Innovation is literally translated renewal. Economy and society are changing when production factors are linked and exploited together in a novel way. In this case, an enterprise enforces technical or organizational innovations. Nowadays it is very important that a company is innovative and does not rest on successes realized. But what does this have an impact on controlling?Normaly when you hear Controlling you mainlythink about economic numbers and correlations evaluated. NovelControlling approaches say that innovation controlling is becoming increasingly important. Here innovations are divided into three divisions: processes, products and structure.
– Process Innovations:
These improve the final quality of the service or the product. E.g. Saving production days through better organization of production sites / lines.
– Product Innovations:
Bring forth new products and services. E.g. Apple’s iPhone, who would have thought about the year 2000 that humans eventually make a large part of the electronic communications on a phone.
– Structural Innovations Here we talk about the effects of changing structures which result in generall synergies. The overall organizational structure should be constantly scrutinized. Must everything be done in-house, etc.?
The innovation process takes place in three stages: idea development, implementation and launch. It is very important that the controlling is already involved from the beginning. Main tasks are the goal setting, transparency creation and control of the economical value. The main task of controlling is also in the innovation process, the determination of measurable data. Several milestones must be established and mutual feedback is carried out regularly (monthly reporting, meetings, etc.).
– Innovation metrics
By which metrics innovation can be really measured? I have summarized some possible approaches here:
– Milestones About continuation or discontinuation of a project often decide the intervals between milestones. Milestones are important events in the overall process. Usually it applies to draw, evaluate key figures and advise on how to proceed after reaching such a conclusion.
– Target Cost Management This is based on the reporting and acting consistently from the market. The allowable costs of a product are calculated based on the final price of the service / product. For example, we know we can sell a boat in the market at a selling price of 500 CHF. This final price the entire value chain will be subordinated.
– Earned Value Method: It combines information on the time frame, the cost and the project’s progress. Foundations for are the plan, actual and target costing calculations. When you combine the different values it gives you a good overall picture of the course of the project.
Accounting policy for innovation
Innovations can be included in the balance sheet. A distinction is made between non-monetary and monetary methods. R & D costs must be separated in accordance with IFRS. Research costs are therefore an immediate expense, whereas development costs on the asset side are recognized. Thus, the development costs are also activated, six characteristics must be met (IAS 38):
- Available power (to make the use of the asset to procure)
- Future economic benefits (such as income or future cost savings)
- Identification: An intangible asset is identifiable if it: [IAS 38.12]
- Separable is (to be capable separated and sold separately or as part of a group, transferred to be rented or exchanged) or
- Based on a contractual or legal basis, irrespective of whether the right or transferable by the company or its other rights and obligations is separable.
If a company can create new ideas and be innovative, a very good foundation is already laid for a successful future. If this process is also accompanied by the management and the controlling, a successful and profitable innovationprocess is assured. If the Controlling but neglected, it can happen that you lose yourself in ideas and certain things are not economically feasible. The controller in turn is also very required because it must have a creative imagination and needs to understand the innovative people. Where the world stands probably in 10 years? Considered innovative I would say that we no longer need to drive a car itself, to bet? 🙂
Thank you for your attention and until next time. 🙂