Innovations play a decisive role for companies in maintaining their competitiveness and gaining competitive advantages. Innovations aim to offer solutions that are superior to existing approaches. Despite their potential, predicting the economic profitability of such innovations often remains difficult, as many factors can influence their success.
Potential of oxygen-free production
Researchers at IFA, Leibniz University Hannover, are working to change this. Their research focuses on technological innovations from the Collaborative Research Centre 1368, where processes and reaction zones in oxygen-free environments are studied to develop sustainable production techniques and manufacturing processes. Oxygen-free production offers potential benefits, such as reducing tool wear, creating durable adhesive bonds between metal components, and producing highly efficient heat sinks.
The integration of such innovations into operational practice in the form of process innovations enables companies to develop and utilise more advanced technologies. Process innovations provide opportunities to differentiate from competitors through novel combinations of production factors, potentially leading to more cost-effective, higher quality, safer, or more efficient production methods and products. Implementing these innovations results in adjustments to process chains and the entire production system, affecting both financial and production-logistic objectives.
Challenges in innovation valuation
The goal of innovation valuation is to develop methods that capture the impact of innovations on businesses. A realistic assessment of the future effects of innovations is crucial. In practice, investment decisions are typically based on economic benefits. However, in the early stages of an innovation, sufficient quantitative data is often unavailable as a foundation for financial valuation methods. This data gap significantly complicates assessing innovations with lower maturity levels, as traditional methods are not designed for this purpose. Yet, evaluating the economic effects of an innovation during these initial phases is essential.
A comprehensive system is needed to make informed decisions about implementing innovative production processes and technologies. This system must evaluate the monetary and production-logistic impact of innovations, encompassing both their benefits and costs. It should include an approach that allows the application of financial valuation methods early on, effectively processing descriptions, estimates, and initial evaluation data of the innovation process.
Developing a strategic valuation approach
In this context, the IFA is developing an approach to economically evaluate innovations. The focus is on examining the economic impact of technical innovations considering logistic objectives. It is particularly important to understand how specific process innovations influence logistics performance and costs and what significance these effects have for economic efficiency.
To facilitate the successful transfer of innovations, it’s crucial to model the interactions between technical, economic, and logistic effects within the innovation valuation framework. In the case of oxygen-free production, characterized by a high degree of novelty, a targeted identification and analysis of these effects and their interdependencies is required. The resulting insights include both the identified technical effects of process innovations for oxygen-free production and the economic impacts, as well as the qualitatively described relationships between technical and economic effects. This forms the basis for assessing the overall benefit of these innovative processes.
The goal: maximising the value of the company
To develop the evaluation methodology, the IFA draws on a range of existing qualitative, semi-quantitative, and quantitative approaches, particularly from controlling. Methods and metrics from finance, such as those used in investment and corporate valuation, can be adapted for innovation valuation. In this context, the IFA utilises a value-oriented approach in which future increases in value are measured and innovations are selected based on their contribution to the value of the company. All business activities are aligned with the aim of maximising the company’s value.
Given the highly dynamic nature of the innovation process, innovation valuation should not be a one-time measure but an iterative, recurring evaluation process. It is essential to quantify the identified interactions between technical, economic, and particularly logistic effects over time using simulation studies. This allows for a comprehensive view of the various technical effects of process innovations and their overlaps, a significant challenge due to the complex interactions between technical and economic effects.
Transfer from research to industry
The developed methodology needs validation through various process innovations researched and developed in other sub-projects of the research center. Based on the identified innovation-driven economic benefits and considering the described interactions, measures can be derived to positively influence the economic utility, promoting the successful transfer of innovations into practice. This approach enables the sub-projects of the research center to identify development paths with higher potential for future industrial application.
A sustainable implementation of technologies in an oxygen-free atmosphere that are efficient and ecologically compatible will help to secure high-quality production in Germany as a centre of research in the long term.
