Expenditure in R&D compared to competitors

Companies with high R&D budgets compared to market norms are more likely to be innovative. This shows that a company is investing resources in innovation.

Driving creativity in star performance

The way a company treats its top performers provides role models for all others. If such fast track performers are innovative, then others will see creativity and innovation as the path to success. If most star performers are cautious and rule bound, the clear message would be, “Be careful and just follow rules if you want to move up. Creativity does not pay”.

The organization's response to unsuccessful risk taking

A risk, in fact anything new, involves the possibility of failure. The path to successful innovation may pass through a period when nothing seems to work. The organizational response to an unsuccessful innovation holds the key to whether the company will develop into an innovative company or not.

The organization's response to successful risk taking

Organizations that institutionalize successful risk-taking by teams and individuals by public rewards and affirmations, are more likely to reinforce innovation through new and riskier paths. Performance should be monitored. Champions should be rewarded.

Top management’s relevance to risk taking

Taking risk is key to innovation. The more formal a company is, the less likely people are to do anything to rock the boat. Doing new things does involve some professional risk to the person leading the initiative. A lot of handholding by top management can encourage people to take risks. Innovation happens on small budgets as proved by Velvette Shampoo, sold in one-rupee sachets for the poor.

Innovation does not always call for big budgets

 Dyanora Television, acting in collaboration with Matsushita, took televisions to low-income households through hire purchase and direct selling.  Hindustan Lever’s Shakti Ammas, acting as door-to-door retail agents, now have incomes to buy consumer products.  Amul brought Lakshmi, the goddess of wealth, into the homes of poor dairy farmers through the magic of co-operatives.  Kegg Farms did the same for poor poultry owners by developing a hardy, local variety of poultry called Kuroilers that could be raised in rural backyards.

Allocating time for new product development

New product development is the best way to reap first mover advantage. Time has to be budgeted for new product development. While many traditional companies have their own R&D teams, there are fast moving IT giants who have outsourced innovation to smaller, less expensive, outside teams. They have vice-presidents of External Innovation. Whatever the strategy may be, time has to be allotted for New Product Development. A lack of resources can result in extraordinary innovation • Toyota’s Kanban system of Just In Time management was the direct result of acute space shortage in Japan. • Holland with limited land and water resources became the foremost exporter of cut flowers, capturing a major share of the market. They grow flowers on rock wool and recycle all the water.