Businesses increasingly invest in innovation centres

17 September 2015 Consultancy.uk

Without innovation, many old giants like Blackberry and Kodak have come to hit the dust. Innovation remains a gamble however. While more than $1.5 trillion is spent on innovation, 85% of new products bunk. In a recent report from Capgemini, the state of the adoption of innovation centres is considered as a way of overcoming the glut in internal R&D project engagement. The firm finds that 38% of 200 of the world’s largest organisations are experimenting with such centres.

In its ‘The innovation game: Why and how businesses are investing in innovation centres’ report, Capgemini Consulting and Altimeter Group explore the effect of innovation centres on the innovative outcomes of organisations. For the research, the consulting firms approached companies above $5 billion in revenue for direct interviews, as well as involving 200 companies across a diverse range of industries in web-based research – with a total of 309 innovation centres reached.

One key finding from the report is that innovation remains a key element in the success of businesses. In a recent survey of large corporates, 65% of senior executives face increased pressure to be innovative. However, the pressure comes in part from the difficulty of being innovative. In 2014, $1.6 trillion was invested in R&D (Research and Development) globally. Yet despite this investment, success can be difficult to find and 85% of new product lines fail. The normal R&D functions at large corporations face issues and, according to the survey, only around 5% of those working in these large corporate functions are highly motivated to innovate.

Penetration of Innovation Centers by Sectors

Innovation centres
One way to potentially improve the innovation output of a business is to create a semi-standalone innovation centre. Innovation centres, comprising teams of people and often physical sites, are established in a global tech hub with the goal to leverage the ecosystem of start-ups, venture capitalists, accelerators, vendors, and academic institutions that may come to collaborate at hubs. Capgemini finds that 38% of the leading companies have set up an innovation centre. Different fields have different levels of adoption however, with particularly manufacturing companies in the high-tech sector deploying such centres at 58%, followed be telecom companies at 43%. Financial services have the least investment of the sectors surveyed, at 28%.

City locations
In terms of the location of centres, most are situated in Silicon Valley, which houses 53 centres. The next largest concentration is in London with 10, followed by Paris on 9. Berlin and Munich each house five. In Asia, the largest concentration is in Singapore, followed by Tokyo and Shanghai with 6 each.

Location of innovation centres

Focused mission
The research further highlights what companies are investing in when it comes to innovation. Of the 200 companies approached, 63% are investing in mobility technology and 51% in Big Data/Analytics. The Internet of Things is seen as important at 39% of such centres, while 13% see robotics is valuable area of focus.

Besides the kind of focus the centre has, the consultancy also asked respondents to identify the primary mission of the centre. For 65% this is to gain access to the latest technology and for 35% to better understand their customers’ needs, with recent changes in behaviour through tech advances coming to transform traditional behaviour.

Innovation focus and mission

“Many organisations are solving the issue of embracing innovation by partnering with or acquiring technology start-ups, but too often this is a sole focus. A more equal balance between external and internal thinking is required,” comments Jerome Buvat, Global Head of Research at Capgemini Consulting. “Innovation centres are proving an effective means to cultivate the agile start-up mentality needed to remain at the forefront of the market, but it is clear that establishing an effective centre has many challenges.”

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