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Innovation May Hold The Key To Startup Success

Written by Ken Gaebler
Published: 9/8/2009

Innovation is more than just the traditional input/output measurement, and is based on business models, ability to cope with challenges, and outperformance in their markets, McKinsey & Company reported.

To predict a startup's success, many companies focus on research and development and output performance to identify the company's innovation performance score, or IPS.

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Yet McKinsey & Company had important news for entrepreneurs about calculating their IPS - it is not as easy as one may think.

Instead of the standard input/output measurements, McKinsey identified several key areas that are strong indicators of innovation, and consequently predictors of startup success.

One of the most important characteristics of startups with a high IPS is that they consistently do well and outperform competitors in their existing markets, instead of focusing on entering or creating new segments.

McKinsey also noted that top innovators did not use economic downturns as an excuse for underperformance - "top innovators continued to outperform their peers even during the tough times," the study noted. "Their agility and capacity to innovate made it easier for them to cope with the challenges."

Furthermore, of the three types of innovation - product, process and business model - McKinsey found that business model was the strongest predictor of success.

With the Small Business Administration reporting that just two-thirds of businesses survive at least two years, the bar for innovation is high, and could separate the winning - and surviving - startups from the losers.

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