Sunday, September 03, 2006

Innovation Investment

Why are 97% of today's CEOs dissappointed with their i-ROI (Innovation return on investment)? That depends on what you call an innovation. Managers very often confuse motion with progress, viewing any product, service, technology, or process that is new or different as an innovation.

For example, The Home Depot was first to market french door refrigerators with water in the door. An exclusive distribution agreement with manufacturers gave The Home Depot a proprietary six month advantage over rivals. Yet, The Home Depot failed to realize an incremental profit.

The innovative refrigerator design failed to fuel a higher replacement rate or first time purchase velocity.

Considered a remarkable "improvement" by the manufacturer, updating technology for technology's sake is merely seen as keeping up with the jones by consumers - which explains why revenues are flat in the $2 trillion US consumer goods industry- and why CEOs wonder where the new growth is going to come from. CEOs should be interested in exploring processes that can turn mature earnings companies back into rapid growth businesses.

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