The Company may find that it has to set priorities on all the innovations it might undertake. To do that, you rank each innovation for its likely economic value to the Company. You then undertake those innovations in order of their economic value and up to the limit of the capacity, the Company has to undertake the innovations.
The objectives of a performance innovation are to increase sales and profits. The Company would especially like to increase the sales and profits it enjoys compared to those of its competition. To the extent that the Company's relative profits are a result of its relative market share, then share becomes the primary standard of measure. Where share has little impact on the Company's profit position; profitability sits as final arbiter on the innovation program. To set priorities, then, the Company evaluates the Company and customer economics of each of its potential innovations. It sets priorities based on these economics and pursues those it has the capacity to undertake.
This section of StrategyStreet covers these issues in the following topics:
Capsule: The Company estimates its costs for each innovation and sets a price for the innovation. Then it evaluates the sales volume customers might bring to the Company as a result of the innovation by checking the innovation’s net value to the customer after the customer has paid the price of the innovation. The Company ranks these innovation alternatives; first, according to the market share change each should create and, second, by the profitability of the innovation.
Capsule: The Company would eliminate innovations that are likely to be copied quickly or that have an unattractive economic outlook. It then would implement the remaining innovations in the order of their greatest impact on the volume and profitability of the Company. The Company would innovate all of the innovations that it has the capital and human resources to undertake during the planning period.