Innovation Cliff Notes

There's a press release from Sara Lee today that encapsulates all the expected challenges, issues and benefits of innovation. Clearly the Sara Lee people recognize that innovation is the key strategic initiative for the foreseeable future. You can read the press release here. In my mind, this press release and my comments below serve as the Executive Management Cliff Notes for Innovation. You can now skip the coursework.

There are a few things within the press release I want to point out specifically.

First, innovation is critical for long term success. Here's the first quote:

The move is also key to keeping Sara Lee competitive, analysts say, especially in the food industry, where companies are carving out high- and low-end niches, making it difficult for major foodmakers to thrive serving the same products to one mass, middle market.

"It really is what is going to make or break companies going forward. Line extensions, package modifications don't lead to much incremental value. Real breakthrough innovation is what is important," said Bob Goldin, vice president of Technomics Inc., a Chicago-based food research company.

Second, your competitors are doing something so you may already be late to the game. Sara Lee reacted because Wrigley, Kraft and others have opened innovation labs and have invested in innovation as a differentiator, while Sara Lee :

"has had a reputation among analysts of skimping on research spending. While other food companies were investing in R&D facilities during the 1980s and 1990s, Sara Lee allocated little to the development of new products, they said."

Third, hope is not a strategy. Innovation must be managed as a process for ongoing, sustainable new product introduction.

"Innovation is easier said than done. You have to put pretty significant resources behind it," Goldin said. "Companies that really manage their innovation business are going to be in a far better position."

Fourth, there are real, tangible, measurable benefits from being great at innovation. Sara Lee expects increased sales and higher stock prices based on successful innovation.

Sara Lee executives say their R&D push is crucial to its reinvention of the company as an American food company. Executives hope the changes will lead to innovations, boost sales and ultimately move Sara Lee's stock price

Finally, what's really important about innovation is the end to end process and getting new products out the door quickly.

"What we have now is a real opportunity to go from an idea into a concept pretty quickly"

So, this is basically a Cliff Note's version of the rationale for innovation and the important things to do now.