Innovating for Cash

James P Andrew & Harold L Sirkin

2003

There are several ways to bring a new product to market. If you're not looking at all of them, odds are you're leaving big money on the table.

Creativity is not enough

Majority of products in most companies are cash traps

5-9 out of 10 new products end up being financial failures Many corporations make the lions share of profits from only a handful of products

Most corporations presume that they can boost profits by fostering creativity and generate more and more ideas

Important difference between being innovative and being an innovative enterprise: The former generates lots of ideas; the latter generates lots of cash.

3 Approaches to Innovation
Integrator
Polaroid Whirlpool

Orchestrator
Apple Sony

GlaxosmithKline

Licensor

Choosing the Right Approach

Integrators Description Investment Requirements Capability Requirements
Manage all the steps necessary to generate profits from an idea High Manufacturingprocess design skills Product design Strong cross functional links within the organization Less Speed-to-market Proven technology Incremental innovation Stable customer tastes

Orchestrator
Focus on some steps & link with partners to carry out the rest Medium Collaborate with several partners Complex projectmanagement skills Focus on core competencies Brand Management Mature supplier/partner base Need for constant innovation Strong substitutes exist Technology in early stages

Licensor
License the innovation to another company to take it to market Low Basic Research skills Intellectual property management skills Contracting skills Ability to influence standards Strong intellectual property protection Low importance of innovators brand Market is new to the innovator Infrastructure needed but not developed

Best used when