From Invention Innovation: Conversion Ability in Product Development
MINNEAPOLIS, MN (8/1/2006) -- The ability to convert inputs into outputs is a critical determinant of success in many fields of endeavor. In the August 2006 Journal of Marketing Research paper "From Invention to Innovation: Conversion Ability in Product Development," Rajesh Chandy, Carlson Professor and Om Narasimhan, Assistant Professor at the Carlson School of Management at the University of Minnesota, and their co-authors study the ability of firms to convert ideas into products, i.e., their conversion ability. Specifically we address the question: Why are some firms better at conversion than others?
As a response to pressures to innovate, many firms have gravitated toward generating larger numbers of promising ideas, and increasing the speed with which these ideas are taken to the market. Relatedly, the product development literature has frequently highlighted the virtues of increased speed and increased idea generation. In contrast, we propose that a strong focus on speed and on generating many ideas may actually hurt firms, by lowering their conversion ability.
Along with co-authors Brigitte Hostaken and Jaideep Prabhu, Chandy and Narasimhan present a number of hypotheses on why some firms are better at conversion than others, and test these on data between 1960 and 2001 from a cross-national sample of pharmaceutical firms. They found that converting promising ideas to launched drugs is no easy task: only about 20% of patented drug ideas make it to product launch. The research also finds that firms vary widely in their ability to convert promising drug ideas to launched drugs. Firms with the highest conversion ability are those that: 1) focus on a moderate number of ideas, in areas of importance, and in areas where they have expertise, and 2) deliberate for a moderate length of time on promising ideas.
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