Note: This is a repost from my www.kitetail.com site. 

The profitability equation is quite simple: when a firm’s revenue from selling its product or service is greater than the cost of offering it, then it is concluded that the firm is profitable on that given offering.

Profits = Revenues – Cost

If we further analyze this simple equation, then we recognize that the revenues are a function of the quantity of a product or service sold at a price that the customer is willing to pay. This price is chosen based on the attractiveness of that product or service to the customer, i.e. its attributes. On the other hand, the cost is also a function of product’s attributes and the quantity it is produced at. For profitability, the ultimate goal of a firm is to offer products with differentiated attributes that customers are willing to pay high prices for, while keeping costs low and competitors out.

What does that mean for your innovation? Innovation is about implementation of a new idea for the purpose of creating value: value for the firm, and value for the consumer. Innovations come in many forms, and the research on innovation and innovation types can be quite confusing, as each author has his/her perspective and terminology. Unfortunately, this is further exacerbated by the fact that innovation has become the latest buzzword or Holy Grail for firms as they look for growth.

Innovation Types (more…)

In a few days, I will be arriving to Tokyo, Japan. I was there in 2001 as part of my Management of Technology International Study Program. We had a blast visiting numerous companies in Japan and Singapore (Japan Productivity Center, NTT-DoCoMo, Kao Corporation, Sony Corporate Research Center and more). Our purpose was to compile American Practitioners’ Views of Technology Management in Japanese and Singaporean High-Technology Organizations. 

However, this trip is all about having fun! I am taking my 11-year-old to see Tokyo, Nikko, Osaka, Kyoto, Himeji, Hiroshima and surrounding areas. He is looking forward to visiting all the electronics and anime stores in Tokyo.  

Here is a quick look at our observations from 2001. Overall, we summarized our views of Japan and changes Japanese institutions were experiencing as such: (more…)

MIT Sloan Management Review recently posted about a new working paper from Researchers Viral Acharya, Ramin Baghai-Wadji, and Krishnamurthy V. Subramanian. Their findings (based on their study of labor laws and patents and citations from the US, Germany, UK, France and India) suggest that national labor laws that make it harder to dismiss employees have a positive effect on innovation — and even on economic growth.

The authors report that they found evidence that strong labor laws in general foster innovation but have a negative effect on economic growth. However one aspect of such laws — more stringent laws regulating employee dismissal — had a strong positive effect on both innovation and economic growth in a country.
Why would laws that make it more complicated for employers to let workers go have a positive effect on innovation? One reason, the authors suggest, is that such laws may make employees more willing to take the greater risks associated with attempting innovation.

This topic sparked my interest, but I do wonder about their conclusions… Here are my thoughts. What do you think? 

First, it seems like the study defines innovation and innovativeness based on inventions. While it is true that a patent’s value is measured through the number of citations, I don’t equate patents to innovation. Successful commercialization of patents is what drives economic value. 

Also, there is no universally accepted definition of innovation or how to measure innovativeness. Take a look at few of the recent studies measuring global innovation.  (more…)

Innovation is not synonymous with new product releases. There is certainly an overlap, but innovation is not just about making new stuff. Otherwise, we would be in the perpetual cycle of: think ⇒ make ⇒ waste. Wait, we are… But, that is a topic for another post.

Many firms use the percentage of revenue from new products or number of new products launched as a metric to gauge the success rate of a firm’s innovation capability. Measuring innovation is certainly challenging. Inherent with any metrics program, there could be unintended, negative side effects. There is an article on Freakonomics blog regarding this complexity that is worth checking out: How Can We Measure Innovation? A Freakonomics Quorum.

Should the New Product Development (NPD) process be adopted as a framework for innovation management? In organizations where innovation is managed in an ad-hoc fashion, that certainly seem to be the case. Here is an hypothetical scenario on how innovations can be managed using the NPD process. Does this seem familiar?
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We are all creative, even when we don’t acknowledge our creative powers. How we take ideas and combine them in unique and unexpected ways is what creativity is all about. Motivation, inspiration, exploration, constraints and sharing are the ingredients of creativity. Sharing is also the igniter that starts us on the path of invention and innovation.

Sharing is risky. It generates conflicting emotions… What if someone steals my idea? What if I make a fool of myself? What if they don’t like it? What if? Yet, sharing is a must in order to prosper, to thrive, to evolve … A story comes to mind that I read recently about the difference between Dead Sea and Sea of Galilee.

…. The Dead Sea has no outlet. Both are fed by the same source but the Dead Sea can only receive an inward flow. The Dead Sea is prevented from flowing outward and the accumulation of salt has killed it. The Sea of Galilee is alive, only because what flows in can also flow out.

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