Reasons for Innovation in New Zealand 2007

I had a conversation with a CEO we have worked with recently and we were discussing who the decision maker is and what the drivers for design and innovation were. He astutely noted that the core requirements for him (as a CEO generally) were; revenue grow, cost reduction, competitive advantage and risk reduction the rest was a luxury.

This discussion prompted me to look more closely if there was information regarding R&D and Innovation within New Zealand businesses. As it turns out there are two very effective reports that delve into a great deal of detail. The 2007 Innovation Report and the 2008 Research and Development Report both produced by Statistics New Zealand. We participated in the second report, but have never delved into the detail of the report.

The innovation report in particular holds some interesting information. They describe 'An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.  They refer to the Oslo manual which identifies four types of innovation:

• product innovations – new or significantly improved goods or services
• process innovations – new or significantly improved methods for production or delivery (operational processes)
• organisational innovations – new or significantly improved methods in a firm’s business practices, workplace organisation or external relations (organisational or managerial processes)
• marketing innovations – new or significantly improved marketing methods.

From Locus Research perspective we are concretely involved with product innovations, process innovations, and marketing innovations. Although as with most things in business it is hard to draw a line between where all these things finish, they operate in the same continuum. Theory typically distinguishes between 'invention, an idea made manifest, and innovation, ideas applied successfully in practice' (Ref). Ideas applied successfully says it in such a succint way it is hard to improve on that definition without adding salad dressing.

The top five reasons for innovation were:

• Increase Revenue
• Reduce Costs
• Increase Market Share
• Improve Productivity
• Improve Responsiveness to Customers

The most common reason for innovating was to Increase Revenue, 87% of all firms cited this as their most important reason. The statistics around business performance of innovators compared to non-innovators are relatively predictable, with innovating companies outperforming non innovators. There are probably a range of factors that contributing to this including a companies organisation and management.