6 Secrets of Highly Innovative Companies: Secret #2 – Build “Flex Points” into Financial Models

This month we are running a series based on our independent research on innovation confidence.  To learn more about disruptive innovation and other strategy approaches, visit the Newport Consulting Group website strategy page.

Qualitative discussions with several executives revealed that while the extent of the economic downturn was not known, the confidence that executives had to address the downturn was at a relatively high confidence level. Executives surveyed are determined to see this current recessionary storm through and feel they have the means to do so, regardless of how unpleasant those actions may be in the future.

Appliance manufacturer Whirlpool has long been considered a standard-bearer for innovation in its industry. Through technology and proactive ideation, Whirlpool has instilled a global commitment to innovation since 1999. The practice of developing an idea, or “innovation,” pipeline has increased the customer appeal, profitability, and arguably competitiveness of the company into the 21st century.

While the innovation pipeline is one element to competitiveness for Whirlpool, this concept transcends into a holistic approach to innovation, including the financial arena. “Innovation requires investment but many in the financial community cannot see the payback especially, on IT investments,” suggests Dana Nickerson, Director of Global Business Process Management at Whirlpool. “Most of the greatest innovations didn’t result from a financial business case. Great leaders such as Steve Job and Jack Welsh didn’t make innovation investment decisions based on financial analysis alone.”

Based on qualitative discussions with executives, new technology innovations will be engaged only through selective reduction in existing portfolios of non-performing initiatives where these initiatives can be eliminated. From this position we understand that executives are looking forward to finally “cleaning out the closet” and divesting of under-performing initiatives, an activity that has until this point had not been given much attention.

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Filed under Financial Management, Innovation, Operations, Strategy

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