Advice: Should innovation teams strive to impact revenue/costs?

Revenue versus Expense

An executive from the utility industry who is new to the innovation role writes with a request for your input: “Should our team aim to generate revenues, or reduce costs, at our company? My concern is that if we don’t try to show how we are impacting either of those, the team won’t be here for very long, and we’ll be seen as a cost center (similar to IT), not something that facilitates growth.”

We’ve spoken to execs recently, like Rolf Kleiner at Kelly Services, who say that moving the needle on the company’s revenues is a key part of their mission. “We believe that the revenues that innovation groups create matter,” he told us. “We have a dashboard for this office, and it measures both how effective we are in generating ideas…and what is the impact after launch.” Phil Swisher of Brown Brothers Harriman has argued that “the way to create the staying power in most organizations is you have to produce outcomes — tangible things you can point to and say, ‘Here is something that is generating cash.'”

But others, like Kyle Nel of Lowe’s, say that the act of looking for future trends, training employees in innovation methods, or changing the way an organization sources and cultivates ideas may not necessarily generate significant revenues (or reduce costs) in the near-term, and so building that into a team’s metrics can be detrimental. Nel says that his innovation team at Lowe’s is “definitely not sales-driven, because what we are working on is too far away to impact sales. But we are conscious of making sure that what we’re working on will change consumer behavior or the perception of the Lowe’s brand.”

How are you addressing this question at your company? Are you trying to move the needle on revenue and/or costs? Over what time frame? Add a comment using the box below, or send us an e-mail if you prefer to be anonymous.

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From an innovation and energy efficiency executive in Brazil: “I believe that in the beginning, you should focus on costs. We all know that innovation for efficiency is much easier than innovation for growth, and will bring faster results. These quick wins will give your team the confidence and support from the board to pursue innovations for long-term growth.”

From a pharma industry executive in Atlanta: “I understand the situation you are in because I have been there. We are all busy, so I will be brief, but here are my thoughts:

    • Your leadership/executive sponsor should be fully committed to the idea of innovation as a potential identifier of competitive differentiation. You should not feel the pressure to ‘show him the money’ right out of the gate. Remember, you are doing very well if 1 in 10 ideas actually make it past pilot. If you are getting pressure, maybe a more fundamental conversation and expectation-setting needs to happen, because the pressure could be a sign of cracks in the foundation of support for innovation.

    • Your customers will drive what types of projects you work on. If they have needs in cost-cutting, then their ‘voice of the customer’ activities will show that. The opposite is true as well.”

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