Innovation isn’t an option in today’s business world – it’s a necessity.
But while it remains high on the executive agenda, new research indicates that few companies are harnessing its potential to drive progress and profitability.
An international study by industry expert Tendayi Viki and the Danish design and innovation consultancy firm 1508 suggests that most organisations are struggling to take full advantage of the opportunities it offers for potential growth.
Less than 10 per cent of the business leaders they questioned were convinced their company had a clearly articulated innovation strategy.And only 11 per cent of respondents were sure that most employees across the business had been made aware of the policy.
The Innovation Made Tangible Report warns that CEOs must actively lead their companies’ innovation efforts and avoid engaging in ‘random acts of innovation’.
Senior executives must foster a culture of innovation that learns as much from its failures as it does its successes.
Tendayi Viki, managing martner at consultancy firm Benneli Jacobs, says that corporate leaders can no longer remain ‘passive supporters’ of innovation and must instead adopt agile techniques that facilitate new business models, value propositions and growth engines.
Speaking exclusively to GrowthBusiness.co.uk Viki, the award-winning author of The Corporate Startup, says, ‘The data appears to show that companies do not have strong innovation capabilities, even though it’s high on the executive agenda.
‘As such, corporate leaders can no longer be passive supporters of innovation within their organisations. There is need for a change in leadership expectations of their teams and a change in how leaders manage, track and measure the success of innovation within their companies.
Thomas Busk, CEO of 1508 adds, ‘It is the most successful companies that should worry about the future. This is a hard thing to embrace.
‘It is only when companies start to struggle that leadership starts to worry about the future. The discipline for CEOs is to start thinking about the future, when we are doing well. If we wait until we are not doing well, it might be too late to innovate.’
The report’s findings are based on the feedback of 181 senior executives, directors, middle managers and practitioners from organisations in the United States, Africa, Asia and Europe.
Those respondents, which represent all major industries including telecommunications, healthcare, IT and manufacturing, were benchmarked on their corporate innovation capability and active innovation leadership.
Strategy, management and practice
It found that, on average, companies scored ‘very low’ on the three key capabilities of a good innovation operating model – strategy, management and practice.
Of those 181 respondents, just 9.9 per cent ‘strongly agreed’ that their company had a clearly articulated innovation strategy, while 89 per cent could not say with certainty that most employees in the organisation were aware of that strategy.
Moreover, only 13.8 per cent of the respondents strongly agreed with the statement that their company was making balanced portfolio investments in innovation.
When it comes to innovation management, the data showed that that most companies lack a clear framework for innovation. When they do, it is ‘hardly used by the employees in their work or by investment boards to make decisions’.
Viki notes that, ‘Our survey results around innovation management are particularly concerning.
‘Of the three capabilities in our innovation operating model, innovation management is the one with lowest score. And when we dig deeper into the data, we find that companies score very low on having a clear innovation framework and even lower on the framework being used by employees and investment boards.’
While they are present in most organisations, the three process models of agile, lean start-up and design thinking were found to be less widespread and impactful as previously assumed.
Only 17.7 per cent, 27.6 per cent and 26 per cent of respondents strongly agreed that their company has adopted agile, design thinking and lean startup, and customer development and lean experimentation respectively.
For innovation to be a success, Viki and 1508 argue, leaders must engender a culture of trial and error where failure itself is rewarded. Despite this, less than 13 per cent of those questioned felt strongly that their company celebrated failure when it occurs.
Investment in innovation
Elsewhere, the report found that almost half of the companies (42 per cent) invested only 0-1 per cent of their revenue in innovation, and that only 12.2 per cent believed these were fully protected from budget cuts.
‘This means that a lot of companies are not even in the game! And it is hard to win when you are not in the game,’ Viki says.
‘But even with the small budget allocations to innovation, companies are not protecting this investment from encroachment by core business budget cuts.’
Other key findings of the Innovation Made Tangible Report include:
- That older companies scored significantly lower than younger companies on innovation strategy, management and practice
- That companies with more employees scored significantly lower than smaller companies on innovation strategy, management and practice
- For net profit margin, there is a trend towards increased innovation strategy, management and practice – except for companies that make +30 per cent profits. These companies are no different from those that make 0-5 per cent.
Viki, who is co-creator of a radical new dual-model for corporate innovation that fuses the established strengths of corporations with those of lean startups , adds, ‘While most companies have examples of one-off innovation projects, most leaders aspire to make innovation a repeatable process within their companies.
‘They are looking for an operating model that helps their teams to consistently turn great ideas into sustainably profitable business models that ensure their organisations can not only survive but thrive amidst market uncertainty.’
See the full survey and questions at InnovationMadeTangible.com, where you can also test your own Company Innovation Infrastructure.