Innovating on your own terms

Imitation may be the sincerest form of flattery, but a new study conducted by IBM, Innosight and APQC has found that when it comes to innovation, copying other innovators doesn't necessarily translate to profitable results. Frequently companies try to model the efforts of popular innovators like IBM, Apple or Google, but many organizations end up pulling the plug on innovation efforts before they have the chance to get off the ground.

Recently three organizations, IBM Global Business Services, the innovation consulting firm Innosight, and the benchmarking organization APQC developed an Open Innovation Research Study to better understand how organizations' innovation capabilities impact business performance. The study was conducted by APQC between December 2006 and May 2007. Executives in 90 organizations in multiple industries and 14 countries provided their company's data on innovation metrics and practices. Here are some of the areas which were analyzed:

Products/services metrics

• Revenue growth normalized by R&D spend
• Average time to market for new products/services in days
• Average time to profitability/payback for new products/services in months
• Percentage of revenue from new products and/or services launched in the past year

Operational metrics

• Cost of goods sold as a percentage of revenue
• SG&A as a percentage of revenue
• Average days in inventory
• Percentage product and/or service sales orders delivered on time
• Fixed assets utilization rate

Business model metrics

• Number of new businesses launched in past three years
• Percentage of revenue by fulfillment channels
• Customer retention rate

Innovation enablers

• Employment of cross-functional teams
• Collaboration practices
• Mobilization capabilities (e.g., percentage of employees tasked with innovation goals)
• Innovation agenda (e.g., formal process for fostering and vetting new ideas)
• Customer satisfaction