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Best Practice Innovation Increases Profitability    [Date Added : 04/02/2013 ]
Innovation performance is now significantly worse than three years ago, yet top innovative companies still regularly achieve up to 13% greater EBIT than average performers, according to management consultancy Arthur D. Little's (ADL) 8th Global Innovation Excellence Study, a cross-industry survey of trends and best practice in innovation management.

Drawing on over 650 responses from senior executives, the study reveals a strong relationship between using best practice management approaches (measured using ADL's Innovation Excellence Model) and achieving higher innovation performance. Comparing top quartile performers against the rest of the sample, there is a significant gap of up to 13% in terms of EBIT from recent product and service introduction and a 30% gap in terms of time-to-break even.

"The range between the best and worst performers has narrowed since 2010, suggesting underperformers can and do catch up, and that maintaining a lead in innovation performance is getting harder," says Anders Johansson, Practice Leader in ADL's Technology & Innovation Management Practice.

The study identifies four cross-industry innovation management practices which have the biggest impact on strong innovation performance:

- understanding the contribution of important technologies to corporate goals.

- structured use of external sources of business intelligence.

- reacting to changes in targeted segments by reviewing the product/service portfolio.

- mobilizing the whole organization to develop new ideas.

The study also shows a significant decrease in innovation performance of up to 25% since 2010, yet satisfaction with the level of innovation achieved has increased significantly from 25% to 42%. This may be due to tough market conditions which have forced companies to focus on short-term performance.

"Understanding which innovation management techniques to invest in is crucial to achieving a better return on innovation investment as some practices have a much higher impact than others," observes Rick Eagar, Partner in ADL's Technology & Innovation Management Practice.
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