This framework is developed by a team of former McKinsey and Big 4 consultants. The presentation follows the headline-body-bumper slide format used by global consulting firms.
This product (Innovation Effectiveness Curve) is a 28-slide PPT PowerPoint presentation slide deck (PPT), which you can download immediately upon purchase.
For many companies, developing new products is a hit-or-miss proposition. Successful Innovation—the kind that leads to customer engagement and profits—is rare and hard to achieve. Some have tried investing intensively in research and development.
In a global study of public companies representing almost 60% of global R&D expenditures, it was found out that there is generally no correlation between R&D spending and financial metrics such as sales or profit growth. Open Innovation has been resorted to by some companies but this, too, does not necessarily lead to higher Innovation returns. A strategy of tacit benchmarking has also been pursued. Near the average amount of R&D spending have been invested but this led to greater number of minor product line extensions with often diminishing returns.
On the other hand, there are companies that do best at dreaming up great new products while spending less to do it. One of these is Apple, which commits 5.9% of sales to R&D, less than its industry’s average of 7.6%. This shows that, when it comes to Innovation investment, the key question is not how much to spend but how to spend it.
Indeed, Innovation success depends on mysterious factors. But there are companies that can overcome these hurdles and regularly product high-yield Innovations. The answer is the use of the best approach in determining which Innovation success and why others fail.
This framework provides an in-depth discussion on Return on Innovation Investment or ROI2 Approach and the Innovation Effectiveness Curve. The Innovation Effective Curve has 3 core properties.
1. Comprehensive
2. Stable
3. Correlated to Growth
The 3 core properties of the Innovation Effective Curve make the curve a most powerful analytical tool. Raising the Innovation Effectiveness Curve can increase organic growth rates that is persistent over time.
This deck also includes slide templates for you to use in your own business presentations.
The Innovation Effectiveness Curve is an essential tool for tracking the value and quality of a company's innovation portfolio. It provides actionable insights into which innovation projects are worth funding and which are likely to yield minimal returns.
This PPT slide presents the Innovation Effectiveness Curve, a framework designed to evaluate the financial viability of innovation projects. It plots annual spending on these projects against their expected financial returns, quantified as the internal rate of return (IRR). The graph features 2 curves: the Current Innovation Curve and the Raised Innovation Curve.
The Current Innovation Curve illustrates the typical return on investment (ROI) for various projects, highlighting a downward trend as investments increase. This suggests that while some projects yield healthy returns, others may not justify the financial commitment. The Raised Innovation Curve indicates a potential for improved returns through strategic adjustments in project selection or funding levels.
Key metrics are displayed, such as ROI per project and annual investment per project. These metrics are crucial for executives seeking to optimize their innovation portfolios. The horizontal axis categorizes projects from "Healthy Innovation projects" to the "Tail," which likely represents lower-performing initiatives. This segmentation allows decision-makers to identify which projects warrant continued investment and which should be reconsidered or phased out.
The concluding statement emphasizes that a higher curve correlates with greater overall returns on innovation investments. This insight is vital for organizations aiming to maximize their innovation strategies. By understanding where their projects fall on this curve, executives can make informed decisions that align with their financial goals and innovation objectives.
This PPT slide outlines 7 archetypes of innovators, categorizing them based on their approach to key performance indicators (KPIs) related to innovation. Each type is defined by specific characteristics and recommended strategies, providing a framework for understanding how different organizations engage with innovation.
The first archetype, "Health Effective," represents best practices with high returns on investment. These organizations invest modestly in projects that have the potential for significant returns, suggesting a balanced approach to risk and reward. The guidance here is to maintain current practices and consider expanding innovation capabilities into adjacent markets.
Next, "Stingy Effective" innovators demonstrate high effectiveness while maintaining a careful balance of investment across various promising projects. The recommendation is to increase overall innovation investment, emphasizing that simply pouring resources into all projects may not be the most effective strategy.
"Risky Ventures" face challenges with uneven performance across their innovation projects. They often engage in higher-risk initiatives, but may struggle with consistency. The slide advises these organizations to evaluate their project portfolio critically, tighten approval processes, and focus on brand support to stabilize their innovation outcomes.
Lastly, "Incremental Innovator" organizations show acceptable effectiveness, but tend to focus on smaller, safer projects. They are often biased toward low-risk line extensions rather than groundbreaking innovations. The suggested approach includes developing a new innovation strategy with clear market priorities and enhancing the ideation process to identify high-impact ideas.
Understanding these archetypes can help organizations make informed decisions about their innovation strategies, aligning their approaches with their specific characteristics and market conditions.
This PPT slide presents an overview of the Innovation Effectiveness Curve, which serves as a tool for assessing the return on innovation investments within a company. The curve's shape and height indicate the expected earnings from these investments and the potential for organic growth. It emphasizes that this analysis is conducted on a project-by-project basis, allowing for a granular understanding of each active project in the company's innovation pipeline.
Each point along the curve represents the return generated by a specific innovation project. The area beneath the curve aggregates the total projected return from all innovation efforts, providing a comprehensive view of the company's annual innovation investment returns. The height of the curve is particularly critical, as it offers insights into the overall capability of the company's innovation initiatives to deliver returns and foster growth.
Understanding the dynamics of each project portfolio is essential for diagnosing the company's innovation practices and capabilities. This foundational knowledge is crucial for establishing an effective Innovation Effectiveness Curve, which can guide strategic decisions and optimize resource allocation in innovation efforts. The slide underscores the importance of a systematic approach to evaluating innovation projects, which can ultimately drive sustainable growth and enhance overall performance.
This PPT slide presents the core properties of the Innovation Effectiveness Curve, emphasizing 3 main attributes: Comprehensive, Stable, and Correlated to Growth. Each property is visually represented in a circular format, indicating their interconnectedness and importance in driving innovation within organizations.
The "Comprehensive" aspect highlights the necessity for a holistic approach that integrates various functions such as R&D, marketing, strategy, and operations. This integration is crucial as it directly impacts the creation and launch of new products. The slide notes that activities are often siloed and evaluated against different goals, which can hinder overall effectiveness. By consolidating all functions related to new products, organizations can streamline their innovation processes.
The "Stable" property points out that the overall shape of the Innovation Effectiveness Curve has remained consistent despite fluctuations in innovation projects. This stability suggests that organizations can rely on this framework over time, allowing for a predictable approach to managing innovation.
The final property, "Correlated to Growth," establishes a direct link between the effectiveness of innovation efforts and the company’s growth trajectory. It emphasizes the strong correlation between return on investment (ROI) and organic revenue growth, suggesting that effective innovation strategies can lead to significant financial benefits.
Overall, this slide serves as a foundational overview for executives looking to enhance their innovation strategies. It underscores the importance of a comprehensive, stable approach that is directly tied to growth, providing a clear rationale for adopting the Innovation Effectiveness Curve as a guiding framework.
This PPT slide discusses the relationship between a company's innovation performance and its strategic choices, emphasizing the importance of understanding return on investment (ROI) in research and development (R&D). It introduces the concept of the Innovation Effectiveness Curve, which serves as a framework for driving sustainable results and returns.
Key points include the identification of different strategies that can lead to successful innovation versus those that may not yield significant outcomes. It suggests that recognizing these differences allows organizations to adjust their strategic innovation priorities. By reallocating investments toward areas with potentially higher returns, companies can enhance their innovation capabilities.
The slide also highlights a practical example of a company transitioning from a first-mover strategy to a fast follower approach. This shift illustrates how a company can adapt its strategy based on market dynamics and competitive pressures. The accompanying action taken indicates a strategic pivot where risky projects are replaced with more modest and safer alternatives, reflecting a calculated approach to innovation.
Furthermore, the slide asserts that revamping an innovation strategy can produce tangible results within a few development cycles. This suggests that organizations can achieve quick wins by reassessing their innovation frameworks and making informed adjustments. Overall, the content encourages executives to rethink their innovation strategies, focusing on areas that promise sustainable growth and improved returns.
This PPT slide presents the Innovation Effectiveness Curve, which illustrates the correlation between total innovation return as a percentage of revenue and organic revenue growth. The graph plots various companies, labeled A through F, against these 2 metrics. Company A and Company B are positioned at the higher end of both axes, indicating strong performance in both innovation returns and organic growth.
The R² value of 0.8632 suggests a strong positive relationship between the 2 variables, implying that as companies improve their innovation returns, they are likely to experience enhanced organic growth. This correlation serves as a critical insight for R&D and marketing teams, emphasizing the need to focus on innovation strategies that yield measurable returns.
The slide also hints at the importance of monitoring these metrics over time. A faltering curve could signal potential stagnation in growth, prompting organizations to reassess their innovation strategies. The message is clear: companies must actively manage their innovation efforts to ensure sustained growth.
The bottom section of the slide reinforces the idea that making targeted improvements in innovation components can lead to increased areas under the curve, which translates to better organic growth. This insight is particularly valuable for executives looking to drive performance and ensure their organizations remain competitive in a rapidly evolving market. The visual representation and accompanying text effectively convey the necessity of aligning innovation efforts with growth objectives.
This PPT slide presents a case study focusing on Bayer Healthcare AG’s Consumer Care Division, illustrating the challenges faced by incremental innovators. The key issue highlighted is that the current capabilities of the division are insufficient to meet its growth objectives. This situation necessitates a strategic approach to innovation investment.
The graphical representation on the slide depicts 2 curves: the original innovation curve and the adjusted innovation curve following resource reallocation. The x-axis indicates total annual innovation investments, while the y-axis shows the return on innovation investment (ROI). The original curve illustrates a decline in ROI over time, suggesting diminishing returns on innovation efforts. In contrast, the adjusted curve demonstrates an upward trend after resources were strategically reallocated, indicating improved returns.
The highlighted area labeled "Resource Reallocation" signifies a critical intervention point where investment strategies were modified. This adjustment led to a noticeable increase in overall innovation returns and an acceleration in growth rates. The slide emphasizes the importance of identifying root causes behind recurring issues, suggesting that a thorough analysis of resource allocation can lead to significant improvements in innovation effectiveness.
For potential customers, this slide serves as a compelling example of how strategic adjustments in resource management can drive better outcomes in innovation. It underscores the necessity for organizations to continuously assess their innovation strategies and adapt them to align with growth goals. The insights provided here are not just theoretical; they are grounded in practical application, making them relevant for executives looking to enhance their innovation capabilities.
This framework is developed by a team of former McKinsey and Big 4 consultants. The presentation follows the headline-body-bumper slide format used by global consulting firms.
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