Patents no longer the Holy Grail of innovation

September 10, 2011
| By Pete Daly |
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More than 500 companies across Michigan, Ohio and Illinois just finished completing the first Innovation Quotient survey from Plante & Moran and the NewNorth Center in Holland, with one of the findings pointing to less reliance on patents as an indicator of success in innovation.

“Patents are only one of many indicators of innovation,” states the survey report. “While patents have traditionally been the hallmark of innovation, the IQ survey found that they are no longer as strong an indicator of success in generating commercially viable new products as services. In fact, more than 60 percent of survey respondents indicated that they held no patents — and many companies did not pursue them.”

What is critical in determining a company’s innovation quotient is the existence of a formal development and commercialization process.

“Despite the focus on innovation, only 27 percent of those surveyed said they had a formal process for development,” states the report. “That figure dropped to 20 percent when it comes to commercialization. Only 9 percent saw their new products and services as true breakthroughs within their industries or markets.”

The survey results show that strategy without including a process for executive involvement will not go far toward guaranteeing innovation success.

Manufacturers, financial institutions, health care providers and other businesses in the three states completed the proprietary survey, which was designed to measure: a company’s attitude toward innovation; the business value of innovation; drivers and catalysts for innovation; and variables of process, budget and corporate culture and how they impact an organization’s innovation quotient.

Six percent of the executives who participated in the survey are from manufacturing companies, and 1 percent are from financial institutions. None of the businesses had annual revenues less than $10 million; 9 percent had revenues of more than $100 million.

Plante & Moran, a public accounting, tax, and business advisory firm, and NewNorth, a nonprofit executive education and innovation training institute in Holland, plan to hold a webinar on the survey results Sept. 21.

“The IQ survey is the first large-scale examination of innovation in our region, and the results establish a benchmark for the role innovation plays within business,” said Gordon Krater, Plante & Moran managing partner. “We found positive trends in innovation, but realize that most organizations could benefit from establishing formal development and commercialization processes to encourage a deliberate outcome, rather than leaving it to chance.”

Nate Young, president of NewNorth Center, said the IQ survey results were “incredibly revealing and insightful. Some of our initial assumptions were affirmed, while others required re-evaluation. We have distilled the results into five key observations that can benefit businesses that are serious about instilling repeatable innovation processes and driving revenue growth as a result of innovation.”

Appropriate investment for innovation, and rewards for successful innovation, are also essential, according to the survey results.

Only 27 percent of survey respondents indicated they feel their company puts up sufficient capital for innovation strategies, but that establishing a dedicated budget for innovation is perceived as creating greater accountability and allows those tasked with the process to take risks to develop and validate new ideas.

The survey report states that companies must establish a formal rewards program to support the successful conversion of ideas into commercially viable products and services, but only 35 percent of respondents indicated they have a process designed to motivate innovation. That number jumps to 42 percent in companies with revenue greater than $100 million.

“While it’s clear that Midwest executives understand and embrace the importance of innovation, their businesses have not yet fully committed the talent or resources necessary to embed innovation into their corporate cultures,” Krater said. He added that those businesses can undertake the following steps over the next 12 months to improve their Innovation Quotient:

  • Create a formal process to vet new ideas;

  • Allocate the appropriate talent — manufacturing, operations, marketing and program management, among others;

  • Focus company resources on commercializing the best ideas;

  • Create a budget and return-on-investment objectives;

  • Create a rewards program.

“Our first IQ survey has established the benchmark for innovation in the Midwest,” Young said. “NewNorth and Plante & Moran are committed to reviewing the status of innovation each year, tracking the progress of our region and identifying trends and best practices for businesses. We firmly believe that the diligent pursuit of commercially viable innovation can help launch a new era of economic viability in our region — and beyond.”

Survey participants each received a customized report benchmarking their organization’s Innovation Quotient against best-in-class practices.

The Innovation Quotient survey is designed as an ongoing, annual study that will help determine innovative practices and benchmark the importance of, and capabilities in, innovation in the Midwest.

NewNorth Center and Plante & Moran partnered with numerous co-sponsors to secure survey responses, including the Chicagoland Chamber of Commerce, Cornerstone Chamber of Commerce, Detroit Regional Chamber, European American Chamber of Commerce, Grand Rapids Area Chamber of Commerce, Holland Area Chamber of Commerce, Illinois Manufacturers’ Association, Lansing Regional Chamber, Lakeshore Advantage, Ohio Manufacturers’ Association, The Right Place, PolymerOhio Inc., Southwest Michigan First, TechSolve and the Traverse City Area Chamber of Commerce.

The NewNorth Center specializes in immersive skills training, research, executive education, workshops, seminars and an annual Design in Business Summit. Young launched NewNorth in early 2009 with seed money and backing from the Lakeshore Advantage economic development group and Brooks Capital Management.

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