Innovation Management Executive Market Report 2014

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4
The InnovationManagement.se Executive Market Report 2014
Figure 1 The Innovation Management Service Market Sectors
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While some experts and vendors agree with this market division, others feel that the sectors
not only overlap, but can sometimes be so strongly connected to each other that it would be
almost impossible to provide one without the other.
For instance, Jesper Müller-Krogstrup, Partner at Nosco
ApS points out to the fact that it would not be possible to
provide IT solutions for collaborative platforms on the
innovation management service market without being able
to provide innovation management consulting services at
the same time:
"Sectors 1 (IT solutions for collaborative platforms) and 3
(innovation management consulting) are very correlated -
it's very rare not to offer 3 when offering 1" Jesper Müller
Krogstrup, Partner at Nosco ApS
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Other vendors also mentioned that more than one of the
four sectors would correspond to the area in which their
company provides innovation management services.
However, they all agree that their core competence can
only be linked to one of the four sectors.
Next, the four sectors of the innovation management
service market will be briefly introduced with the help of
quotes selected from the interviews that were conducted
for the report.
”The software tool is just
an enabler for managing
ideas but it has to be
placed correctly in the
value chain of the
company”
Jesper Müller-Krogstrup,
Partner at Nosco ApS
!
© 2013, InnovationManagement.se, Reproduction Prohibited November, 2013

7
Figure 2 shows the distribution of the respondents’ job titles. More than a third (38%) of the
total number of respondents was in the senior management group, while almost a third (32%)
of the total number of respondents was middle level management. C-level positions follow
with a percentage below a quarter (21%) while other types of positions registered among the
respondents were only 9%.
Figure 2 Distribution of Respondents' Positions
Figure 3 Distribution of Respondents' Sector of Business Activity
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When asked in which sector of the innovation management service market their organization
was active in, 38% of all respondents said to work with companies with core competencies in
sector 1, 14% in sector 2, 33% in sector 3 and 15% in sector 4.
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C-level
Senior Management
Middle Management
Other
%&#$
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Sector 1 - IT Solutions for Collaborative
Platforms
Sector 2 - Services for Open Innovation
Solutions
Sector 3 - Innovation Management
Consulting
Sector 4 - Innovation Management
Executive Training

10
It can be easily concluded that innovation is generally associated with growth and progress.
This inference partly answers the question “Why is innovation management necessary?” In an
attempt to provide as complete an answer as possible, interviewees were asked to mention
some of the reasons why they believe that innovation management is a necessity.
Why is innovation management necessary?
Some of the answers to the question “Why is innovation management necessary?” mention
the increasingly rapid changes that the market and the companies in it are subjected to. This in
turn generates a need for companies to innovate. Hence the need develops to be able to
manage innovation properly. This need is not new; however, the fact that people and
companies have begun to regard innovation management more as a discipline rather than
plain serendipity is indeed something novel.
The old paradigm of innovation management being an
“oxymoron” - as Scott Anthony, Managing Partner at
Innosight, calls it - is slowly fading, making way for
innovation management as a discipline. He talks about
the difficulties of both managing and measuring
innovation. These matters will be further discussed in
another section of the report. Scott Anthony also
compares the way people regarded innovation
management ten years ago with the way they are
beginning to view it today. As it seems that the
common opinion on innovation management is no
longer revolving around the word “serendipity” but
has rather shifted towards the keyword “discipline”:
“Given the pace of change in the market, innovation
is a necessity. There is a common frustration that
investment in innovation feels hard to measure and
hard to manage. A decade ago, people would say
innovation management is an oxymoron, innovation is
random, it just kind of happens. People recognize now
that it is a discipline - you can destroy it with too tight
controls but that does not mean there should be no
control at all.” Scott Anthony, Managing Partner at
Innosight
“A decade ago, people would
say innovation management is
an oxymoron, innovation is
random, it just kind of happens.
People recognize now that it is
a discipline”
Scott Anthony,
Managing Partner at Innosight
!
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Colin Nelson, Director of Strategic Consulting at Hype Softwaretechnik GmbH, mentions two
reasons why innovation management is important. The first reason refers to the fast changing
innovation management service market, while the second one points out to the increased
“international exposure” that more and more companies are experiencing:
“1.The speed of change is increasing - companies have to react to new competitors, new
situations, new markets, much faster.
2. Another reason is that companies (even small companies) are more exposed
internationally, rather than just the domestic market, so their employees are spread all over
the world.“ Colin Nelson, Director of Strategic Consulting at Hype Softwaretechnik GmbH

13
"I was working as CFO for another software company, we had these meetings with a lot of
great ideas but afterwards nothing really happened - this is what I wanted to change." Alf
Martin Johansen, CEO at Induct Software AS
This is additional proof that the importance of innovation management is increasing and thus
the innovation management service market will keep growing as well. However, it is essential
to become more aware of what innovation management truly represents, of its history, of
innovation management tools and many others. Only then will it be possible to understand its
present status and possible future development.
Past Development of the Innovation Management Service Market
The innovation management service market has been growing rapidly over the past years.
This is a fact confirmed by both experts and vendors in the industry, as well as annual
revenues registered since 2010. One of the main reasons behind this growth is the increased
awareness on what innovation management means and how it can help an organization
progress. Doug Collins, VP Innovation Architecture at Spigit/Mindjet observes that:
"Organizations have gone from viewing the practice of collaborative innovation as a novelty
and they are starting to internalize this practice in a way that it contributes directly to the
business" Doug Collins, VP Innovation Architecture at Spigit/Mindjet
In order to show how the innovation management service market has grown over the past few
years, respondents were asked to indicate their approximate annual revenues for each of the
past three years.
Figure 6 presents an overall view of the innovation management service market growth. Why
growth? Because there is a clear tendency for the percentage of companies with annual
revenues below 500,000 USD to decrease, while the percentage of companies with annual
revenues above 4,000,000 USD has clearly increased since 2010.
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Figure 6 Past Growth in the Innovation Management Service Market
Annual revenues <
500,000 USD
Annual revenues
500,000 - 3,999,999
USD
Annual revenues
>4,000,000 USD

16
Current Status Of The Innovation Management Service Market
Professor Wim Vanhaverbeke refers to today’s innovation management service market as
being very different from the way it was ten years ago. He indicates that the problems and
challenges that companies are facing have changed, thus resulting in different approaches
towards innovation management.
“Companies have different problems now than they had ten years ago. For instance, many
large companies change gradually their R&D perspectives from long term to short term, from
"in-house" to collaborative and so on. There are huge changes and the R&D or the
innovation in a company is no longer what it was ten years ago.” Wim Vanhaverbeke,
Professor Strategy & Innovation Management UHasselt
According to the data obtained by InnovationManagement.se from the surveys and interviews
conducted for this report, the innovation management service market has registered
approximate percentage growths of: 16% from 2010 to 2011 and 13% from 2011 to 2012.
Based on the surveys and interviews results conducted for this report, it is estimated that the
growth registered for 2013 as compared to the 2012 market size will be of approximately
32%.
Figure 11 Annual Percentage Growth Rate of the Innovation
Management Service Market
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Based on data regarding annual revenues for the past three years collected from surveys and
interviews by InnovationManagement.se, the estimated size of the innovation management
service market was little below the threshold of 500 million USD during 2010 and 2011. The
same data suggests that in 2012 the innovation management service market exceeded the 500
million USD limit. Moreover, it is estimated that by the end of 2013 the innovation
management market will have surpassed 700 million USD. These estimates encompass all the
four sectors.
© 2013, InnovationManagement.se, Reproduction Prohibited November, 2013!

19
This more detailed distribution of the types of obstacles that innovation management vendors
encountered is shown in figure 13.
Figure 13 Obstacles - Sub-categories
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Nevertheless, the biggest of all obstacles seems to be the lack of understanding or confusion
about innovation management. Some of the obstacles that innovation management vendors
have faced over time and are still struggling with will be analyzed as follows.
Expecting “magic” to happen
As previously stated, one major obstacle encountered
by vendors in the innovation management service
market is the unrealistic expectations of customers.
While the positive results of proper innovation
management implementation in a company’s strategy
and culture may take years to show, in reality,
customers often expect much quicker results. When
they fail to receive immediate return on their
investment in innovation, some companies give up and
switch to other plans.
Tim Woods, VP of Marketing and Product Strategy at
Hype Softwaretechnik GmbH, explains that these
unrealistic expectations that customers often have
about innovation management services’ results is the
biggest obstacle vendors are facing:
"The biggest obstacle in innovation management is
getting results - it's hard to prove results of innovation
management tools; people expect it to be a "magic
bullet" Tim Woods, VP of Marketing and Product
Strategy at Hype Softwaretechnik GmbH
"The biggest obstacle in
innovation management is
getting results - it's hard to
prove results of innovation
management tools; people
expect it to be a "magic
bullet"
Tim Woods, VP of Marketing
and Product Strategy at Hype
Softwaretechnik GmbH
!

22
Many innovation management vendors seem to agree on the need for organizations to
experience a “transformation” in order to really make use of innovation management.
Rick Wielens, CEO NineSigma Europe, identifies two approaches that innovation
management customers adopt: the “transactional” approach and the “transformational”
approach. He also confirms both the need for transformation and top management support, as
well as the necessity for the right people to be in charge of innovation-related decision
making.
""Transactional vs. transformational approach: the transactional approach basically means
expecting magic to happen. Very few companies are taking the transformational approach i.e.
begin with an innovation strategy and work around that to attain their goals.
(…)
There are three main obstacles:
1. Recurring customers are a problem in open innovation because more customers are
transactionally-oriented, open innovation is not part of their culture, strategy, etc., so they
switch it on and off depending on the budget and other.
2. Companies need real CEO support - open innovation is a big change so with this the
culture of the company needs to be changed as well.
3. Most companies start open innovation on the wrong side - most companies start open
innovation on R&D but the people who should be driving open innovation are the strategic
marketing people, the CMO not the CTO needs to be in charge of driving OI" Rick Wielens,
CEO NineSigma Europe
The so-called “transactional” approach that Rick Wielens, CEO NineSigma Europe, mentions
is, in its essence, quite similar to the “magic bullet” that people expect, previously described
by Tim Woods, VP of Marketing and Product Strategy at Hype Softwaretechnik GmbH.
Lack of top management involvement in innovation management processes
Another big obstacle can be the top management’s passive
attitude towards innovation, as Sofia Börjesson, Professor at
Chalmers University of Technology suggests:
"The biggest obstacle to overcome on the market is the lack
of top management involvement and support" Sofia
Börjesson, Professor at Chalmers University of Technology
Professor Sofia Börjesson is not the only one regarding top
management involvement as being essential to innovation
management success. Other vendors have also stressed that
top management involvement often enables things to run
more smoothly and problems to be solved more quickly.
Moreover, the top managers need to involve their
employees in innovation management processes and make
it possible for it to become part of their organization’s
culture, and most important, part of their organization’s
strategy.
"The biggest obstacle to
overcome on the market
is the lack of top
management involvement
and support"
Sofia Börjesson, Professor
at Chalmers University of
Technology
!

25
THE CUSTOMERS SEEN FROM A VENDOR’S PERSPECTIVE
Generally, customers are asked what they think about the vendors. In this market report,
InnovationManagement.se is presenting the vendors’ view on their customers. This section is
structured according to a set of questions about the customers that was included in the
interviews for the report.
Are the customers mature enough when dealing with innovation matters? What sizes
companies are mostly encountered among the customers?
The first two questions in this set were related to how the vendors view the “maturity” of their
customers in regard to innovation management practices and what sizes the companies that
are their customers usually have. Even though a vast majority of the innovation management
vendors pointed out to large companies with more than 1000 or even 5000 employees as their
customers, many vendors also mentioned that the customer-companies had not yet reached a
maturity level for innovation management.
The so-called “lack of maturity” on the customers’ side can be interpreted in various ways.
Mats Magnusson, Professor at KTH Royal Institute of Technology was previously quoted in
this report on the fact that a synonym of maturity towards innovation management is to send
employees to innovation management training. Furthermore, many vendors acknowledged the
expanding presence of SMEs among their customers. Particularly medium sized enterprises
were indicated as a new category of customers.
Rick Wielens, CEO NineSigma Europe, explains that small enterprises lack the resources and
“absorptive capacity” to integrate innovation management in their strategy and practices. This
leaves the medium sized enterprises a relatively new group of customers with tremendous
potential. Rick Wielens further mentions the more positive outcomes of medium sized
companies when dealing with innovation management tools
and services. He attributes this to the significantly increased
involvement of CEOs in innovation management processes:
“For any successful
company, open
"Open innovation is for me the ultimate tool for an SME but
innovation management
you need to take the S away because the small companies
is embedded in all their
usually do not have any absorptive capacity, any resources. In
processes, even their IP
a midsized company usually the CEO is involved and thus you
departments are set up
are talking directly with the decision maker; the results are
to be open and
that these companies are a lot faster than the big
collaborative”
corporations." Rick Wielens, CEO NineSigma Europe
Emma Hughes,
Managing Director,
Further related to SMEs, Emma Hughes, Managing Director
Yet2.com Europe Ltd.
Yet2.com Europe Ltd., explains how the more “mature”
companies implement the innovation management tools:
“It's still a work in progress; some of the more mature
companies are making the open innovation management tools
strategic all across the organization, this is not a separate
activity. For any successful company, open innovation
management is embedded in all their processes, even their IP
(intellectual property) departments are set up to be open and
collaborative” Emma Hughes, Managing Director Yet2.com
Europe Ltd.
!

28
On the same matter, Mats Magnusson, Professor at KTH Royal Institute of Technology points
out to the fact that the people making the budget allocation decisions for innovation
management often do not have a clear view and understanding of this. These people usually
focus on reducing or optimizing costs while lacking sufficient knowledge about “innovation
economics” to make better decisions. Professor Magnusson also stresses the fact that people
(customers) are often more worried about losing money than they are about losing innovation
management related opportunities:
“If we let controllers actually be in charge of allocation of budget for innovation we will
always under-allocate for innovation management, because controllers do not see the
alternative cost, the opportunity cost, they don't see alternative revenues and opportunity. We
are not evaluating innovation in the right way because we have a lack of knowledge about
innovation economics. Unfortunately, people are more concerned with not losing money than
with not missing opportunities. And as long as we have that, we will under-invest" Mats
Magnusson, Professor at KTH Royal Institute of Technology
How do the customers manage challenges when using innovation management
tools?
For this question Rick Wielens, CEO of NineSigma Europe, provided an interesting answer
quoted previously in this report. It seems that companies can be divided into two categories
when it comes to their approach towards innovation management: the “transactional” and the
“transformational” approach. The “transactional” approach refers to companies expecting
quick results from innovation management without making all the necessary “efforts” to
integrate it in their culture. This can be further linked to previous quotes and observations,
particularly in the “Obstacles” section of the report, where it has been shown that one of the
greatest obstacles encountered by innovation management vendors is their customers’
expectations for innovation management to work like “magic” and the failure to embed
innovation in all parts of their organization. The “transformational” approach is just that - the
proper integration of innovation management in the strategies, governance, processes and, last
but not least, culture of the organization.
!
!
!
© 2013, InnovationManagement.se, Reproduction Prohibited November, 2013!

31
“Cracking” the business model
Rick Wielens, CEO NineSigma Europe, estimates that a
leading company will be the one to “crack the business
model of innovation management” referring to the lack of
structure and scientific methods for innovation
management also signaled by Wim Vanhaverbeke earlier
in this report:
"The company that will win is the company that will be
able to crack the business model code because no
company has really done this so far. If you produce
software, you only develop it once but you can sell it many
times and get huge returns and that's a fantastic business
model. The "code" that needs to be cracked is the "code"
where you provide the people with a tool to help them to
do their work better by engaging with the outside world,
which has all the good things that the open innovation
model basically has but makes it very low-threshold and
easy-to-use" Rick Wielens, CEO NineSigma Europe
"The company that will win
is the company that will be
able to crack the business
model code”
Rick Wielens, CEO
NineSigma Europe
!
Survival of the “biggest”
Other expectations for the future of the innovation management service market include a
decrease in the number of small companies. This is one of the direct results of the past growth
of the innovation management service market and its sectors, shown earlier in the report.
“Many small companies will not survive long on the innovation management service market.
They will be swallowed by bigger companies as the innovation management service market
consolidates.”Wim Vanhaverbeke, Professor Strategy & Innovation Management UHasselt
Future growth estimates
Figure 16 shows the estimated overall innovation management service market growth in the
upcoming years, based on the estimations given by the surveys and interviews respondents.
For the next three years, the average growth that innovation management vendors foresee is
more than 30% per year. The annual percentage growth rate of the innovation management
service market is expected to increase gradually, almost reaching 40% (estimated 38.3%)
growth in 2016.
If assuming these growth rates are correct, it is to be expected that by the end of 2014 the
innovation management service market will have reached the figure of 1 billion USD and that
by the end of 2016 the market size will be more than 1.6 billion USD.
The above-mentioned percentage growth rates and the figures calculated based on these growth
rates reflect the expectations of the vendors and experts that took part in the
InnovationManagement.se surveys and interviews during autumn 2013.!

34
Do’s and Don’ts for Vendors
In the immature and still unconsolidated market of innovation management services, most
successful vendors that have been able to survive and grow over the years have already
understood the meaning and importance of innovation management. They should however be
prepared for the afore-mentioned obstacles that most innovation management vendors seem to
come across. Some of these obstacles are related to the customers’ unrealistic expectations of
the effects of innovation management; others are concerned with the lack of knowledge and
confusion about innovation management. Further obstacles could be the lack of top
management involvement in innovation management on the customers’ side or the lack of
scientific approaches and guidelines for innovation management.
Vendors are thus advised to be prepared for such obstacles and others that might results from
them. They should also expect the innovation management service market to shift very
rapidly and for new competitors to arise, even ones from countries or cultures that have not
previously adopted innovation management practices.
Figure 19: Do’s and Don’ts for Innovation Management Vendors
management service
market to remain the
Identify the
person in charge
of innovation
management
budget allocation
Don't dismiss the
possibility of R&D
partnerships or
newcompetitors from
the East
Expect shifts in
the market
anytime This document is a partial preview. Full document download can be found on Flevy:
Don't expect the
innovation
sames
For Vendors
Don't
"Crack the business
Develop innovation
management guidelines
and methods for your
underestimate
the importance
of innovation
leaders
Be prepared for the
general lack of
knowledge and
confusion about
innovation
management
model!"
customers
A more general recommendation that can be made to both innovation management vendors and
customers is to make sure to gain as much knowledge and understanding about innovation
management as possible and to be patient and cautious as positive effects of innovation management
practices and tools often take time while new, possibly strong competitors may appear every day.
!
!

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Innovation Management Executive Market Report 2014