The Boston Consulting Group has released their latest report on innovation, “Innovation 2008: Is the Tide Turning?” As always, the BCG report provides some great insights on the state of innovation in business.
Some highlights of the report are:
- Innovation remains at the top of corporate agendas. Roughly 2/3 of
respondents identify innovation among there top three priorities.
- However, executive satisfaction with return on innovation is on the
decline with only 43% of respondents saying they are satisfied with the
financial return on innovation. Yet, there is a disconnect with the
top of the executive hierarchy. Chairpersons, CEOs, and president as a
group expressed overall satisfaction.
- The three biggest impediments to innovation were reports as long
development time, risk-averse cultural bias, and difficulty with
selection of the right ideas to pursue.
There is a lot of good detail in the report that shed further light
on some of the initial observations. Of course, it comes as no
surprise that innovation is still a top of mind urgency with
companies. With leading companies fending off the multiple challenges
of aging products and intellectual property, loss of key expertise due
to shifting workforce demographics, new and determined competitive
threats from emerging participants in the global economy, and financial
pressures of a difficult economic climate, innovation is a necessary
element in the prescription for corporate health.
The trend of the past few years showing continued erosion in
satisfaction levels with the return on innovation is of great concern.
Coupled with the corresponding decline in companies planning on
increasing investment in innovation, it suggests that many companies
are finding it difficult to establish sustainable innovation programs.
Too many companies are spinning their wheels as they find driving their
companies out of the mud and muck of accidental innovation to be harder
than they first thought.
One clue as to what is behind this can be found in the results of
the survey’s question about how companies measure innovation success.
The top three responses were customer satisfaction, percentage of sales
from new products, and overall revenue growth. These are all very
important measures of a company’s management execution, but they are
not necessarily accurate measures of innovation success. Innovation
metrics must be both specific and verifiably incremental. (That is to
say if your innovation isn’t making a measurable difference, what’s the
point?) Even more to the point is that measures such as new product
success ratios and time to market ranked near the bottom of the list.
A quick look at the top three impediments to innovation underscores
the importance of good sustainable innovation practice. Systematic
innovation shortens development cycles. Innovation best practices
reduce and eliminate risks. Sustainable innovation is built upon
alignment of innovation with corporate objectives, customer
aspirations, congruence with the opportunity space, and maximally
leveraging available technology and knowledge—all making optimal idea
selection a natural process.
There are plenty of other very interesting insights in the report. It is a quick read and definitely worth it. You can find the report here.