Without an underlying purpose any innovation acivity is obsolete. The purpose of innovation comes into play in different scenarios. No matter what scenario, it should be clearly formulated because based on this purpose Innovation Management needs to derive the respective measures that are suitable to fulfill the purpose. A declared purpose of innovation in a company is the fundament and justification for an innovation management unit.

In times when market shares are in danger

Drastically spoken, an innovation management unit is always a cost centre. As CEO, when sales go down or margins shrink, what do you do? You look where to reduce expenses. Everything that does not directly pay in to securing market shares in the short term will be questioned. Not an easy time for innovation management units. And if then it is unclear how and to what extend innovation shall contribute to securing market shares or even generating new revenues, you can do the maths. Investing in innovation initiatives is then hard to justify when "being more competitive" could also be reached much easier by lowering prices for instance.

Often, however, lowering prices is no option. What is then left to give to customers to stay with us? Additional values. By comparing our prices and perceived values to competitor`s prices and perceived values we can roughly estimate the size of the additional value(s) we need to offer.

And here we go we are already starting to define a possible purpose of innovation which could be "filling the value gap of xx Euros that our customers perceive between our product and those of our competitors."

This is only one of several purposes of innovation.

In times of growth or change

A purpose for innovation could also be to gain access to new markets or target groups. Or to develop towards a new focus for instance improving the carbon foot print. Also here a rough estimation where we want to be in e.g. 5 yrs from now gives an indication what innovation effort is needed to get there.

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