Friday, June 6, 2008

Emerson’s Embraces New Innovation Metrics

Emerson Electric has a long track of measuring numbers. If something can be measured, then this company doesn’t hesitate to do so. This latest article in Business Week details how Emerson has created a new metric to measure it’s innovative process.

Emerson’s new approach to tracking new product sales is seen as more revealing, effective, and more insightful. New product sales are divided into four different categories: minor improvements, major improvements, products that are new lines for business, and ones that are completely new. These guidelines offer a more accurate reading for decision-makers. Through this rubric more time and money can be allocated to the processes and categories that are doing best.

1 comment:

Jackie Hutter, IP Strategist said...

Thanks for noting this article.

Emerson's methodology sets clear delineation of where sales are coming from as a function of set changes from existing products and product lines. This is an improvement over the often non-systematic innovation processes I have seen over the years.

Prior to investing in Emerson on the basis of this laudable effort, however, potential investors would be well-served by examining whether Emerson is simultaneously engaged in a developing a robust IP strategy that mirrors the relative value of its technologies, as measured by the innovation metrics described in the BusinessWeek article.

Too often, companies throw the same amount of money at protecting IP related to tweaks as to "game changing" technology. Companies unfortunately see IP as a cost-center and try to indiscriminately minimize costs, rather than scaling IP spends to the relative value of the innovations being protected from competition.

If Emerson obtains significant value from its non-incremental innovations, competitors will want a piece of the action. And, if the IP protection is shoddy, competitors will succeed in knocking-off Emerson's products, and Emerson will have to go back to the drawing board to continue innovating. Emerson's costs will then be higher than its competitors, which will, of course, affect its profits over time.

It would be interesting to conduct an IP strategy analysis of Emerson to see whether they have the "whole package" and thus investment worthy for the long-term.

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