Senior management stifles innovation – Nielsen

18 Jun 2010

A new Nielsen study of the innovation processes at 30 large companies in the United States reveals that organisations with less senior management involvement in the new product development process generate 80pc more new product revenue than those with heavy involvement from the top.

The study found that companies that have less senior management input in the creative process and employ other innovation practices gain on average 650pc more revenue from new products compared to companies that do not. 

“New product innovation is a top priority of every major company CEO, yet success varies so widely that it’s absolutely critical to understand what drives successful innovation and what undermines it,” said Tom Agan, senior vice-president and managing director, The Nielsen Company. “Once you understand it, then you need to ask yourselves, are we living it?”

According to Nielsen’s research, simply being physically near corporate headquarters can stifle new idea generation. It maintains that having no Blue Sky innovation team at all is better than having a team on-site at corporate headquarters. The best place for breakthrough innovators was found to be far away: companies with an off-site Blue Sky innovation team reported 5.7pc of revenues coming from new products, compared to 4.8pc from companies with no Blue Sky team at all. Companies with Blue Sky teams on-site reported just 2.7pc of revenues coming from new products. 

Manage ideas lightly, processes precisely

“One of the keys to successful new product innovation is to manage new ideas lightly,” said Agan. “While we don’t dispute senior management’s strengths and good intentions, they are often too quick to get involved in the creative process, especially when things are not going well, and their mere presence can stifle free-thinking and boundaryless ideas – which can doom the new product development process to failure.”

Nielsen’s research indicates that senior management needs to play a different, more important role in new product development in that it manages the process rather than the ideas. According to Nielsen, companies with rigid decision points in the process where a new product idea must pass certain criteria to proceed forward average 130pc more new product revenue than companies with loose processes.

“New product development success comes down to two important principles – managing ideas lightly while managing the process precisely,” said Agan.

Innovation doesn’t simply ‘happen’

“From the outside, it can often feel like innovation simply ‘happens’, arriving like a bolt of lightning out of the sky,” he concluded. “The truth is that companies with successful innovation track records go to great lengths to create an ideal creative environment and the right behaviours, supporting policies and procedures. When they execute well, the best ideas rise to the surface and into consumers’ homes.”