Innovation controlling

Innovation controlling represents a necessary extension of R&D controlling, which results directly from the definition of the term innovation. The result of R&D is new knowledge, which can be in the form of an invention, for example. The application of this knowledge through the introduction of a new product on the market or a new process in manufacturing is referred to as product or process innovation.
Accordingly, R&D controlling primarily relates to the process and the result of technological knowledge acquisition, while innovation controlling explicitly targets the economic result after the introduction of a new product or process. This approach based on the time of introduction must be further developed from a dynamic point of view by mapping the diffusion of new products and new processes in innovation controlling. For this purpose, Hauschildt suggests process-accompanying controlling, in which the respective measured variables are dependent on the phase reached in Innovation process vary.

Assuming that innovations represent projects with an investment character and success orientation, so-called innovation results calculations have been developed at various points, which represent an essential element of innovation controlling. According to Brockhoff, such calculations must fulfill three properties:

1) Recording of all expenses and income attributable to the project,
2) Recording of economic relationships with other projects and
3) flexible adaptation to different development stages of the project.
The figure illustrates the structure of an innovation result calculation. It is set up as an account, with expenses being posted on the debit side and income being posted on the credit side. Before the start of the project, the sum of the realized income and expenditure is zero, so that the innovation result calculation only contains expected values. Analogous to an investment calculation, the net present values of the payment and payment series of the project can be determined. The account collects the realized expenses and income in the course of the project. In the course of the project, the realized income (field 5) and expenditure (field 1) will increase at the expense of the expected income (field 7) and expenditure (field 3). The innovation results calculation outlined here is presented for a risk-neutral decision maker (fields 3 and 7). Depending on the decision-maker’s attitude to risk, corresponding correction items can be created which are reduced as the cash flows realized increase.

The innovation result analysis can be used for various purposes. For planning purposes, only the expected income and expenditure or the corresponding capital values are relevant. This information can be the basis for a timely termination decision if alternative usage options promise higher returns or a benchmark derived from overarching corporate goals is not achieved. As a control calculation, the innovation result calculation records the realized income and expenditure. The comparison of target and actual values results in a Deviation analysis. The causes of deviations are to be determined. In the course of the process, such deviation analyzes form an essential basis for decisions about project continuation or termination.

Success factor research shows that process-accompanying innovation controlling and a consequent consequent termination of projects that do not contribute to the achievement of goals have a significantly positive influence on the profitability of new products.

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