Are you a leader of an FDI enterprise in Vietnam? Are you seeking an innovative solution to develop your business most effectively? This article provides a complete explanation of innovation to create a competitive advantage, helping your enterprise stand out and generate higher value compared to competitors.
The Role of Innovation in Enterprises
Innovation plays a crucial role in creating a competitive advantage, enabling enterprises to develop unique and differentiated products and services, thereby generating higher value compared to competitors.
Innovation is the act of transforming ideas into solutions that create new value in business and competition. Once all scenarios have been tested, the enterprise can select the most optimal innovation approach for its business development journey.
The Current Challenges of FDI Enterprises Regarding Innovation
According to the World Bank, 70% of innovation projects by FDI enterprises in Asia fail due to a lack of clear measurement mechanisms. Executives acknowledge the three biggest challenges:
- Inability to quantify financial risks when testing new ideas
- Lack of standardized metrics (KPIs) for non-traditional innovation projects
- Difficulty convincing investors when ROI does not immediately appear on financial statements
Risk Management Solutions in the Innovation Process for Enterprises
When implementing innovation in FDI enterprises, multinational companies need to integrate a comprehensive risk management process through the following steps:
Step 1: Classify Risks Using the ICE Matrix
Apply the Impact–Confidence–Ease (ICE) matrix from the Cambridge Innovation Institute to accurately classify risks and make informed decisions on whether to innovate or invest.
Reference the risk levels that enterprises may face:
Risk Level | ICE Score | Action |
| High (8–10 points) | High impact + High confidence + Easy to implement | Invest immediately |
| Medium (4–7 points) | Medium impact + Moderate confidence | Small pilot |
| Low (0–3 points) | Low impact + Unclear confidence | Further research |
Step 2: Establish a “Controlled Failure” Mechanism
Manage each innovation project according to the 70-20-10 principle as follows:
- 70% of the budget for low-risk projects with ROI under 2 years
- 20% for medium-risk projects with ROI of 2–5 years
- 10% for breakthrough projects, accepting possible failure
Step 3: Build a Multi-Layer KPI System
Develop a multi-layer KPI system to closely and accurately manage risks for each category and task item.
See also:3P Salary and KPI
Formula for Measuring Innovation Effectiveness in Enterprises
To accurately measure and evaluate the effectiveness of innovation, enterprises can apply the ROI calculation method as follows:
ROI = (Financial Benefits – Investment Costs) / Investment Costs × 100%
Where:
- Financial Benefits: Revenue increase + Cost savings + Loss reduction
- Investment Costs: Human resources + Technology + Training + Time
Example: A Japanese electronics corporation in Hai Phong invests USD 500,000 in an AI system. After 18 months:
- Labor cost savings: USD 200,000/year
- Reduced production errors: USD 150,000/year
- Productivity increase: USD 100,000/year
In the first year:
In the first year: ROI = [(200,000 + 150,000 + 100,000) – 500,000] / 500,000 × 100% = -10% in the first year.
By the second year, when the system operates stably, ROI reaches 45%. This demonstrates the need to evaluate ROI over a sufficiently long period.
Factors Determining Innovation in Enterprises
According to OECD research, qualitative indicators account for 40% of the success of innovation in enterprises:
- Speed of Experimentation: Number of MVPs (Minimum Viable Products) tested in the market per month
- Rate of Ideas Commercialized: Percentage of ideas transformed into products/services
- Innovation Culture Index: Measured by the level of idea sharing and acceptance of failure
- Time to Market: Duration from idea to actual product
- Talent Retention Rate: Percentage of creative employees retained long-term
KMC: Consulting and Providing Comprehensive Solutions for FDI Enterprises in Vietnam
If you are struggling with corporate innovation and, as a manager, are unsure how to measure the effectiveness of your innovation policies, contact KMC. Our experienced experts advise Japanese and FDI enterprises in Vietnam on developing a tailored innovation management framework suited to the Vietnamese market.
A professional, comprehensive measurement system includes:
- Multi-dimensional ROI measurement system for each type of innovation
- Risk assessment toolkit tailored to specific industry sectors
- Rapid testing process that reduces time-to-market by 50%
- Staff training model combining Japanese experience with Vietnamese practices
Beyond consulting on management solutions and accurately measuring effectiveness, KMC experts can also provide rapid support in analyzing factors within the innovation programs your enterprise wishes to implement, particularly feasibility and legal compliance.
Contact our hotline: 081 489 4789 for fast, professional support from KMC experts.
