We review the implications of innovation’s 90% failure rate both financially and also in the culture of the organisation, aka The Doom Loop.
Using a case study from a FTSE 250 company, we highlight the costs of different types of innovation, highlighting that innovation project costs vary from £177,600 up to £449,400 just in labour costs alone.
We introduce Hurdle Rates for innovation to help understand whether projects have a healthy chance of paying back.
Using Companies House data we review the costs of innovation as percentage of turnover, and find that innovation investment is a significant amount of turnover for smaller companies that varies inversely by company size and varies by industry sector.
We illustrate the Return on Investment for Innovation of 185% by looking at companies that invested in innovation 5 years ago, and their increase in turnover.
We look at how to review your innovation performance alongside your innovation budget to understand whether to Manage, Invest, Restart, or Restructure.
- The financial cost of innovation can be both high and poorly measured or misunderstood – ensure you track your innovation costs properly when embarking on an innovation journey.
- The softer impact on people in an organisation underperforming in innovation can be significant.
- The opportunity for innovation success is significant given the size of the problem across the FMCG industry
Find out more about Chapter 3