2.1.2 Where to use an innovation audit

Innovation management is important in all sectors regardless of whether it is a highly technological sector or a traditional sector.  The nature of innovation, which is horizontal, can support many other business process and areas like finance, production, supply chain, marketing, strategy, etc. Moreover, the important effects innovation can have to a company’s overall performance make us believe that no sector should be excluded from the innovation audit course. In addition, you shouldn’t forget that innovation requirements might refer to a new management method or practice and therefore an innovation audit can help all companies independent of their sector, size or other specific problem.

Among others there are several business cases, where auditing innovation has increased priority and is highly recommended, these include:

Urgent market changes

An innovation audit can help a lot a company to better analyse its current position and decide what future steps to follow to face major market changes like a new and strong competitor in the market, an important market share loss, etc. People say that in many past cases the real innovation didn’t occur from someone sitting in his/her desk watching the growing figures in company’s financial statement but from someone who was in the edge of collapse and he/she more or less was trying to “survive”.

Strategy formulation

To utilise its results successfully, innovation management shouldn’t be considered as an easy task or a simple and quick method. Although innovation results seem to occur suddenly, systematic management needs time and long term efforts and therefore, must be an important part of a company’s strategy. That said the innovation audit is an important vehicle for identifying many important strategic gaps due to the broad range of areas it investigates and because of its holistic nature, and can help managers to better align the innovation dimension during strategy formulation.

Technological progress

In the knowledge economy and in highly competitive sectors, product life cycles have been reduced and major technological changes can impact overnight on the production platform a company uses. In addition, a completely new competitive or substitute product or processes can emerge and eliminate a company from the market. Therefore, during such periods, implementing an innovation audit can reduce the above mentioned risks and keep a company’s innovative performance at a high standards.

Innovation audit frequency

Innovation and its main prerequisites, which are creativity and knowledge, are to great extent ecological in nature. Therefore, managers shouldn’t see innovation as an item, which can be easily measured and managed simply by following some innovative methods. What is more important for managers in innovation is to be able to cultivate the suitable environment for innovation. However, a company’s context (corporate or external) particularly in competitive sectors and markets, changes continuously in an unpredictable manner. If we take this into account we can easily conclude that an innovation audit must be done frequently or at least must be reviewed  periodically following market changes. It is estimated that a periodic review of the innovation policy every 12 months is enough. However, in knowledge based sectors a more frequent innovation audit might be needed. In any case you should try to balance and compare all the costs incurred during an innovation audit with the possible benefits for the company.