage. Their success was built on brand/product related ideas that were novel in the New Zealand market rather than their delivery/production technologies which were already well established internationally. In addition to technology, Trade Me also used a similar business model to that established by EBay.

A point worth reflecting on is the New Zealand Government's funding of innovation related activities has a significant focus on technology-based innovation, particularly that derived from new science as opposed to innovation from a clever combination of existing technologies. There is little focus on other types of innovation, including commercial opportunities which, in the best cases, can be highly disruptive (Ryanair's business model, for example).

As a result, the New Zealand economy has a high risk innovation profile. Better returns on public investment are likely to be generated where the country has a much broader focus on where and how it fosters innovation. Hopefully, this is an issue the new Ministry for Business, Innovation and Employment picks up on.

There are many factors required to successfully innovate. It is critical to undertake, at an early stage, an opportunity assessment to position each innovation concept within its competitive landscape, determining its novelty, usefulness and freedom to operate status. Failure to do this at the outset risks all subsequent investment and commercialisation related activities.

The establishment of a patent position is no determinant of a competitive opportunity, while undertaking R&D with a view to generating inventive ideas without understanding the competitive landscape risks coming up with new ideas that are already in existence.

Establishing as early as possible the commercial feasibility of an opportunity is important. A new technology to convert algae to biofuel for airline industry use may be novel and have freedom to operate but unless it is commercially tested it won't fly. A feasibility study should look at commercial scale supply and/or the production and conversion process itself in relation to the production costs per unit of output, including absorbed capital costs and indirect costs associated with managing any toxic waste output of the process otherwise the usefulness of the technology for that specific application is questionable.

It is not just the case of establishing technical feasibility; it also requires an approach to R&D that looks for solutions to commercial feasibility. A robust R&D strategy and a creative business model solution can sometimes overcome technical or performance limitations which impact on commercial feasibility.

Building the A team is also an important element to achieving successful innovation outcomes. This relates not just to the internal people on the project or venture team but also the external partners who deliver capital, development and commercialisation capabilities and who can help integrate a new product into national and global value chains. Having a commercialisation strategy that targets individuals and companies who can best assist you in your innovation related activities is a smart move.

Article by Nicholas Bain, Cranleigh expert adviser


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