Controlling of Innovation

Value based management of innovation

The importance of innovation

DAX in the start in 1988

Mortality
rate: 2,1%
per year

Mortality
rate: 2,5%
per year
Names marked in red are no longer
included in the current DAX.

Of the 300 leading listed [US] companies for 1996, 10 years later,
64 are no longer on the list.
Of the Fortune 500 companies in 1970, in 2005 just 190 are
Mortality
left in the market.
rate: 1,6%
per year
06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

The importance of innovation

Each company normally insures against existential

risk of 2% or more!
Innovation Management is an insurance against
going out of business.
The insurance fee is not sunken cost but investment!

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

The value of innovation management

Every year, German companies waste

150 Billion Euros in projects.
Efficient
(31%)

Not efficient
(69%)

Adding
value (43%)

13 %

30 %

Not adding
value (57%)

18 %

39 %

More than one

quarter of the
projects are
launched with
insufficient financial
and human
resources.

Source:
Munich University of Applied Science: Studie Projektmanagement 2004

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

The value of innovation management

Every year, German companies waste

Projects that were stopped
150 Billion Euros in projects.
More than one
or failed

Efficient
(31%)

Not efficient
(69%)
16%

Adding 46%
value (43%)

13 %

30 %

Not adding
value (57%)

18 %

3938%
%

quarter of the
projects are
Projects that were only
launched
with
partially
successful
insufficient
financial
and
Projects
that were
successfully
human
resources.

Source:
Munich University of Applied Science: Studie Projektmanagement 2004

Source: IBM Global CEO Study 2006

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

When and where to innovate

Tactical innovation =
Optimisation of strategy implementation

Yield of strategy

As long as the strategy holds up in the market

=> How to stay/become better than my competitors?
time

Strategic innovation =
Development of fundamentally new business opportunities

Yield of strategy

If the current strategy cant any more successfully be pursued in the market
=> which new strategy can successfully be implemented with my means and
resources.
time

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

Controlling the innovation process

Analysis of innovation needs

Yield

Competitive position

Plan

Potential improvements by optimizing

Life cycle position of the current strategy

Strategic gap

Comparison of present and future yields

Tactical gap
time
Tools:
Life cycle analysis of strategy
GAP Analysis
SWOT-Analysis
Cost-benefit-analysis

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

Controlling the innovation process

Analysis of innovation needs

Competitive position
Potential improvements by optimizing
Life cycle position of the current strategy
Comparison of present and future yields

Decision-making: profit versus investment in

innovation

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

Controlling the innovation process

Analysis of innovation needs

Competitive position
Potential improvements by optimizing
Life cycle position of the current strategy
Comparison of present and future yields

Decision-making: profit versus investment in

innovation

Distribution of the innovation budget on strategy

and tactics

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

Controlling the innovation process

Analysis of innovation needs

Competitive position
Potential improvements by optimizing
Life cycle position of the current strategy
Comparison of present and future yields

Decision-making: profit versus investment in

innovation

Distribution of the innovation budget on strategy

and tactics

Draft project portfolio proposal referring to the

requirements of the business and availability of

resources

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

10

Controlling innovation

Innovation
Expenses

Operation

Revenue

Expenses

Primary costs

Primary costs

Labour costs

Labour costs

Material

Material costs

Secondary costs

Secondary costs

Allocated costs
for performance
in projects
Profit

License fees

License Fees
Entire company
Expenses

Revenue

Revenue

Sales

Allocated costs
for performance
in projects

Profit

Primary costs
Labour costs

Sales

Material costs
Profit
06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

11

Approach to evaluation of the benefit of

innovation

These figures
dont need the accounting
accuracy
of the legal
accounting system!

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

12

Tasks for the controller

Support

06/05/2010

LIFELONG LEARNING PROGRAMME - Leonardo da Vinci

Creating Enduring Organisations

13