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If you are someone who began hoarding boxes of Twinkies last year, you may have felt a bit reactionary following the recent news on Hostess. With the Private Equity buyout of Hostess, this heartening symbol of U.S. culture is returning to store shelves. Even with expertise on their side, the two firms that agreed to the buyout certainly have their work cut out for them in revitalizing the brand to its glory days.
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The market for new market entry strategy consulting is about resources and incentives. It’s a not too hot, not too cold, but just right equation.
»The New War For Talent
When a meteorite blazed through the morning skies of central Russia in mid-February and exploded, the news media described it as a rare event. And it was. Fast forward one month and just about every government in the world is looking at the potential for a "rare event" to visit their borders, and wringing their hands over how to prepare for it.
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»One on One with Booz & Company’s John Loehr
Every year since 2005, Booz & Company has conducted the Global Innovation 1000 study, which investigates the relationship between what companies spend on R&D and their overall financial performance—and every year, the firm reinforces the conclusion that there is no correlation between the two. Over the years, Booz & Company has expanded the scope of the study to include critical issues such as the importance of customer-driven innovation and the recession's effect on R&D spending. At the Consulting Summit in New York on Oct. 24, John Loehr, Global Leader of Booz & Company's Innovation Practice and co-author of the innovation study, will present the just released and proprietary findings of the study in his presentation: “Inside the Numbers: The 2013 Booz & Company Global Innovation 1000 Study.” Loehr sat down with
Consulting One on One to discuss his upcoming presentation.Consulting: What are the key historical trends you’ve uncovered since launching the study nine years ago?
One thing we’ve noticed, for sure, is that it is clear that innovation was protected during the downturn. Innovation spend has been growing faster than GDP spend. A lot of people had feared that during the recession, it would be one of the first things to go, and I’m happy to report that that’s not true at all. That’s one of the main findings as far as trend lines go. There’s no question that the world as whole recognizes the pre-eminent role of innovation in terms of driving global prosperity and corporate profitability. Consulting: Would you say companies are spending innovation dollars wisely?
I think it’s really all over the map. The very first finding we had nine years ago and we re-validate it every year but it still always works. Once you get above the bottom 10 to 20 percent of spend in your industry—with spend measured as R&D as a percentage of sales, if you cut it nothing you’re not going to do very well—but once you get into the top 80 percent, there’s really no correlation between the amount you spend on innovation and the results your achieve. I mean that is measured by standard metrics, such as shareholder return or profitability. Once you’re in the game with your innovation spending, it’s all about how effectively you organize and executive your innovation. You can look at that two ways: It’s random, it’s serendipity, and it’s black magic and some of that may be true, but we believe there are certain key aspects of managing and using your innovation spend to help you be successful. That’s the core of our work—helping companies recognize that and improve on that.Consulting: Where is the majority of the innovation spend occurring?
Really, right now, most of the spend is in three industries, healthcare, automotive and computer and electronics. And those are huge industries and that’s where the innovation spend is right now, and I don’t really see that changing much this year. Although consumer products is also a huge industry, of course, but there’s not a lot happening in terms of innovation. In energy, the petroleum companies are gigantic, but the innovation spend in terms of overall sales is really low.Consulting: What are clients seeking from Booz? What are the biggest client needs?
Companies are continuing to look for assistance in the areas of overall portfolio management, but with a twist. These days there’s so much focus on external innovation, open innovation. There’s still significant work around innovation process, hardcore engineering and innovation development. How do we take time out of the innovation process? How do we improve validation? How do we reduce errors? How do we improve quality? How do we increase global scale? The types of things a major automaker would be interested in to improve an engineering department. The work, in some ways, at the opposite end of the spectrum: One is very oriented around traditional metrics and at the other end it’s more blue-sky stuff, how do we become the next Google. Both of those are of interest to clients?Consulting: Are client companies now set up with stand-along innovation departments or is the innovation woven into the fabric of the company?
That’s interesting. A lot of clients are attempting to set up what’s called ‘corporate innovation,” which is separate from an R&D lab. Some companies are starting to go that route. Companies are trying to drive novel innovation process into the business units or an internal counsel that would be tasked with review of new and great ideas. Frankly, I haven’t seen that be very successful. They tend to be very far removed from the operating space of the business. They tend to be removed from operations, markets and technology—so what are you left with? They’re just too insulated from all the dimensions that innovation comes from. Innovation comes from basic science and research, it comes from really understanding an operation or a product and it comes from being very close to markets and customers. People who are successful at innovating, tend to spend most of their time in their market, thinking about the customers etc. They don’t sit around with a bunch of other people in a corporate venturing office. That type of model makes it really tough.To hear more from John Loehr and additional insights from his “Inside the Numbers: The 2013 Booz & Company Global Innovation 1000 Study” presentation, or for additional information about the Consulting Summit, please visit www.consultingsummit.com.