Innovation 101: The ROI Barrier

We talk to Raytheon's CINO about life or death innovation


Welcome to the first instalment of the Innovation Enterprise’s ‘Innovation 101’ series.

Over the next six weeks we will be hearing from a number of prominent innovators and finding out how they’ve overcome the innovation boundaries at their respective companies.

In this week’s edition we hear from Mark Bigham, Chief Innovation Officer at Raytheon.

When we think of the world’s biggest companies it’s often Microsoft, Google and Apple that come to mind. With their glitzy marketing campaigns, they’re surrounding us all the time.

Whilst these companies are highly successful, their contemporaries, in terms of revenue, are often more understated in terms of their notoriety.

Take Glencore, a multinational commodity trading and mining company, ranked 10th in the Fortune Global 500, how many people would truly be able to describe what they do? But with their revenue standing at $232.7 billion, they’re one of the most profitable companies in the world.

Raytheon comes under a similar bracket - a billion dollar business which many aren’t aware of. Whilst their image might not be as glamorous as Apple’s or Google’s, their impact is just as important, if not more so.

Operating in the defence sector, Raytheon is a technology company which was founded in Cambridge, Massachusetts. It’s now the world’s largest producer of guided missiles.

Their technology is having a real impact on society and is being used to help combat ISIS, the Syrian/Iraqi terrorist group responsible for atrocities across Syria, Libya and Iraq.

Working within this environment brings additional pressures to those present in the commercial setting, further increasing the need for Raytheon’s innovation initiatives to be successful.

With this in mind, it’s important that Raytheon stay ahead of the market and have the best possible tools to measure their ROI on innovation.

When asked how Raytheon does this Mark Bigham, the Chief Innovation Officer at the company, says, ‘the way we measure ROI on innovation at Raytheon is really in two ways - one is financial, looking at investment and the potential return, and the second is strategically, the technology that we’re investing in - do we think that it’s going to position us strategically in the market?’

Whilst this seems like a simple strategy, Mark’s keen to accentuate that the measurement of ROI differs considerably from project to project. Raytheon operate in a vast array of domains, including space and online, and due to this, ROI has to be viewed differently. Marks says, ‘there’s a big change in ROI from project to project, and depending on your area of focus, you will measure your ROI differently, but we do separate them slightly from traditional R&D projects’

In terms of ROI, Mark states that it’s about ‘driving game-changers’ and making sure that the ROI is as large as it could possibly be for each initiative.

A domain which Raytheon are currently involved in is cyber security. Cybercrime is a real growth industry where the risks are low for criminals but the rewards high. It’s been estimated that the annual cost of cybercrime on the global economy is more than $400 Billion.

Due to this, Raytheon have come up with ‘Raytheoncyber’ a portal of information concerned with making sure that the public has the correct resources to guard themselves against cybercriminals.

This is testament to the fact that executive buy-in for cyber security has been great at the company, proving the importance of innovation initiatives being in line with the current needs of the organization and the customers they serve.

Mark explains that the unpredictability of cybercrime, and the threats it poses, has meant that buy-in has been easier to achieve from senior management. He also elaborates on this by saying, ‘we see that unpredictability increasing the demand for cyber products, unfortunately we see the problem as getting worse so our executives have definitely bought into cyber’

As an extension of this, Mark emphasises that Raytheon will buy-in to any innovation initiative which allows its customers to better understand geo-political threats. He states, ‘anything that’s going to help our customers, whether it be cyber, in the space domain, in the air, land, surface domain, those are areas we’re going to invest in to help our customers understand them better’.

Raytheon is clearly a company which values excellence and this is one the reasons why the organization’s senior management team are keen to implement innovation whenever possible. The best innovators, whether that be Google or Apple, have never compared themselves with the competition - they see their products as superior and therefore above what their rivals can offer.

For Mark this is a healthy way for a company to look at things, and whilst it’s important that companies don’t forget that they have competitors, it’s also essential that executive buy-in is centred around the customers needs.

He elaborates on this by saying, ‘we don’t respond to competitors in that way, we’ll monitor the competition, we’ll watch what they’re doing, but I don’t think responding to a competitor is a good thing to do’. He also elaborates on this by saying, ‘responding to larger global trends and understanding what our customers need is a much more important strategic investment and focusing on being good for our customers and responding to that is a much better thing to do’.

This goes to show how important it is for innovation initiatives to be proactive rather than reactive. When it comes to getting executive buy-in, management want to make sure that their innovation efforts are propelling the company forward and ahead of the competition - not sideways alongside its rivals. This is encapsulated by Mark when he states, ‘we try and do our best to satisfy our customers needs, and if we do that well, we don’t need to concentrate on the competition’.

This approach to buy-in is a universal one which will used by an array of companies, all of which operate in different sectors. Whilst this is similar, Raytheon’s measurement of ROI is different to commercial companies due to the life and death situations where their products are used. Mark says, ‘it’s very difficult to compare a project where you’re helping a government try and fight something like ISIS, compared to an innovative commercial project - they’re still important but it’s a different type of calculus’.

Due to this high consequence market the ROI must be looked at from a variety of different angles. This could be helping win the war against ISIS or helping a government save a group of hostages.

In terms of executive buy-in, the innovation initiative should be in line with customer demand and never a reaction to the movements made by competitors. ROI is also highly customer-focused, where a project is valued against its capacity to help customers.

Raytheon’s field of expertise is such that it provides us with an innovation framework that’s unlike many commercial organizations. Their definition of ROI can be boiled down to life and death situations, meaning that their executive management team are keen to invest in an innovation initiative which has the potential to save lives.

Next week’s article will be from Sue Jefferson,VP Global Innovation at McCain Foods, who will be discussing the importance of culture.


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