{"id":1323,"date":"2018-09-27T07:48:28","date_gmt":"2018-09-27T06:48:28","guid":{"rendered":"https:\/\/rosetta.vn\/short\/2018\/09\/27\/the-right-way-to-spend-your-innovation-budget\/"},"modified":"2018-09-27T07:48:28","modified_gmt":"2018-09-27T06:48:28","slug":"the-right-way-to-spend-your-innovation-budget","status":"publish","type":"post","link":"https:\/\/rosetta.vn\/short\/2018\/09\/27\/the-right-way-to-spend-your-innovation-budget\/","title":{"rendered":"The Right Way to Spend Your Innovation Budget"},"content":{"rendered":"<blockquote>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 2.5rem 0px 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">\n<p class=\"byline\" style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding: 0px 0px 0.375rem; font-size: 0.875rem; font-family: National; line-height: 22.4px;\">\n<ul class=\"byline-list\" style=\"box-sizing: inherit; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px !important; padding: 0px; font-family: National; font-size: 1.125rem; line-height: 1.2; list-style: none; display: inline;\">\n<li style=\"box-sizing: inherit; margin: 0px; padding: 0px; display: inline;\"><a href=\"https:\/\/hbr.org\/search?term=peder+inge+furseth\" style=\"box-sizing: inherit; color: rgb(200, 37, 2); line-height: inherit; overflow-wrap: break-word; word-wrap: break-word; word-break: break-word; background: 0px 0px;\">Peder Inge Furseth<\/a><\/li>\n<li style=\"box-sizing: inherit; margin: 0px; padding: 0px; display: inline;\"><a href=\"https:\/\/hbr.org\/search?term=richard+cuthbertson\" style=\"box-sizing: inherit; color: rgb(200, 37, 2); line-height: inherit; overflow-wrap: break-word; word-wrap: break-word; word-break: break-word; background: 0px 0px;\">Richard Cuthbertson<\/a><\/li>\n<\/ul>\n<p class=\"publication-date text-gray\" style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding: 0px 0px 1.5rem; font-family: National; font-size: 0.8125rem; text-transform: uppercase; line-height: 22.4px; color: rgb(102, 102, 102) !important;\">AUGUST 03, 2018<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 2.5rem 0px 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Innovation is famously difficult \u2014 many projects end up losing money, frustrating employees, and going nowhere.&nbsp;And yet corporations and governments spend billions of dollars annually pursuing innovation. This huge spending would generate more value for businesses and societies if the innovation success rate were just a<span class=\"Apple-converted-space\">&nbsp;<\/span><em style=\"box-sizing: inherit; line-height: inherit;\">little<\/em><span class=\"Apple-converted-space\">&nbsp;<\/span>higher. Is there a way to increase the success rate without spending more?<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">We think there is. Innovation projects often fail because the resources are spent on the wrong kind of innovation. Too much money is spent on attention-grabbing activities that are straightforward to do, like hiring new people, procuring new technologies, and buying more facilities. It is much less obvious, and usually harder, to change the design of a current service system, introduce new customer experiences, or build a better business model&nbsp;\u2014 but the return on those investments may be much higher.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Innovation needs to be considered in two ways: innovation capacity and innovation ability.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\"><span style=\"box-sizing: inherit; font-weight: 700; line-height: inherit;\">Innovation capacity<\/span><span class=\"Apple-converted-space\">&nbsp;<\/span>is the organization\u2019s potential for innovation. This is the stuff that\u2019s easy to buy, and that organizations tend to spend too much on: assets and resources. This includes technology and people, as well as tangible, intangible, and financial assets. Most innovation investments, such as product improvement, technological innovation, and research and development (R&amp;D) traditionally aim at strengthening the innovation capacity of the organization. Today, every company, small or multi-national, new or incumbent, can obtain innovation capacity. People can be hired through the sharing economy; technology can be rented by the hour; finance can be sought for any prototype, and assets bought. But capacity alone is insufficient to create new, significant, sustainable value for customers&nbsp;\u2014 no matter how huge the capacity.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">That\u2019s where<span class=\"Apple-converted-space\">&nbsp;<\/span><span style=\"box-sizing: inherit; font-weight: 700; line-height: inherit;\">innovation ability<\/span><span class=\"Apple-converted-space\">&nbsp;<\/span>comes in. This term describes the more difficult aspects of creating value, like new customer experiences, a revised service system, or new business models. An organization may have many people providing innovation capacity, but may still struggle to increase innovation ability, because capacity by itself does not invent nor implement a new business model or a better customer experience. Yes, an organization requires a certain amount of innovation capacity, but there is no increased value creation through an increase in innovation capacity<span class=\"Apple-converted-space\">&nbsp;<\/span><em style=\"box-sizing: inherit; line-height: inherit;\">alone.<\/em><\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">We\u2019ve come to these conclusions after completing case study analyses of a range of companies, including Nokia, Kodak, Borders, Amazon, Apple, and Xerox. Together, these companies have spent billions on innovation. But although the latter three spent relatively less on innovation, they spent their innovation budgets more wisely, choosing to invest in innovation ability rather than capacity.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Nokia during 2007-2010 was an example of a corporation with great innovation capacity. Nokia always offered technologically feature-rich mobile phones&nbsp;\u2014 in fact, Nokia invented the smartphone. Nokia actually offered a touchscreen smartphone two years before Apple\u2019s iPhone. Yet Nokia hung on to the Symbian operating system despite knowing its weaknesses in the eyes of the consumer. Nokia did have resources to develop a new operating system, but chose to stick with Symbian. As a result, Nokia became less and less able to create new value. At one point Nokia manufactured 90 different mobile phones. Their functionality was developed slightly from one model to the next, but most phones were examples of innovation driven by the company\u2019s innovation capacity. In short, technology was a strength for both companies, but Apple did a much better job connecting its technology to a service system delivering new customer experiences through a relevant business model. Developers outside of Apple were allowed to sell apps through iTunes and the App Store. Apple kept 30% of the sales made by outside developers. The huge number of apps created provided customers with a very wide selection of new customer experiences.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Nokia launched the OVI Store globally in May 2009. The company was however unable to match the service system provided by the iPhone in combination with iTunes and the thousands of applications that had already been developed. The then Nokia CEO Stephen Elop was quoted in Wired of February 2011 stating: \u201cThe first iPhone shipped in 2007, and we still don\u2019t have a product that is close to their experience.\u201d The Ovi Store was discontinued in 2015.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Kodak is another example of a company that spent most of its resources on drivers of innovation capacity. The company famously spent over four billion dollars developing the digital camera, but chose not to develop a new business model to convert that innovation capacity into innovation ability&nbsp;\u2014 and as a result, failed to capture the value of what they\u2019d invented. By contrast, Xerox invested in customer experiences, creating increased value for customers by expanding its platform, resulting in increased revenues. As Xerox\u2019s CEO Anne Mulcahy said in the Dean\u2019s Innovative Leader Series at MIT in 2006: \u201cIn trying to rebound, we spent the vast majority of our time talking to customers.\u201d&nbsp;&nbsp;By 2011, two-thirds of Xerox\u2019s revenues came from products or services it had introduced within the last two years. Put simply, Xerox embraced the digital era and developed a host of technologies enabling the firm\u2019s ability to transform to a services business . Kodak \u2014 in contrast&nbsp;\u2014 tried to delay that transformation as long as possible, avoiding developing its service system, customer experiences, and business model.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Three lessons for value creation emerge here.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">First, organizations should spend less on building the capacity for innovation. In other words, even if your organization increases the number of people working on innovation initiatives by 10% or even 20% \u2014 while at the same time no other changes are made internally&nbsp;\u2014 there is simply no legitimate reason to believe that the organization will create even greater value.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Second, to succeed with innovation initiatives, corporations need to consider the value drivers that change through innovation<span class=\"Apple-converted-space\">&nbsp;<\/span><em style=\"box-sizing: inherit; line-height: inherit;\">ability<\/em>&nbsp;\u2014 the business model, customer experiences, and the service system. Even if an organization has a new idea, a new technology,&nbsp; a new product, or a new service, none of these will necessarily increase the&nbsp; organization\u2019s innovation success rate unless innovation ability changes one or more of the value drivers.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">Finally, the thinking and practice of innovation should start from the premise that successful innovation is driven by the shared value created.<span class=\"Apple-converted-space\">&nbsp;<\/span><em style=\"box-sizing: inherit; line-height: inherit;\">Innovation should be value-driven;<\/em><span class=\"Apple-converted-space\">&nbsp;<\/span>corporations, and governments, need to create value for a network of stakeholders: customers, suppliers, and the firm&nbsp;\u2014 maximizing value solely for the owners is not enough.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">A corporation can have the same idea, product, service or technology as its main competitor, but to win in the marketplace it must develop a new business model, customer experience, or service system that will put that new idea, product, or technology to use.<\/p>\n<p style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 2rem; margin-left: 0px; padding: 0px; font-family: Guardian; font-size: 1rem; line-height: 1.9; text-rendering: optimizeSpeed; color: rgb(34, 34, 34); background-color: rgb(255, 255, 255);\">\n<p class=\"is-inline-block width-100pct\" style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding: 0px; width: 340px; font-family: National; font-size: 16px; line-height: 22.4px; display: inline-block !important;\">\n<p class=\"mbn description-text \" style=\"box-sizing: inherit; margin-right: 0px; margin-left: 0px; padding: 0px; font-family: National; font-size: 1rem; line-height: 1.6; text-rendering: optimizeSpeed; margin-bottom: 0px !important;\"><a href=\"https:\/\/hbr.org\/search?term=peder+inge+furseth\" class=\"font-size-xlarge line-height-tight\" style=\"box-sizing: inherit; color: rgb(200, 37, 2); overflow-wrap: break-word; word-wrap: break-word; word-break: break-word; background: 0px 0px; line-height: 1 !important; font-size: 1.375rem !important;\">Peder Inge Furseth<\/a><span class=\"Apple-converted-space\">&nbsp;<\/span>is a professor of innovation management at the Department of Culture and Communication at BI Norwegian Business School, Oslo. Furseth runs courses, networks and research projects on service innovation, new business models, and digital transformation. He co-authored the book<span class=\"Apple-converted-space\">&nbsp;<\/span><em style=\"box-sizing: inherit; line-height: inherit;\">Innovation in an Advanced Consumer Society<\/em>&nbsp;(Oxford University Press) with Richard Cuthbertson in 2016.<\/p>\n<p><span style=\"font-family: National; font-size: 16px; line-height: 22.4px;\"><\/span><\/p>\n<hr style=\"box-sizing: content-box; height: 0px; border-style: solid; border-color: rgb(213, 215, 216); border-width: 1px 0px 0px; clear: both; margin: 1.5rem 0px; color: rgb(34, 34, 34); font-family: National; font-size: 16px; line-height: 22.4px; background-color: rgb(255, 255, 255);\">\n<p class=\"is-inline-block width-100pct\" style=\"box-sizing: inherit; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; padding: 0px; width: 340px; font-family: National; font-size: 16px; line-height: 22.4px; display: inline-block !important;\">\n<p class=\"mbn description-text \" style=\"box-sizing: inherit; margin-right: 0px; margin-left: 0px; padding: 0px; font-family: National; font-size: 1rem; line-height: 1.6; text-rendering: optimizeSpeed; margin-bottom: 0px !important;\"><a href=\"https:\/\/hbr.org\/search?term=richard+cuthbertson\" class=\"font-size-xlarge line-height-tight\" style=\"box-sizing: inherit; color: rgb(200, 37, 2); overflow-wrap: break-word; word-wrap: break-word; word-break: break-word; background: 0px 0px; line-height: 1 !important; font-size: 1.375rem !important;\">Richard Cuthbertson<\/a><span class=\"Apple-converted-space\">&nbsp;<\/span>is a Senior Research Fellow and Research Director, OXIRM at Sa\u00efd Business School, University of Oxford. He is a leading expert in the development of consumer-facing businesses in a data rich world, where the diversity of customer experiences, formats, and channels combine to create a challenging environment for firms, supply chains, and public policy.<\/p>\n<\/blockquote>\n<p><a href=\"https:\/\/hbr.org\/2018\/08\/the-right-way-to-spend-your-innovation-budget\">https:\/\/hbr.org\/2018\/08\/the-right-way-to-spend-your-innovation-budget<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Peder Inge Furseth Richard Cuthbertson AUGUST 03, 2018 Innovation is famously difficult \u2014 many projects end up losing money, frustrating employees, and going nowhere.&nbsp;And yet corporations and governments spend billions of dollars annually pursuing innovation. This huge spending would generate<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"quote","meta":{"_mi_skip_tracking":false},"categories":[79,196],"tags":[907,908],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p8jhJx-ll","_links":{"self":[{"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/posts\/1323"}],"collection":[{"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/comments?post=1323"}],"version-history":[{"count":0,"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/posts\/1323\/revisions"}],"wp:attachment":[{"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/media?parent=1323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/categories?post=1323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rosetta.vn\/short\/wp-json\/wp\/v2\/tags?post=1323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}