Where should you promote innovation first?

The authors of a recent McKinsey article, “Innovation: What’s Your Score?” argue for a new way to measure innovation to get an innovation performance score. Although developing such a measure may take more time than most companies want to spend, the authors’ research revealed four insights that were true for all industries:

1. Strong innovators do consistently well, mostly by outperforming the markets they are already in rather an entering or creating new ones.
2. Top innovators continue to outperform their competitors during the tough times. Their agility—a Baldrige core value—helps them cope with the challenges.
3. There may be an optimum level of innovation. The lowest innovation performance always suffers but the highest isn’t always rewarded proportional to its position.
4. Business model innovation, as opposed to product and process innovation, “seems to be necessary for superior innovation impact.” They define business model innovation as “the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system.”

That’s what the Baldrige process is all about: understanding what is valuable to customers and transforming your management system to deliver it. As this research shows, building an innovative management system turns out to be at least as important as creating a new product or service or improving a production or delivery process.

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