Conservative strategy on innovation can be perilous
by Rich Rovito, WMEP Industry Reporter
Many companies are becoming increasingly frustrated with the returns they are deriving from investments in innovation and are scaling back their expectations while limiting the scope of new products, services and business models.
The conclusion is drawn in a recent study by Accenture, a global management consulting, technology services and outsourcing company serving clients in more than 120 countries.
Instead of the “next big thing,” innovations coming to market today typically tend to be line extensions rather than a broader portfolio that includes bigger and bolder ideas, the study found.
The cautious approach to innovation is understandable, given the relatively disappointing results stemming from investments in innovation. At the same time, it is a potentially perilous strategy to become more conservative in regards to innovation, the study’s authors determined.
The vast majority of executives, 93 percent, continue to believe that the long-term success of their companies is dependent on the ability to innovate. However, only 18 percent believe their own innovation strategy is delivering a competitive advantage, according to the study.
The divergence between expectations and results has widened in recent years.
Frustrated with results, companies are showing a tendency to pursue a low-risk approach that produces only incremental improvements.
Despite the challenges, companies that are successfully able to innovate at a meaningful level can increase the likelihood that they will dominate and prosper in the new markets they create, the study’s authors claim.
That factor wasn’t lost on survey respondents, 70 percent of whom ranked innovation among their top five priorities. About 18 percent put innovation at the top of the list.
Respondents cited specific challenges to innovation, however. Those include predicting future trends, achieving cost containment, securing ongoing budget support, leveraging new technology and transforming new ideas into marketable goods and services.
So what can be done to align expectations and results? The survey’s authors wrote that organizations that have a holistic formal system in place for innovation consistently report better outcomes and higher levels of satisfaction from their investments in innovation.
Furthermore, companies with formalized innovation systems may be less likely to pursue line extensions at the expense of more significant breakthroughs and less likely to miss out on developing new markets due to a lack of an organizational home to nurture them.
The Accenture study concludes that having a formal system in place is the best way to manage innovation and generate the desired return on investment.