strategy+business Winter 2013 : Page 34

Barry Jaruzelski barry.jaruzelski@booz.com is a senior partner with Booz & Company in Florham Park, N.J., and the global leader of the firm’s engineered products and services practice. He created the Global Innovation 1000 study in 2005, and continues to lead the research. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core innovation processes. John Loehr john.loehr@booz.com is a partner with Booz & Company based in Chicago, and is the global leader of the firm’s innovation practice. He works with automotive, industrial, and technology companies to help them build competitive innovation capabilities and to resolve critical decisions in their product and market strategies. Richard Holman richard.holman@booz.com is a partner with Booz & Company based in Florham Park, N.J. As a senior leader of the firm’s innovation practice, he works with clients in highly engineered products sectors such as aerospace, industrials, high tech, and healthcare on innovation capability building, new product development efficiency and effectiveness, and product management. Also contributing to this article were s+b contributing editor Edward H. Baker and Booz & Company senior associate Stefan Luckner and senior analyst Jennifer Ding. 34 that mine and analyze “big data” and customer immer-sion labs that use digital reality to simulate experiences. “The earlier in the process you are,” says Cohen, “the more uncertainties and hurdles there are to manage”— and the new digital tools are ideal for confronting un-certainty and surmounting hurdles. Although they have not yet been widely adopted or tested, these tools are already enabling some companies to first gather a bet-ter and deeper understanding of customers’ needs and engage them in the design process, and then monitor their products’ use after launch to capture data that can be fed back into the innovation process. These new digital tools are fostering change, but not in isolation; they are joining another group that has been around for years and is already well established at most companies. Productivity enablers such as com-puter-aided design (CAD) software used in the design and tooling stages of product development and project management tools that help track time lines, workflows, milestones, and spending have a long track record of helping companies boost the efficiency of their innova-tion processes—particularly at the back end when they are developing products. The result? Digital tools are influencing every stage of the innovation life cycle: from collecting and analyz-ing customer insights, to generating and vetting ideas, to designing and manufacturing new products, and, fi-nally, to tracking products’ success once launched ( see Exhibit 1 ). As part of this year’s Global Innovation 1000 study, our ninth annual analysis of R&D spend-ing, we took a closer look at these digital tools, both old and new, to determine what’s being used most widely and what’s working most effectively (they aren’t always one and the same). We found that companies have a The Customer Insight Advantage The new entrants in the digital tool kit tend to appear more frequently in the earlier stages of the innovation strategy+business issue 73 real opportunity—perhaps even an imperative—to re-think their digital tool kit. Indeed, we are seeing the first signs of a digital revolution that will transform how innovation is done. As with all revolutions, both break-throughs and dead ends will make an appearance along the way. And there can be a tendency to get caught up in the hype. But make no mistake—digitization will change innovation, and companies should act now to avoid being left behind. Many are already taking action: Executives at the more than 350 companies we surveyed say they cur-rently spend 8.1 percent of their R&D budgets on digi-tal tools, suggesting that of the US$638 billion spent on R&D by the Global Innovation 1000 in 2013, about $52 billion was invested in digital enablers. But as we know from our ongoing annual studies of R&D spend-ing, when it comes to successful innovation, what really counts is not how much money you spend, but how you spend it. Our 2013 study found that respondents whose companies made significant use of these digital enablers were 77 percent more likely to report that they outper-formed competitors than were those with low or mod-erate usage rates ( see Exhibit 2 ). However, because our results revealed that usage of digital tools does not nec-essarily correlate with the tools’ effectiveness, compa-nies need to choose the enablers that are right for their company and that align with their overall innovation strategy. Digital tools are only as good as the underlying innovation process they support. Those companies that understand that are poised for success. feature innovation

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