Professional Documents
Culture Documents
Controlling
Paper
Innovation
Controlling
1.
Introduction....................................................................................................... 3
Bibliography............................................................................................................ 14
3
1.
Introduction
The
global
economical
crisis
demonstrated
that
a
managerial
strategy,
which
aims
to
secure
medium-‐
and
long-‐term
economic
growth,
has
to
be
driven
by
a
greater
focus
on
innovation
than
before.
A
recent
search
of
the
database
of
the
professional
networking
site
LinkedIn
found
that
nearly
25,000
members
had
the
word
“innovation“
in
their
job
titles.1
This
makes
clear
that
innovation
is
not
just
a
trend
word.
Improved
and
state-‐of
the-‐art
innovation
techniques
have
become
tremendously
important
for
today’s
businesses
Specifically
those
innovation
techniques
that
not
only
improve
on
existing
products
(incremental
innovations)
but
also
create
fundamental
new
approaches
to
secure
a
competitive
edge
over
the
contestants
in
the
long
run
(radical
innovations).2
Unfortunately
vast
innovation
efforts
through
Research
and
Development
(R&D)
remain
to
be
one
of
the
most
cost
driving
factors
for
the
majority
of
today’s
businesses.
This
is
aggravated
by
the
fact
that
R&D
costs
rise
steadily
in
almost
every
industry
due
to
shorter
product
lifecycles
(see
Graphic
1)
and
increasing
global
competition.
As
many
markets
become
saturated
businesses
need
to
remain
dynamic
in
order
to
shorten
their
innovation
cycles.
Accelerated
product
development
becomes
vital
as
the
digitalization
of
business
and
increased
transparency
allows
for
an
ever-‐
faster
imitation
of
products
and
services.
The
business
environment
itself
is
changing
rapidly
due
to
new
players,
demanding
customers
and
emerging
technologies.
To
be
competitive,
companies
realize
increasingly
that
they
will
not
succeed
by
focusing
solely
on
product
innovations.
As
a
result,
innovation
in
business
models
becomes
a
major
differentiating
success
factor.
The
ability
to
adapt
the
business
model
in
terms
of
industry
model,
revenue
model
and
enterprise
model,
requires
a
corporate
culture
that
embraces
constant
change
and
incorporates
modifiable
systems
and
processes.3
The
challenge
for
an
Innovation
1
Cf. Lohr (2010).
2
90% of all innovations are incremental product improvements. Only radical innovation projects
secure a long term competitive advantage.
3
Accenture Information (2010), p.7.
4
As
pointed
out
R&D
simultaneously
needs
to
excel
in
efficiency,
quality,
flexibility
and
cost
effectiveness.
It
is
not
always
easy
to
put
the
contribution
of
R&D
in
respect
to
the
company’s
success.
Therefore
new
performance
measurements,
control
tools
and
product
development
activities
are
needed
to
better
scale
the
effect
an
innovation
has
on
the
companies
performance
and
to
lead
the
innovational
endeavors
of
R&D
into
the
right
direction.
Compared
to
R&D
controlling
has
a
different,
sometimes
even
conflicting
function.
It
supports
the
general
management
in
decision-‐making
by
providing
a
summarized
view
of
the
business’
core
processes.
Looking
at
the
relative
contribution
to
the
creation
of
value
within
the
company
controlling
assesses
each
process
in
terms
of
effectiveness
and
efficiency.
Consequently
the
main
goal
of
a
controller
is
not
to
foster
creativity
but
to
secure
the
overall
profitability
of
the
organization.
While
controlling
primarily
uses
mathematical
tools
to
describe
the
performance
of
each
process
the
dilemma
with
measuring
innovation
and
creativeness
is
that
the
value
of
a
potential
innovation
cannot
be
expressed
in
numbers
simply
because
it
is
not
in
the
market
yet.
CREATIVITY
CULTURE
OF
DISCIPLINE
LOW
HIGH
HIGH
Hierarchy
“Great
Organization”
LOW
Bureaucracy
Startup
A
meaningful
framework
for
the
governance
of
an
innovation
processes
within
the
company’s
structures
should
always
include
an
innovation
strategy
(so
to
speak
areas
of
strategic
focus
on
which
to
concentrate
innovation
efforts,
long
term
commitment
and
a
product
roadmap)
and
Open
Innovation
activities
(outside-‐in;
idea
portfolio
management).6
• innovation
strategy,
• open
innovation
activities,
• radical
innovation
support,
• innovation
culture
and
building
up
of
dynamic
capabilities,
• balance
between
efficiency
and
effectiveness
and
• organizational
structure
of
R&D.8
The
following
paragraphs
will
elaborate
on
some
of
the
points
mentioned
above
to
clarify
what
elements
and
activities
a
powerful
yet
efficient
innovation
framework
requires.
3.1
Measurement
of
innovation
performance
Since
there
is
no
universal
way
to
measure
innovation
performance,
a
new
and
individualized
system
of
innovation
performance
measurement
based
on
different
methods,
which
vary
according
to
industry,
size
and
the
ambitions
of
a
company,
are
the
only
solution
to
evaluate
and
subsequently
control
innovation.
8
Cf. TECTEM (2007), p.1.
8
Part
of
what
makes
Innovation
Controlling
a
powerful
yet
not
easy
to
implement
tool
is
that
it
requires
the
use
of
a
clear
innovation
strategy.
An
innovation
strategy
phrases
the
role
innovation
practices
play
in
achieving
the
overall
goal
of
the
company.
This
includes
a
“description
of
areas
of
strategic
focus
on
which
to
concentrate
innovation
efforts,
a
clear
definition
of
innovation
goals,
long-‐term
commitment
and
a
product
roadmap.9
The
innovation
strategy
also
has
to
fit
the
company’s
culture,
history
and
personality.
No
matter
how
efficient
and
cost
saving
a
powerful
innovation
strategy
might
be
committing
own
R&D
efforts
remains
to
be
a
cost
intensive
business.
Open
Innovation
activities
can
help
to
minimize
these
costs
and
therefore
should
be
encouraged
by
an
Innovation
Controller
as
a
technique
to
cut
costs
while
increasing
the
quality
of
the
innovational
outcomes.
3.4
Idea
Portfolio
Management
9
Cf. TECTEM (2007), p.2.
9
After
choosing
which
projects
have
the
highest
potential
and
fit
the
company’s
strategy
a
specific
amount
of
resources
has
to
be
allocated
to
every
innovation
project.
These
resources
should
be
calculated
on
the
basis
of
the
expected
proportion
the
project
contributes
to
the
overall
success
of
the
enterprise.
Graphic 3: The Innovation Funnel.
10
4.0
Best
Practice
In
paragraph
3.1
it
has
been
pointed
out
that
due
to
complexity
and
incalculability
of
an
innovation
there
is
no
universal
way
to
measure
innovation
performance.
In
addition
to
that
every
industry
and
every
company
has
an
individual
innovation
pace
and
philosophy
that
has
grown
over
years
and
reflects
the
very
culture
of
the
enterprise
itself.
Therefore
there
cannot
be
a
general
implementation
guideline
that
is
valid
for
every
single
business
case.
The
application
of
Innovation
Controlling
requires
a
unique
implementation
process
in
virtually
every
single
business
case.
Nevertheless
there
is
a
set
of
best
practices
in
Innovation
Controlling
that
can
be
adapted
to
the
prerequisites
and
needs
of
an
individual
company.
A
definition
of
Controlling
says
that
it
accompanies
and
shapes
the
management
process
in
target
setting,
planning
and
governance.
It
is
therefore
jointly
responsible
for
the
achievement
of
the
company’s
objectives.10
Since
Innovation
Management
itself
follows
this
operational
process,
initially
it
does
not
differentiate
from
any
other
management
task.
In
the
beginning
an
innovation
procedure,
just
like
any
other
business
process,
starts
with
a
clear
definition
of
operative
and
strategic
market
objectives
written
down
in
business
plans
including
methods
and
procedures
as
well
as
budgeting.
The
specific
challenge
Innovation
Controlling
has
to
deal
with
is
that
business
plans
for
innovation
projects
are
mostly
incalculable
and
inaccurate.
The
calculation
of
both
expenses
and
earnings
as
well
as
the
unpredictability
of
the
time
to
market
are
nearly
impossible
and
bear
a
lot
of
risks.
Looking
at
the
aviation
industry
both
Boeing
and
Airbus
experienced
this
problem
first
hand
during
the
development
process
of
their
new
A380
and
787
airliners.
Miscalculations
and
wrongly
estimated
market
release
dates
caused
by
production
delays
drove
both
companies
to
the
verge
of
bankruptcy.
This
example
also
shows
that
time
is
one
of
10
Definition of Controlling, International Group of Controlling (IGC)
11
the
most
important
success
factors.
The
time
it
takes
to
develop
a
product,
which
really
satisfies
the
needs
of
the
costumers
and
bring
this
product
to
the
marketplace
influences
four
essential
key
factors,
which
sometimes
oppose
each
other:11
(a) faster processes and quality of the product or process:
The
faster
the
development
process
of
the
finalized
product
the
shorter
is
the
time
to
market.
Shortening
the
development
process
not
only
saves
costs
but
due
to
a
l
technological
lead
also
results
in
a
much
better
competitiveness
compared
to
other
applicants.
On
the
other
hand
a
faster
development
process
and
shorter
time
to
market
in
most
cases
cause
more
immature
products,
because
of
insufficient
testing
or
mistakes
in
the
product
design
itself.
This
creates
high
consequential
costs
for
warranty
demands
and
the
change
of
the
production
design.
The
longer
it
takes
to
finish
the
development
of
a
product
the
higher
will
be
the
costs.
This
influences
the
price
per
unit
and
therefore
the
sales
figures,
because
increasing
development
costs
have
to
be
allocated
to
the
price
of
the
product.
On
the
other
hand
well-‐engineered
product
will
have
lower
production
costs
which
have
the
opposite
effect
on
the
price
and
hence
on
the
profit
The
solution
to
these
problems
and
therefore
the
task
of
Innovation
Controlling
is
to
adapt
the
business
plan
of
an
innovational
effort
at
regular
intervals
and
where
appropriate
deviate
corresponding
measures
like
further
endorsement
or
cancellation.
11
Cf. Wildemann (2009), p. 8-11.
12
As
shown
in
the
graphic
Innovation
Controlling
can
be
separated
into
four
core
processes.
Initially
there
is
support
for
project
selection
and
selection
of
the
technological
direction
of
impact.
For
an
ongoing
success
a
new
innovation
project
has
to
fit
the
company’s
current
product
portfolio
and
future
roadmap,
because
in
most
cases
a
range
of
contiguous
products
is
being
produced,
which
should
not
overlap
(cf.
section
4.4,
Idea
Portfolio
Management).12
12
Cf. Wildemann (2009), p.5.
13
Lastly
the
fourth
process
evaluates
the
project’s
success
taking
into
account
the
marketplace
success
and
cost-‐effectiveness
considerations.15
The
tools
used
to
accomplish
the
processes
described
cannot
be
named
in
this
general
approach
because
they
vary
depending
on
the
nature
of
the
company
and
the
innovation
itself.
The
corporate
culture,
Open
Innovation
activities
and
other
variables
need
to
be
taken
into
account
to
choose
the
right
tools
for
each
one
of
the
processes.
Even
though
Innovation
Controlling
remains
to
be
a
vague
concept
and
has
to
be
adapted
to
the
needs
and
premises
of
every
single
business
case
it
is
a
vital
instrument
to
close
the
gab
between
the
Controlling
and
R&D
branches
and
integrate
both
structures.
The
Controller
is
forced
to
widen
his
view
by
being
exposed
to
the
requisitions
successful
innovation
requires
while
R&D
is
effectively
compelled
to
focus
on
the
essential.
The
Controller
has
to
have
an
overview
over
the
company
and
is
used
to
work
with
absolute
or
predictive
figures,
but
putting
innovation
into
numbers
is
not
an
easy
task.
This
work
illustrated
that
successful
innovation
depends
on
creativity
as
well
as
on
control
and
the
practices
described
here
can
help
to
evaluate
innovation
performance,
streamline
the
innovation
process
and
evaluate
the
outcomes.
Just
like
successful
Innovation
Controlling
cannot
remain
static
and
has
to
adapt
to
meet
the
needs
of
modern
business
procedures.
13
Cf. Wildemann (2009), p.15.
14
Cf. Wildemann (2009), p.18.
15
Cf. Wildemann (2009), p.19.
14
Bibliography
Lohr
Steve
(2010),
The
NYT
August
14th
2010:
Innovate,
Yes,
but
Make
it
Practical.
http://www.nytimes.com/2010/08/15/business/15unboxed.html?_r=1
Accenture
Information
2015
–
Reforming
the
Paradigm
(2010).
Chu,
F.
(2004),
The
Innovation
Paradox:
Reconciling
Creativity
&
Discipline
-‐
How
Winning
Organizations
Combine
Inspiration
With
Perspiration.
Graphic 2, A Culture of creativity and discipline: Chu, F. (2002), p.1.