Innovation: Challenges

Well over a century ago, American essayist Ralph Waldo Emerson famously surmised that "If a an can make a better mousetrap . . . though he builds his house in the woods, the world will make a beaten path to his door." Emerson assumed two things, of course—that innovation was something done in-house (literally), and that the innovator and the merchant were one and the same. But today, companies are increasingly challenging these durable assumptions.

Don’t get us wrong. Innovation in products, services and processes is as much—or more—a key to long-term growth and competitive success as it ever was. But it is becoming less and
less clear to executives just how to turn investment in innovation—or an innovation itself—into the economic returns and eager customers that Emerson’s aphorism implies. going to external sources for innovation. Why? Because they choose partners in an ad hoc manner and
rely on local management skills to ensure that projects deliver the promised benefits. And these companies often focus too narrowly on products when they think about innovation and hence source innovation on a case-by-case basis.

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