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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
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The Innovation Journey for technology-rich product businesses
Final study report - Summary
February 2011
Alastair Ross
Simon Bramwell
Codexx Associates Ltd
3-4 Eastwood Court
Broadwater Road
Romsey, SO51 8JJ
United Kingdom
Company Registration No. 04481932
Tel +44-(0)1794-324167
www.codexx.com
[email protected]
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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
AGENDA
• The landscape for product innovation
• Study objectives, approach and participants
• Taking the Innovation Journey – what did we find?
- Initiation
- Implementation
- Into Market
- Intellectual Property Management
• Learning points for businesses in making their innovation journey
• Phase 2 – the opportunity for Thomas Eggar
ACKNOWLEDGEMENTS
Thanks to the following, without whose support this study would not have been completed:
Professor John Bessant, Director of Research, University of Exeter Business School, UK
David Stead, Marketing Director, Gill, Jennings & Every
Professor Frank Gertsen, Center for Industrial Production, Aalborg University, Denmark
Poul Henrik Kyvsgaard Hansen, Center for Industrial Production, Aalborg University, Denmark
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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
The landscape for product innovation
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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
The Landscape for product innovation
The seeds of failure for all too many products lie in the 'fuzzy front end' of the innovation process when
the ideas selected are weak in some way. This can result in effort expended on poor quality ideas with more
innovative ideas rejected at too early a stage.
Developing an effective and feasible value proposition around the original idea for new technology or
new products, together with partners to provide complementing software, accessories and services, is core
to successful innovation.
But of course even strong value propositions can fall on rocky ground if the company has a poorly managed
'back end' when the product is manufactured, delivered and supported in the market.
Having a good NPI process is important but increasingly it is not enough. The importance and challenges of
achieving appropriate IP protection is also growing. Effective IP management can provide strategic
advantages in the market, protect revenue sources and also generate revenue through licensing and sale.
There is increasing opportunity for learning from other sectors in the innovation journey. With the
internet and global communication, business practices are much more visible and transferable.
The growth of Open Innovation thinking means that there are new opportunities for getting new ideas
from outside the business. This can help leverage customer knowledge and other external innovators.
All the time companies face the threat – and have the opportunity – for market change through disruptive
or radical innovation.
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Study objectives and Approach
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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
Study Timetable
Develop goals and questionnaire October – December 2009
Data collection in UK January – May 2010
Data collection in Denmark August – October 2010
Analysis & reporting October 2010 – January 2011
Report Publication February 2011
This study aimed to answer the following question:
What are the key practices applied in the journey from ideas to innovative products that determine success?
This study does not look at the culture or general approach for innovation within an organisation – which we
already know to be critical - instead it examines the innovation journey itself.
Study objectives and Approach
Study Partners
Study lead
Academic lead - UK
IP Practices advice
Academic lead - Denmark
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Innovation Journey Study – February 2011 ©2011 Codexx Associates Ltd
This study focused on the key processes enabling the Innovation Journey
External LinkagesExternal Linkages
Successful innovation requires an holistic system
The Innovation System
LeadershipLeadership
ClimateClimate
StrategyStrategy
ResourcesResources
Ideas Select Implement
Process & Controls
Ideas Select Implement
Process & Controls
©2006 Codexx Associates Ltd
Key innovation practices need to be effectively managed
new productsnew productsnew servicesnew services
business modelsbusiness models
process improvementprocess improvement
new marketsnew markets
market positioningmarket positioning
Learning
Learning
Learning
Learning
Commentary
Research by Professor John Bessant at Exeter University has shown that effective innovation requires a number of factors to be in
place to enable an innovation ‘system’. Codexx developed the ‘Foundations for Innovation’ (F4i) model together with Professor
Bessant to assess organisations’ innovation systems and this showed strong correlation of these innovation practices with overall
innovation performance. Our study on the ‘Innovation Journey’ focuses on one key part of this total innovation system - the design and
effectiveness of the key processes used by businesses to make their ‘innovation journey’ for new products.
Our focus for this study
Foundations for Innovation (F4i)
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Implementation
4. Prototype
5. Develop 6. G
o/N
o-go
Initiation
2. Idea Exploration
1. Idea Generation
3. Select
Into Market
7. Prepare
8. Launch& Support
9. Learn
Source: ‘Innovation Journey
for Hi-Tech, Hi-Speed
Organisations’ (unpublished
paper) by Simon Bramwell and
Alastair Ross. 2009
The Innovation Journey for
technology products
The study examined business innovation practices and challenges throughout the innovation
journey from idea to market – using an end-to-end model
We believe that this study is unique; other studies of product innovation focus on some elements of the innovation journey, this study
considers the complete ‘end-to-end’ journey. This journey starts with ideas and ends with products in the marketplace that deliver value to the
product stakeholders – that is: users, customers, the business that developed it, together with its partners .
Commentary
ideas
value
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The study participants were medium to large companies applying significant technology in their
products – we identified innovation leaders for comparison
Companies were invited to participate in the study by Codexx, Exeter and Aalborg Universities and GJE.
13 UK-based companies and 12 Denmark-based companies took part in the study. Participating company sectors included
medical systems, semiconductors, business & consumer electronics, telecommunication systems, adventure clothing,
engineering products, and high-value toys.
Participants – who were typically the Engineering, Development or Innovation Director/Manager - completed a
questionnaire and follow-up email interview. To enable companies to be open and frank in their response, participation
was anonymous.
The Innovation Leaders•We selected the top 1/3 of the participants (a total of 8) based
on their innovation performance* and contrasted those
against the total sample.
•This enabled us to look for correlation between innovation
practices and performance.
•Of the innovation leaders, 6 were B2B (‘Business to Business’)
and 2 were B2C (‘Business to Consumer’) compared to 21 B2B
and 4 B2C overall.
•6 of the innovation leaders were based in the UK and 2 in
Denmark.
•Given the study sample size, in making comparisons between
the Leaders and others and between UK and Danish groups we
only considered an absolute difference of >15% in a practice to
be significant.
•The innovation leaders were well spread across the sample as
measured by revenue (see adjacent diagram).
*Innovation performance was based on the following factors: Organic growth, time to
market, revenue from products launched within last 3 years, quality of products and
NPI performance to plan. This information was gathered from the study participants.
Revenue £m
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Taking the Innovation Journey – what did we find?
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We found correlation between innovation practices and performance
This shows that those companies
that applied the highest level of
innovation practices were more
likely to show the highest
innovation performance. This
supports academic findings.
We believe that the reason the
correlation is not stronger, is that
the innovation journey practices
alone are not responsible for high
innovation performance. The other
aspects of the innovation ‘system’
in place within a business –
covering key attributes such as
culture, leadership and strategy –
are also critical but are not covered
in this study.
Commentary
Note: The alphabetic codes represent the companies that participated in the study. Each participant knows their code,
but not the identify of other participants to enable them to determine their performance, but retain anonymity.
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Idea Exploration, Market Preparation and Intellectual Property (IP) management
were key to innovation performance
Note: Performance Leaders were the top 1/3
of companies from the study sample with
highest overall innovation performance. This
produced 8 companies – 6 UK-based and 2
Denmark-based
Commentary
When we assessed the practices applied by participating companies across the innovation journey, we found that leaders were significantly
ahead of the others in Idea Exploration, Market/Launch Preparation and in Intellectual Property Management. This points to these areas being
critical to the success of an overall innovation journey – rather than those areas typically focused on such as Idea Generation and Product
Development – which actually show little difference in our study.
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Overall Danish & UK innovation practices were broadly similar other than in Idea Exploration and IP
Due to the small sample size, we have only reported on significant differences between the UK and Danish groups in this report – anything
less than a 15% relative difference in scoring we have ignored for this reason. On this basis, the only significant difference was in in Idea
Exploration and IP Strategy & Management where the UK participants scored somewhat better. This showed that UK companies were using a
more sophisticated approach to the exploration of new ideas and a higher focus on IP Strategy. These differences resulted in the UK
companies scoring somewhat better in overall innovation practices and also higher in innovation performance in this study as is shown in the
table.
Commentary
Comparative
Scoring
Innovation
Practice
(Average)
Innovation
Performance
(Average)
UK 60% 48%
Denmark 58% 42%
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Detailed findings: Phase 1 - Initiation
Implementation
4. Prototype
5. Develop 6. G
o/N
o-go
Initiation
2. Idea Exploration
1. Idea Generation
3. Select
Into Market
7. Prepare
8. Launch& Support
9. Learn
Effective Initiation creates concepts for new
products with highest potential value.
Excellence in this phase requires a broad and
diverse approach to idea generation, a rigorous
approach to idea exploration and a systematic
approach for selection.
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Step 1. Idea Generation – where do new ideas come from?
Today almost 2/3 of new product ideas come from employees in the participating companies. However Leaders relatively get 50% more of their
ideas from customers than do other companies. This shows that Leaders today are embracing ‘Open Innovation’ thinking more than other
companies. However this average covers a very broad spread with some performance leaders getting 90% of their ideas from customers.
Overall the participants expected that there will be a significant growth in the use external sources for new ideas (e.g. customers and suppliers)
over the next five years, using open innovation techniques such as “Crowd-Sourcing”. However the Innovation Leaders do not see a growth
in their use of external ideas – this is already comparatively high today and some of the leaders for example see the % of ideas generated
from customers decreasing from 90% to 80%.
Commentary
Now
Future
All Leaders
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Step 2. Idea Exploration – how do companies explore new ideas?
Leaders used a wider set of methods to explore new ideas. This
provides increased insight into both opportunities and challenges for
new technologies and product concepts and so an increased likelihood of
improving the likelihood of successful products.
Prototyping was the most popular way of exploring new ideas,
with more analytical Market Study and User Involvementapproaches having less emphasis. Each of these three approaches has
specific strengths for idea exploration:
– Market Study enables quantitative judgment to be made regarding the
size of the opportunity for a product based on the idea.
– User Involvement is more qualitative but ensures that the idea is
tested and refined for user value.
– Prototyping can help bring the idea to live for user review and also test
against manufacturability requirements.
The Danish companies scored significantly lower in the level of effort
applied to Exploring Markets and Exploring User needs than did the UK
companies, resulting in a lower overall score in Idea Exploration.
Note: Exploration techniques defined were: Market study, User Involvement, Prototyping, Other
Commentary
Average number of techniques
regularly used for Idea Exploration
UK 2.3
Denmark 1.8
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Detailed findings: Phase 2 - Implementation
Implementation
4. Prototype
5. Develop 6. G
o/N
o-go
Initiation
2. Idea Exploration
1. Idea Generation
3. Select
Into Market
7. Prepare
8. Launch& Support
9. Learn
Effective Implementation produces
products ready for market.
Excellence in this phase requires an effective use
of prototyping to test new product concepts
against market opportunities and technical and
supply capabilities; it requires an effective
development process and a robust decision point
prior to release for market preparation.
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Step 5. Product development – what methods are companies using?
The overall score in the Innovation Journey for Development was a combination of the methods used and the effective use of
Information technology (shown on next page).
Leaders were not ahead in their use of product development techniques in most areas. Indeed Leaders were significantly
less likely to be applying Agile techniques than other companies. Agile development methods are particularly prevalent in software
companies with a focus on speed. Leaders use of formal Project Management techniques such as Prince2 was a little less than other
companies, possibly indicating that lighter project management methods are more effective for those companies.
But Leaders are significantly ahead in their application of end-user involvement and in separating out technology and product
development. This makes sense in that user involvement in development will help ensure that there is more user value in the end
product – and thus a greater likelihood of market success. Separating out technology and product development reduces risk of the new
product being late to market or suffering from functional and quality problems – again increasing likely market success.
Danish companies were significantly more active than UK companies in applying project management, Lean and Agile methods
in their product development.
Commentary
** NPI Team decision
NPI stage-gate review
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Step 5. Product development – how are companies applying Information Technology?
Information Technology can provide major benefits in new product innovation – enabling internal and external collaboration,
simulation, CAD/CAM for example. We asked companies how effective they believed their use of IT was in their end-to-end innovation
process. Overall the UK companies scored significantly higher than the Danish companies and this was a key reason why the UK
companies scored slightly higher overall in Product Development practices. Leaders assessment of their IT effectiveness is on average 30%
higher than the other companies, indicating that this is an important area of practice differentiation – however only 6 of the 8 leaders
answered this question, so the sample size is low.
Whilst IT does not replace the value of face-to-face contact, it has a powerful role to play in enabling effective collaboration with users,
suppliers and partners, and in enabling fast time-to-market through computer-aided design and simulation. The role of online collaboration
tools such as web forums, virtual worlds (such as Second Life) and Facebook is increasing the ease by which companies can interact with
their users and through which user communities can bring enhanced value to a product offering.
Commentary
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Key challenges across the journey – Phase 2 (Implementation) – participant feedback
Final subjective tests
Competitor product
offerings coming to market
with new features during our
development phase
Technical challenges
Ensuring firm cost-benefits visible
Getting production time
for test production
Customer
collaboration during
implementation
Ensuring design is frozen
Price and quality approval
Ensuring
manufacturing &
supply processes are
robust and dependable
Ensuring sufficient resourcesto ensure fast time to market
Feature creeping and
avoiding up-stream
activities and work with
non-matured
technologies
Specifications will need amending and the key
issue is changing the right ones and not the easy
ones - avoiding the risk of having a
complete product that doesn't deliver
Implementing change at
the same time as the existing
product goes through the
factory. We don't have an
automated engineering
change system.
Inappropriate project
management
Balancing resourcesbetween product maintenance
and new product development
Selecting the right
new products
Buy in from all areas is
the most difficult as we have
so many people and markets
to satisfy
To get attention and
focus on product
launching from
sales/marketing
Availability of the key
technical resources
Keeping to schedule
Taking an end to end view (e.g.
including testing and maintenance)
Product sign off to
meet the launch timings
Customer acceptance of
products. Typically a product is
customised for a specific
customer.
Technology Business Value
ExecutionUsers
NOTE: The above information was provided by the
participating companies when asked for the key challenges
encountered in this phase. We have grouped these comments
around our four identified critical journey activities.
Technology
Users
Business Value
Execution
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Detailed findings: Phase 3 – Into Market
Implementation
4. Prototype
5. Develop 6. G
o/N
o-go
Initiation
2. Idea Exploration
1. Idea Generation
3. Select
Into Market
7. Prepare
8. Launch& Support
9. Learn
Effective ‘Into Market’creates
commercial and user value through the
sale, support and enhacement of new products.
Excellence in this phase requires an integrated
approach to market preparation involving the key
development, sales & marketing and supply
functions together with partners; it requires an
effective launch to drive awareness and demand
and ongoing support for users and the generation
of additional revenue and user value through
accessories and complementary offerings. Finally a
Learning stage enables the organisation to capture
experience and improve both its own methods
and the value provided to users.
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Step 7. Prepare – how do companies prepare for market introduction?
Commentary
The Leaders were again most user focused, with a high rating for how well they prepared user support for new products and in marking
changes in the product to cope with market changes – but also with high focus on making engineering changes to address product
issues – this is a surprising weakness, perhaps explained by the leaders’ lower scoring in some key product development practices compared
to the other companies. Another reason may be a philosophy of launching products quickly to the market and then fixing issues (an ’80:20’
approach) – this is common and acceptable where much of the functionality is software based. However this can be a risky approach for a
smaller business whose market position is not strong. Indeed enhancing products in market through software enhancements or fixes enables
companies to increase the number of positive ‘touch points’ with users - this can actually improve the user perception of value. This approach
is common for software-based products such as Smartphones, mp3 players and Personal Computers.
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Detailed findings: Intellectual Property Management
Implementation
4. Prototype
5. Develop 6. G
o/N
o-go
Initiation
2. Idea Exploration
1. Idea Generation
3. Select
Into Market
7. Prepare
8. Launch& Support
9. Learn
Effective management of
Intellectual Property (IP) is key to
maximising the value of an idea.
Excellence in IP Management requires a
strategy for IP - that is tailored for each
business and their own business strategy –
together with a structured approach to IP
capture, protection and exploitation.
IP Management
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IP Management – how does IP management impact innovation performance?
There is clear correlation between IP management practices and overall
innovation performance. This means that companies that are more effective at
product innovation are more likely to have effective methods in place for their
Intellectual Capital (IP) management – covering for example an IP policy, patenting or
design protection.
However companies identified challenges in Costs & Complexity of the IP process
and weaknesses in their own IP Management methods. The cost of effective IP
management is a particular challenge for smaller companies, with the cost of
defending patent infringements perceived as a major particular barrier to patenting
in the first place. The plain fact is that an undefendable patent is tantamount to a
business giving away its ‘crown jewels’.
Key IP challenges identified by participating
companies
Costs & Complexity of IP process•Costs, knowledge
•The cost of the process
•Price and value of patents
•Length of process, legalistic (so avoided by employees) - needs
to be driven
•Nothing is patented due to lack of knowledge/competences
Effectiveness of IP management methods•Currently we do not actively protect our IP.
•Only have one product under patent.
•Bringing new innovation to market it is important to protect the
idea that we can commercially exploit it and recoup investment
and research costs.
•That we have probable operability (non-infringement) and that
key ideas can get the earliest priority date
•How to be more proactive
•Applying too late and losing opportunities/protection
Other•Chinese copies
•International Contract Law. Most of our IP is Know-How which is
not protectable by Patent, but is protectable by Contract.
•No concern, we file about 100 patents per year
•Due to the fact that our new products are based on very old
ideas it is hard to find features that can be legally protected.
•Potential copy from competitors
•How to make the biggest problems for our competitors
•Protecting innovative ideas
Commentary
NOTE: IP Management Practice score was the average of the 9 IP
practice questions on both IP Strategy and IP management that
study participants answered.
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IP Management – what’s the strategic role of IP?
The innovation Leaders have a significantly higher view of the strategic benefits of IP than the other companies. This should
help them justify the reason for investing in IP management – alternatively this view could be the result of their accepted investment in IP
management. Less than half of the other companies saw IP as increasing company value. The UK companies have a better strategic
view of the importance of IP than the Danish companies in the study.
The results also highlight that IP is seen by the leading innovators as important in increasing company value, limiting new competitors and
restricting the movement of existing competitors. This looks well understood but the bigger issue highlighted is the fact that so few see the
importance or role of IP in generating income by licensing. It is more likely that companies would take a rounded strategic view if
good foundations were in place to help them manage and monitor their IP. Leaders recognise the value of IP rights for limiting competitors’
activities and accept that the “temporary monopoly rights” granted by patents do create value for the company. But what proof exists that
these measures are in fact increasing corporate value? Is it reported and required at Board level?
Commentary
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IP Management – what are the key practices?
The UK and global IP system is a complex one for companies to navigate through and use effectively – this was identified as a key
challenge by the participating companies. For IP to be effectively managed a policy/strategy needs to be in place, together with a
management system.
Our study showed that the innovation Leaders have significantly better practices for the management of IP than the other
companies.
Although the Danish companies showed a lower strategic view of IP compared to UK companies, this was reversed when it came
to their management approach to IP. Whilst they were less likely to set targets (perhaps a more Anglo-Saxon business approach) or rewards
for generation of formal IP (e.g. patents) – which is consistent with their cultural focus on teams rather than individuals – Danish
companies were ahead in all other areas of IP management – significantly in having a nominated IP Coordinator.
Commentary
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Learning points for businesses in making their innovation journey
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We identified those innovation journey practices which were most strongly correlated
with innovation performance
Commentary
We examined the correlation of individual innovation practices with overall innovation performance and ranked the innovation practices
accordingly. Four of the Top Ten ranked innovation practices related to IP Management and Three of the Top Ten related to the Prepare
for Market stage. Interestingly, areas we might have expected to appear here, such as Product Development practices are absent. This tells
us that idea protection and market preparation practices are the two areas with highest correlation with innovation
performance – based on the findings from this study.
Correlation with
Innovation
Performance
Correlation of innovation journey practices v Innovation Performance
Innovation Practice
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In conclusion, we made a number of key findings from the study
1. We are unaware of other studies that explore the innovation across the complete journey from ideas to value.
2. Overall our study found significant correlation between innovation journey practices and ultimate innovation
performance.
3. The biggest gaps between Innovation Leaders and the others, in innovation journey practices were in Idea
Exploration, Market/Launch Preparation and in IP Strategy & Management. This suggests that these three areas are
the most critical in determining innovation success. This is an issue for many businesses whose existing New
Product Development processes rarely cover these key front and back-end activities.
4. Leaders had a noticeably higher level of user focus across the innovation journey than did other companies and we
would conclude that this is a key enabler to their higher innovation performance.
5. In contrast, practice areas that might have been expected to have high importance – such as Product Development
– show little difference in practice between Innovation Leaders and the others.
6. Intellectual Property (IP) management practices had the highest correlation with overall innovation performance.
We believe that this is as much an outcome of being an effective innovator as an enabler to becoming an effective
innovator.
7. Overall, there was generally little overall difference between the UK and Danish participants.
8. The study also confirmed that those companies practicing significant Open Innovation today were more likely to
have higher innovation performance than those who were not.
9. The study sample was too small for valid comparisons between business sectors.
1. As defined in the F4i innovation model on page 8
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We make the following recommendations for businesses, based on the findings from the study
1. Increase user focus throughout the innovation journey with the ‘voice of the user’ represented throughout
the end-to-end innovation process.
2. Keep flexible to enable late changes from users - a key practice of innovation leaders. To enable this,
ensure there is sufficient flexibility in the product architecture to enable changes and enhancements with
minimal impacts on time-to-market and cost.
3. Focus on users not customers. They may well be the same, but in a B2B (business to business) relationship
they are not. When it comes to product innovation, it is the users who are key.
4. Examine your current NPI/NPD process. A key learning point from this study is that it is in these front and
back-end areas that are critical to innovation success.
5. Give more emphasis to the management of IP (Intellectual Property) in your innovation processes. IP can
offer key strategic benefits if managed effectively. A key starting point is to develop a strategy for IP within
the business.
6. Review your overall innovation system. Whilst the innovation processes as reviewed in this study are a key
enabler to innovation success, there are other key factors such as Leadership, Culture and Strategy within
the business that are major determining factors in innovation success. value
ideasTo request a full copy of this report contact us via www.codexx.com