Question

identify the factor that determines the returns to innovation and evaluate the potential for innovation to establish a competitive advantage

Answer 1

Return On Innovation Investment

Return on innovation investment is a performance measure used to evaluate the effectiveness of a company's investment in new products or services. The return on innovation investment is calculated by comparing the profits of new product or service sales to the research, development and other direct expenditures generated in creating these new products or services. Return on innovation investment is also referred to as "R2I" or "ROI2."

The return on investment formula is as follows:

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

ROI = Current Value of Investment - Cost of Investment / Cost of Investment

Current Value of Investment” refers to the proceeds obtained from the sale of the investment of interest. Because ROI is measured as a percentage, it can be easily compared with returns from other investments, allowing one to measure a variety of types of investments against one another.

Research and development (R&D) include activities that companies undertake to innovate and introduce new products and services. It is often the first stage in the development process. The goal is typically to take new products and services to market and add to the company's bottom line.

KEY TAKEAWAYS

• R&D represents the activities companies undertake to innovate and introduce new products and services or to improve their existing offerings.
• R&D allows a company to stay ahead of its competition.
• Companies in different sectors and industries conduct R&D; pharmaceuticals, semiconductors, and technology companies generally spend the most.

Successful innovation is absolutely essential for companies to establish and maintain a competitive advantage. New products and services attract new customers and, in many cases, can help companies gain market share, even when the overall market is growing slowly at best.

Although most companies recognize the importance of innovation, not all organizations approach the innovation process with the rigor and discipline it deserves. As we have discussed previously, lack of accountability and focus can produce a negative spiral of too many low-value innovations absorbing too many resources, with an ever-poorer rate of success.

Factors that determine the returns to innovation

Financial Profit

The most common reason you may want to measure ROI is to determine the profit you’ve made. In this case, you need to go after numeric indicators and make a total evaluation of the money you’ve earned. The total revenue refers to the money you received after an event. The real profit, on the other hand, is the actual earnings that go into your pocket (or into your company’s pocket) after extracting all the investments you made to execute your services.

Sales Revenue

Another aspect you may be interested in is finding out how your sales pipeline grew after an event. This can be done by evaluating the number of closed sales. By focusing on this measurement concept, you’ll be able to understand the effect your marketing had on the event. On the other hand, you’ll be able to use these measurements to find ways to ensure a future event has a greater sales result.

Brand Awareness

While likes, retweets, and RSVP’s don’t necessarily add profit to your business, it does help bring brand awareness and greater brand reputation. Aside from the online interactions, clients may use word-of-mouth to recommend your services to their friends, family, and colleagues who could benefit from attending or possibly partnering up with your company and vendors.

Educational Impact

With some events, the focus is transmitting an idea or in education professionals about potential challenges they may encounter and ways you can help overcome them. In this case, when you measure event ROI, focus on the number of leads you attracted and the community growth percentage. This will give you a clear idea about the informational impact your event had on your attendees.

Engagement

Similar to brand awareness, engagement is a powerful way to measure ROI. By encouraging your guests to participate in activities you’ve set up such as live polls or quizzes. The participation results you collect after the event will give you a clear idea about the attendee engagement and give you a better understanding of what they are interested in and what they aren’t.

Innovation and competitive advantages for the maintenance of business

Innovation is one of the fundamental processes of strategic management and is generally recognized as the main source of competitive advantage for individual companies, as well as for entire economic and social systems. However, recognizing this fact is not sufficient. We must, in fact be components and know-how to manage strategic processes that transform ideas and creative proposals in projects and practical solutions, workable and sustainable in terms of new products, manufacturing processes, organizational forms or new business models in response to the changing needs of society and markets.

Thus, companies that want to gain a competitive edge must launch radically innovative products (goods, service or ideas), that is able to transfigure the conventional ways of doing business.

Factors That Can Enable a Higher Return on Innovation

1. Innovation is a business process requiring management discipline. Innovation benefits from the disciplines that apply to other key business functions. While many people believe that innovation is a creative endeavor that cannot be managed, the truth is that effective innovation requires cross-functional cooperation and accountability throughout the entire process. Innovation, however, is not a “one-size-fits-all” endeavor and organizations may need to deploy multiple processes, one for breakthrough-type innovations and another for line extension-type bread and butter innovations.
2. Selectivity and balance are critical. Successful innovators have a portfolio of innovations in the pipeline, ranging from modest line extensions to bigger bets on new ideas or technologies. At the same time, however, the successful innovators keep the portfolio small; they do not place their bets on too many horses, but they do focus on the best possibilities for both low and higher-risk ideas. Ongoing trimming of the portfolio prevents the dilutive effect of having too much effort spread over too many projects.
3. Innovation must adopt new technologies. To keep up with shorter product lifecycles and rapidly evolving consumer demands, companies must leverage new tools which support innovation. In addition to established tools, such as stage-gate and others used for portfolio management, companies can use social media to develop products and improve service. Social media tools can accelerate innovation at all phases of development, from ideation to prototype development to pilot programs to commercialization.   Wells Fargo, for example, created an “innovation network” to connect and tap into the insights of the bank’s employees to identify and address the main threats to customer loyalty. An organization can accomplish more by mobilizing this type of broad horizontal network of participants than it can by leveraging a small group of experts such as corporate development or strategy.