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.
Key takeaways
- 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