IMProve The importance of Innovation Management for Gazelles

Tallinn, April 27, 2007

Agenda

Innovation Management as a growth driver IMProve as new approach to generate more Gazelles

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Innovation Management as growth driver

Best Practice Innovation Management capabilities of Innovation Leaders prove the growth potential of innovation
Best Practice Capabilities built by Innovation Leaders
Longer term innovation strategy as an integral part of the business strategy based on deeper "Customer Intelligence" Broader scope of responsibility along the product lifecycle process (e.g. development project start until "time-to-profit") More efficient use of internal & external innovation networks More systematic idea management resulting in a higher transfer rate (# started development project / # successful product or implemented process) Applying more efficiently most recent IT technologies as enablers for "speed" and "quality"
Source: A.T. Kearney Best Innovator Competition 2003-2006

Success of European Innovation Leaders

Cross-industry averages

EBIT as % of revenue
>10%

~4%

Significantly higher growth rate than competition

Average Performers

European Leaders

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Innovation Management as growth driver

Value impact from Innovation Management improvements is achieved mainly through four different value levers
Levers to Realize Impact through Innovation Management
Portfolio Management
Increased innovation spending effectiveness by better innovation strategy and funnel management Increased development efficiency to minimize unit cost while assuring required quality levels

Efficiency, Speed, and Continuous Improvement

Effective Continuous Improvements (processes / product extension) to increase customer value perception Accelerated product ramp-up to minimize time-toprofit Cumulative profit

Spending on stopped projects

Idea Spending on successful projects1) T0

3 2
Time-toMarket Time-to-Profit TLaunch TProfit

Time

1) Successful product innovation projects defined as projects that result in commercialized products; successful process innovation projects defined as projects that result in implemented process improvements Source: A.T. Kearney

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IMProve as new approach to generate more Gazelles

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IMProve as new approach

IMProve is the initiative of the EC to IMProve Innovation Management Performance with sustainable IMPact for SMEs
approach
IMProve Consulting Process

Benchmarking Online selfassessment Benchmark database IMC listing and ranking Intermediaries and Consultancies
Idea management

Consulting
Innovation strategy Innovation organization and culture

Follow-up

Financial actors

Toolbox Trainings Case studies

Policy makers

Innovation life cycle management Product/ process development Launch/ continuous improvement

KPIs Library SMEs

Enabler, e.g. Human Resource Management, Knowledge Management, Project and Program Management, Controlling and IT

SME= Small and medium sized enterprise; IMC= Innovation Management Consultancy; KPI= Key Performance Indicator Source: IMProve, 2007

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IMProve as new approach

Currently the IMProve approach is tested with 1,500 SMEs and numerous consultants throughout Europe
Industry sectors in focus Bio-technology, chemicals and pharmaceuticals ICT, electrics, optics Machinery, equipment (plant construction) Space and aeronautics, automotive Knowledge intensive services Textile Food, beverages Countries in focus 28 countries: All member states and Switzerland Company sizes in focus 5-20 employees 21-100 employees 101-250 employees >250 employees Including innovative, young companies

SME = Small and medium sized enterprise; ICT = Information and Communication Technologies Source: IMProve 2007
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IMProve as new approach

IMProve offers profound benchmarking and support in developing innovation management capabilities
Dynamic benchmarking always reflecting actual competitive situation Individual definition of benchmarking class according to: Size Industry sector Region Holistic approach to Innovation Management showing the gaps to best practice Consulting workshops where roadmap for improving the Innovation Management performance is discussed Strong focus on business impact of the improvement measures
Sample in data base for benchmarking
SME= Small and medium sized enterprise Source: IMProve, 2007

15% Growth Champions Growth in revenue Growth in profit (operational margin) Increase in number of employees Basis for calculation of average

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IMProve as new approach

IMProve can educate SMEs to take a holistic view on Innovation Management Preliminary results
Focus of Innovation Strategy within sample
6,00

Number of projects initiated by sample within last 4 years

900

5,63

855

800 5,00

4,56 4,19
4,00

700

3,8 3,44

600 500

3,00 400

2,00

300

249 208 204 118 128 83 61 58 52

200 1,00 100

0,00

Product Service Process Organi- Business techno- offerings & zational models logies techno- aspects & design logies Innovation strategy: Focus on selected areas

Product innovations

Service innovations

Process innovations

Organizational innovations

Business model innovations

Started radical innovations

Started incremental innovations

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Source: IMP3rove, 2007, results from Pretest; sample 90 across 5 countries

IMProve as new approach

IMProve Growth Champions base their success on a well developed innovation strategy
Preliminary results

Strategic focus of Growth Champions vs. average

Systematic analysis of search areas
55% 43%

Setting objectives for innovation management Using innovation strategy as guidance for improving products, processes, services Taking the innovation strategy as basis for organizational changes

35% 26%

75% 61%

35% 44%

Growth Champions

Average

Source: IMP3rove, 2007, results from Pretest; sample 90 across 5 countries

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IMProve as new approach

SMEs in Eastern Europe analyze more thoroughly the socio-political trends than the average to direct their innovation management

Preliminary results

Analysis of cultural and political trends as basis for the innovation strategy

Western European SMEs

2,2

Growth Champions
3,0 Average

Eastern European SMEs

5,4 3,3

Growth Champions

Average

Growth Champions

Average

Based on a Lickert scale from 1(not important) to 7 (very important) Source: IMP3rove, 2007, results from Pretest; sample 90 across 5 countries

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IMProve as new approach

SMEs are reluctant to build on external networks only customers are considered in the innovation processes
Preliminary results

Involving external partners in the innovation processes

Conception phase Development phase Launch phase

Customers Suppliers Clusters Universities

2,3 1,5

5,0 3,6

3,8 3,7

4,8 4,1

2,3 1,8 1,4

2,2

1,7 1,8

2,0 1,9

1,8 1,9

2,8 2,4 2,6

2,9

1,3 1,6

Growth Champions

Average

Based on a Lickert scale from 1 (not important) to 7(very important) Source: IMP3rove, 2007, results from Pretest; sample 90 across 5 countries

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IMProve as new approach

IMProve shows, where even Growth Champions still need support from policy makers
Example: Financing Knowledge of funding options Percent of Growth Champions not knowing the financing option
Public subsidies for R&D 6,7%

Preliminary results High bureaucracy is a major barrier even for Growth Champions Percent of Growth Champions observing high bureaucracy when searching for financing
Venture Capital 6,7%

Bank loans 6,7%

Public subsidies for R&D 47,7%

Public guarantees 20,0%

Grants 20,0% Mezzanine funding 46,7 %

Grants 33,0%
Source: IMP3rove, 2007, results from Pretest

Bank loans 33,0%

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Invitation to all:

www.improve-innovation.eu
Eva Diedrichs A.T. Kearney GmbH Kaistrae 16 a 40221 Duesseldorf E-mail: Eva.Diedrichs@atkearney.com Mobile: +49 175 2659 266 Phone: +49 211 1377 2266 Fax: +49 175 13 2659 266

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