Criteria for successful innovation management in SMEs

This article provides an insight into DFE's innovation management and offers other companies suggestions for setting up effective innovation management. The exclusive source for this article is DFE Chemie's “Innovation Balance Sheet” on the occasion of its participation in the TOP 100 innovation competition in 2021. (read more)

The innovation report was prepared individually for DFE by Prof. Dr. Nikolaus Franke from the Institute for Entrepreneurship and Innovation at the Vienna University of Economics and Business Administration. With 25 research awards and more than 200 publications, Franke is one of the most internationally renowned innovation researchers.

The document describes in detail how and according to which criteria the innovation management of all applicants of the innovation competition was analysed and how the innovation management of DFE was specifically evaluated.

Prof. Franke and his team analysed both already realised innovation successes (realisation analysis) and future innovation potential (potential analysis) for each company. Well over 100 indicators in five categories were included in the analysis:

1. Top management that promotes innovation

Strategic innovation decisions have a high significance due to their long-term effects. They require cross-divisional coordination and are therefore the responsibility of top management.

Scientific studies show that there is a strong positive correlation between the commitment of the entrepreneurial personality and the success of innovation. It is the managers of a company who can push through innovations even in the face of resistance.

Does the company management act as a promoter of innovation? Is the innovation function a matter for the boss? Does the management support and promote the emergence of something new? Does it ensure a far-sighted and future-oriented corporate strategy?

The analysis was conducted in three areas:
a) In the area of Commitment, it was examined how intensively the management is involved in innovation projects. Commitment at the highest management level is important so that resistance and inertia can be countered.
b) The area of Innovation Strategy covers its content and how it is created and communicated within the company. Without a clearly defined and communicated strategic direction, there is a risk of getting bogged down in day-to-day business.
c) In the area of Resource Deployment, the extent to which top management provides the necessary financial resources was determined. Innovations are investments into the future; only with these can future innovation successes be achieved.

2. Climate for innovation

Without a corporate culture that encourages and rewards creativity, sustainable innovation success is inconceivable. New ideas cannot be imposed from above; they emerge and develop in a positive innovation climate.

So, does the corporate culture promote creativity, a willingness to learn and dynamism?

This category was also divided into three areas:
a) The area of Innovative Orientation examined the extent to which the corporate culture enables and promotes entrepreneurial activities by employees. Are mistakes tolerated and are radical innovation ideas prevented from being stopped too early?
b) In the area of Promoting Potential, measures to promote the innovativeness of employees were evaluated. These are, for example, training activities, incentive systems, free space for entrepreneurial activities, employee participation models or the provision of internal venture capital.
c) In the area of Improvement Proposals, it was examined how intensively employees contribute their own ideas to the company and to what extent the annual result is improved by implemented improvement proposals.

3. Innovative processes and organisation

Innovation is a multi-stage process, starting with the idea and ending with the analysis of the innovation success. This process can take years and is never uniform; after all, innovations are by definition new.

Good ideas and good will alone are not enough to produce successful innovations. What is needed are lean and flexible processes geared to the innovation goal as well as agile organisational methods.

Three areas were also assigned to the category 'Innovative processes and organisation':
a) In the area of Monitoring, the extent to which developments in the market, technology and competition are continuously monitored and incorporated into strategic decisions was analysed.
b) The area of Innovation Management in the narrower sense provides an overview of the design of the actual innovation process from idea generation to market launch.
c) In the area of Instruments and Methods, the tools used in the process were surveyed.

4. External Orientierung/Open Innovation

Every company is small in relation to the rest of the world. Therefore, a systematic and consistently managed exchange relationship with the outside world is critical to success.

The category 'External Orientation/Open Innovation' is also divided into three areas:
a) The area of Involvement analysed how intensively the marketing staff is involved in innovation projects and thus the needs of the customers are directly taken into account.
b) The area Projects and Activities analysed which instruments are used to identify innovation opportunities or to develop competences for the company's own innovation management.
c) How intensively the company cooperates with external partners (customers, suppliers, universities, etc.) was surveyed in the area of Cooperation.

5. Innovation success

The four previously mentioned categories describe the innovation potential of the company, i.e. the probability of realising future innovation successes. In contrast, the category 'innovation success' refers to the present: What successes have already been realised concretely through the innovation activity?

From a business perspective, an innovation is a success for a company if the investment yields an appropriate return. Consequently, innovation success is to be judged according to how high the contribution of the innovation is to the company's success.

Beyond this economic perspective, innovation success can also be assessed according to other criteria. The technological competitive advantage, for example, allows conclusions to be drawn about future business successes, because an economic advantage can also be achieved through technically efficient innovations.

Some of the world's innovation leaders generate up to 90 % of their current turnover with products developed in the last five years. This underlines the importance of innovations for the economic success of companies.

The category thus comprises two areas:
a) In the area of Economic Innovation Success, the importance of product innovations was examined in the form of turnover and profit shares. In addition, process innovations were also examined in the form of savings achieved.
b) The area of Technical Innovation Success refers to competitive advantages and market position.

Course of the study

To determine the TOP 100 companies, a mixed, weighted innovation index was calculated from all variables. Those companies that had the highest innovation index among all applicants were finally included in the circle of outstandingly innovative TOP 100 companies and are allowed to bear the award 'Top Innovator'.

Innovation analysis at DFE

The innovation management of DFE Chemie GmbH was rated 'A+' overall in this strength/weakness analysis (average TOP 100: 'A'). The rating 'A' is awarded to companies that have an innovation management that is unusually professional even by international standards. The probability of future innovation success is very high for these companies.

DFE Chemie GmbH has better ratings than the average of the TOP 100 in two of the four benchmarking categories. These are the categories 'Innovation Climate' and 'External Orientation / Open Innovation'.

Reference:
Innovation report of DFE Chemie GmbH within the context of the innovation competition TOP 100, prepared by Univ.-Prof. Dr. Nikolaus Franke and Dr. Rudolf Dömötör, Vienna University of Economics and Business Administration, 2021