Innovation can drive 35%+ cost savings – according to Bain & Co.

I was just doing some research on the Return on Investment of innovation, focusing on cost reductions. At Imaginatik we developed an approach to driving 10 times return on investment, and as part of this work we are constantly on the look out for other methods we can support with our Idea Central toolset (loosely termed ‘idea management’ software, although it is a lot more versatile than that) to deliver cost reductions.

A quick web search on what Bain & Co has been doing revealed some work around complexity reduction and innovation – right up our path. From their posting:

“Cutting through complexity

 

It’s a dilemma faced by even the most successful companies. Customers are crying out for innovation. Yet if you create too many offerings, costs spiral out of control; create too few and you miss profitable sales. Because traditional accounting systems do not capture the full costs of complexity, we have found that most companies tip the balance toward too much. Companies that find the right balance-their “innovation fulcrum”-can often dramatically improve their performance, with cost reductions of as much as 35%, along with up to 40% increases in sales.

“The problem is where to start. According to Bain & Company’s survey of more than 900 global executives, nearly 70% admit that complexity is hurting profits. But many miss its origins in the product line. The usual response-an incremental cut of the least profitable SKU’s or a “lean operations” program-falls short because it cannot get at the root causes.”

Using the Innovation Fulcrum to identify opportunities for innovation and reducing complexity

Using the Innovation Fulcrum to identify opportunities for innovation and reducing complexity

The online report focuses on the ‘Innovation Fulcrum’ as a way of looking at innovating to reduce costs and maintain customer satisfaction. The report also has links to an audio discussion of the topic. Definitely worth a look.

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