The Efficiency of Innovation

by Kevin McFarthing

Innovation is Combination - Innovation Excellence

Effectiveness is doing the right things, efficiency is doing things right.  Innovation efficiency is simply the output produced from the resource invested.  Increasing the former while reducing the latter increases efficiency.

There is, quite rightly, a strong focus on the effectiveness of innovation, after all customers and users don’t have a clue whether their purchase was developed efficiently – and don’t care. For companies, on the other hand, dealing with limited resources is a daily challenge. The objective of enhancing efficiency is therefore to get the greatest output for the money invested.

One of the ways companies optimize efficiency in, for example, the supply chain, is to standardize as much as possible to ensure repeatability, using techniques like Six Sigma. Significant financial savings and improvements in quality and consistency have been delivered. But now we come to the paradox of innovation and efficiency – how do you ensure repeatability in something that is different every time around, without suppressing that difference in place of consistency?

The answer is “sometimes”. Sorry, I know that doesn’t help much, but bear with me on this. So how can you efficiency of innovation?

Optimise the Process

The objective of innovation managers should be to adopt processes, metrics and ways of working that only get in the way of project progress as much as necessary and no more. There should be active efforts to come up with new ways to streamline things. Senior management should not be too controlling or directive.  Stage Gate processes should not be too onerous.

Yes, those elements of a process that have been shown to add value every time should be repeated in every project. For example, consumer goods projects should always validate ideas and concepts with the type of consumer who they expect to buy the resulting product. Clear, simple and coherent project plans align resources. I’m sure you can come up with plenty of examples of repeatable parts of innovation management, none of which need a Six Sigma approach.

Optimise the Portfolio

It’s also important to distinguish between running a project well; and efficiently managing an innovation portfolio. Applying resource where it gives the greatest output can dramatically improve the total efficiency of innovation. It’s important to have the right balance over timeframes, geography, business groups etc. The appropriate criteria for prioritization and alignment around decisions not only ensure the right projects are done, but also avoid redundant effort and managerial misalignment, both of which lead to inefficiency.

The Right Metrics

If you don’t measure the key parameters of efficiency, it’s tough to improve it.  My favourites include the projected value of the pipeline which, together with the total resource applied, can give you a crude but simple overall measure. It also drives the company to do whatever it can to improve the output while optimizing the allocation of the input.

Which teams are the most efficient? Would moving resource to them increase your overall output?  If you start to measure it, you might find out.

Open Innovation

It takes a long time to build a particular technical competence from scratch, and a lot of investment. Working in collaboration with a partner who already has that strength, in a mutually beneficial relationship, not only gets the innovation to market faster, it can have a really positive impact on innovation efficiency. The counter argument is this creates a weaker position in IP; but if you’re starting way behind those already in the game, you’ll have that anyway.

Treat Efficiency like an Innovation Project

You use creativity techniques to generate new ideas, right?  You prioritise, test and validate them? Then why not use the same techniques for the improvement of innovation efficiency? Freeing up resource, eliminating activity that doesn’t add value or even inhibits progress; and finding ways to increase output are all great contributors to enhanced efficiency.

Innovation efficiency is all about more output from the resource you have, improving your innovation performance and enhancing your competitiveness.  It’s worth your time and attention.

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Kevin McFarthingKevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He spent 17 years with Reckitt Benckiser in innovation leadership positions and also has experience in life sciences. Follow @InnovationFixer

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