Innovation is successful when positive outcomes result in return on investment (ROI). That is why Value Creation is so important. Adding perceived value to a new product or service will drive ROI. The value proposition is the key to successful innovation. Develop an innovation with high perceived value to your customer, and strong sales will follow.

It’s all about understanding your customer and giving them what they want. Customer input and feedback is key. Look at Ford for example. The car manufacturer observed and listened to their large customer base on what they wanted in a car. They launched the “Your Ideas” initiative that invited people to make suggestions for improvement in all areas of comfort, convenience, connectivity, performance and safety. The result? Ford added iPod, MP3 player and USB connections, touch screens, voice activated communication systems, intelligent push-start buttons and more. Sales are soaring – not because of the traditional four wheels and performance but because of perceived value added features. Ford Motor Company now has the highest customer satisfaction rating among all major automakers.

When was the last time you tried or experienced your product or customer experience? Create value and not just onerous processes. Consumer input should be considered at multiple stages of your new product development process in order to increase perceived value. Enhanced product value means higher margins, greater returns, improved loyalty and increased stakeholder value.

Finally, when you find that delicate balance between cost, manufacturability and consumer perceived value, be sure to protect your intellectual property (IP) portfolio through patents. Invest the time and money into constantly updating patents and managing your product or service portfolio because it will lock in the value of your Innovation IP.

For more tips on Innovation and Value Creation, look for Robert’s Rules of Innovation. Robert Brands is the founder of InnovationCoach.com and the author of “Robert’s Rules of Innovation”: A 10-Step Program for Corporate Survival, with Martin Kleinman, published by Wiley.

What’s in your IP cupboard?

Progressive companies create innovation teams. They invest countless man-hours, dollars and other resources in investigating and pursuing innovation. Yet they often leave their intellectual property untouched, thereby failing to translate patents and other IP into revenue opportunities.

American industry and academia hold some two million current patents granted by the U.S. Patent and Trademark Office. Yet, the vast majority remain idle. In a tight economy – and even in the best of times, failure to exploit existing patents for profit means more than money’s being left on the table. New opportunities – and the possibilities they spawn in kind – are lost.

At a recent Intellectual Property Owners meeting in Atlanta, the importance of corporate innovation and IP governance were tied directly to the potential for value creation. The consensus was that this untapped resource represents a significant lost potential value and income generation.

The combined roles of innovation governance and IP management cannot be over-emphasized. While the roles of corporate IP governance, supervision and even leadership are critical, companies that have respectable IP portfolios must install an IP Officer on the innovation teams or new product development board. The intention would be for the IP Officer or team to…

• Manage the IP portfolio, keeping a keen eye on that place where consumer or market trends and the portfolio intersect.
• Present opportunities to the innovation or NPD teams. And
• Work with those teams to craft approaches to maximize potential monetization.

Even small businesses with no IP portfolio can maximize IP potential. For example, IP Teams can search IP auctions or licensing opportunities to see how patents available match with the company’s goals or vision. For example, some 40% of the two million patents held are “common patents” for such generic products as components or parts for automobiles and software elements for cell phones. The patent owners often work out licensing agreements to put the patent into use. It can be cumbersome, costly and time consuming to work out one on one deals. But it often can serve the buyer’s near- and long-term needs.

One such marketplace about to take off , IPX International seeks to work with corporate IP owners and market leaders to maximize intellectual asset management on an open market exchange. “Establishing a fair and reasonable price for IP, the Exchange provides companies with an economical opportunity to be both a corporate good citizen and an innovative leader.”

In the end, these seized opportunities can increase shareholder value.

At the IPO conference and around Innovation war rooms across the business landscape, smart organizations are realizing that IP exploitation is an enabler. It empowers companies to transform often idle holdings into a significant source of income generation and the mindset for continued innovative thinking.

Managing that place where innovation and the IP portfolio meet is not a one-off event. This process must be a habit, an ever-present line-item on the Innovation / NPD To-Do List. Only when it is emphasized and embraced internally will it ensure the contents of the cupboard become fuel for the bottom line.

By Robert Brands with Jeff Zbar

Robert Brands is the founder of InnovationCoach.com, and the author of “Robert’s Rules of Innovation“: A 10-Step Program for Corporate Survival, with Martin Kleinman, published Spring, 2010 by Wiley.

In 1980, the Coca-Cola Company was struggling, and its market share was underperforming compared to its competitors. So at a worldwide management conference in 1981, CEO Roberto Críspulo Goizueta decided to refocus the entire organization on putting value creation first.

The company refined its marketing investment, expanded into new markets, and acquired new bottling companies and the intellectual property and patents they held. The company created new products, including Diet Coke. It embraced a global vision; to wit, some market researchers say the company became the world’s best-known brand.

This transformation of company and IP doubled the company’s market share in 15 years, and Goizueta reportedly created more shareholder wealth than any other CEO in U.S. history.

Much has been written about innovation – the imperatives that drive the process and the results borne from the exercise. The purpose of innovation ostensibly is value creation that translates to enhanced stakeholder value. Process-driven organizational innovation drives value creation that transforms ideas into vital intellectual property, IP into revenues, and revenues into increased stakeholder value.

In any for- and not-for-profit organization, “value creation” can be translated in many ways. It is

• Improved, silo-busting, team-building collaboration
• Amassed IP and new product development, which gives the company or organization a competitive edge on the market or competition
• Strengthened fiscal performance, which lures additional investment

This is why organizations invest the time, energy, creativity, research, planning, refining, modeling and retesting that it hopes will pay off in terms of improved process, better teamwork, a new business model, a refined brand – and black-ink results. These are assets that add value to the company, which is why it is absolutely crucial to protect these ideas.

Yet Intellectual Property will drive the future. As we move past the Industrial Age and the Age of Technology, the future era will focus on process that drives IP – and the real value it delivers. As much as teams and share, it is imperative to build and protect IP through the use of patents. Patents protect and define the innovation so they are the key step to commercialization and enhancing value.

It is essential for every company to keep a patented Intellectual Property portfolio. The IP portfolio of Airspray doubled in value because of the patented technology that turned liquid hand soap into foam. Airspray realized – and its fiscal results proved – that the regular and persistent renewing, refreshing and updating of patents was well worth the cost.

To this day, IP remains arguably the most powerful driver in innovation’s Value Creation.

Some would argue that companies innovate to achieve a heightened competitive advantage, streamline the organization, or create intellectual property – including patents, trademarks and other protected property – that create value in the portfolio.

Many reason and rationales can be argued for the pursuit of innovation. Yet no purpose for or result from innovation can be more compelling than Value Creation. This metric is the ultimate measure of return on investment when measuring innovation’s role in creating value.

Simply put: Innovation done well drives value creation – for the organization, its customers, its internal stakeholders and its external shareholders.

Successful innovation turns ideas into money. All the processes, creativity, time, sweat, research, dreaming, refining, modeling and retesting transform effort into tangible, valuable results.

This includes innovation that touches all sectors in the company or organization – not just in the creation of a new product or service. Enhancing the business model or networking, enabling a new core process, creating a new channel, brand or customer experience delivery model, or offering a new product system, boosting product performance, or providing a new service each creates value.

Nowhere is this more relevant and apparent than in the acquisition process. If one were to look at acquisitions with and without a patent portfolio, I would argue that a well-created and -managed patent or IP portfolio can double company value. My former company, Airspray, created of the novel packaging and dispensing process that turned liquid soap into foam. It was a company with a typical value of 7-8x EBIT. Yet, the addition of this patent to its portfolio resulted in 15x EBIT paid when the company was acquired in 2006.

This is especially important in today’s market. Current economics continue to hold down already devalued corporate stock prices. Companies are challenged to find ways to boost their value to stakeholders – as well as to keep customers and prospects engaged and purchasing goods. Value creation borne from innovation can be critical indeed. As evident in the Airspray example, one item in our patent portfolio almost doubled the EBIT paid at acquisition. This example is not unique, but was the result of painstaking and thoughtful focus on value created by innovation.

Moreover, value creation and innovation done well can immeasurable enhance the corporate brand. Between adding new products, reviving the corporate dress, even launching new marketing creative or advertising campaigns, customer value can be created through the value-added components and enhanced public face of these endeavors.

Of course, it’s essential to find that delicate balance between cost, price, and return. Balance is found, in part, by seeking stakeholder input and customer feedback during development of any innovation process.

The arguments for innovation are, frankly, inarguable. Value, brand enhancement, share price and perception among various stakeholders can be elevated by innovation done well. Add to the equation the inclusion of intellectual property derived during the process, and the overall ROI can be well worth the investment.

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By Robert Brands with Jeff Zbar

Robert Brands is the founder of InnovationCoach.com, and the author of “Robert’s Rules of Innovation”: A 10-Step Program for Corporate Survival, with Martin Kleinman and which will be published in March by Wiley (www.robertsrulesofinnovation.com).