Corporate innovation and business strategies perilously out of sync

14 June 2017 Consultancy.uk

A new research has found that business strategy and innovation strategy are often not aligned, creating risks of lost revenue, market position and waste. Growing sales figures remain key to innovation according to the study, as companies continue to focus on innovation as a means to stay relevant in various rapidly changing markets, from automated vehicles to robotic process automation.

Competitive pressure continues to push businesses toward innovation, despite many instances of such advancement being inherently risky at a time when “pure tech” organisations, whose capital, and skills, can be hard to beat, are entering into various business domains.

In a new joint report from PwC and subsidiary Strategy&, titled ‘Reinventing innovation: Five findings to guide strategy through execution’, the consulting firm explores trends in innovation from 1,200 companies across the globe. The aim of the study, which aimed to identify how far businesses are rising to innovation challenges, found that in general, companies continue to find it difficult to align business strategy with innovation strategy, creating a key area of risk in a field already plagued by expensive pitfalls.

Innovation leaders are growth leaders

According to PwC, around 20% of respondents see themselves as ‘innovation leaders’, attributing to themselves >15% growth over the coming five years from their respective efforts – meanwhile 13% of all other companies, not identifying themselves as innovation leaders, expect the same level of growth.

A recent report from BCG named Apple, Google and Tesla as the globe's most innovative companies, with Microsoft and Amazon closing the top five. The analysis further found that casting a wide net for new ideas, leveraging data, innovation excellence and collaboration with external parties is what sets strong innovators apart from the rest of the pack.

Becoming an innovation leader remains difficult according to researchers – with a direct financial relationship found to be tenuous at best. Simply put, throwing money at the issue is not necessarily going to lead to successful innovation. The finding is in line with previous research from Strategy&, which found that R&D spending does not necessarily correlate with innovation power. 

Innovation’s impact

When it comes to the outcome of innovation, the research points to a selection of financial metrics being key. Predictably perhaps, 69% of businesses surveyed said sales growth is the ultimate measure of success, well above customer satisfaction (43%), number of new ideas in the pipeline (40%), and market share (36%). The areas of least concern when it came to evaluating the impact of innovation were the time to market (24%) and the net value of innovation portfolio (28%).

The study notes however, that while companies are keen to boost revenues with innovation – 54% are unable to actually align their business strategy with their innovation strategy, creating a situation in which many are “flying blind as they place bets on innovation.”

Collaborative operating models

The report highlights a wide range of effort may be required to create a company friendly to innovation. Open innovation and collaboration with partners, design thinking and co-creation with customers, partners and suppliers are all deemed by respondents as important to innovation, at 61%, 59% and 55% of organisations citing their importance respectively. Traditional R&D, internal incubators and investing into startups via corporate venture capital (a $128 billion market) are used by relatively few organisations in contrast, at 34%, 27% and 21% of organisations respectively.

People-power innovation starts with employees

The analysis further notes that respondents believe that employees are a key channel for innovation, as cited by 60% of respondents. Technology partners are cited by 50% of respondents as a key element in the innovation process, while 44% cite channel and business model partners as important.

Interestingly entrepreneurs and startups are not considered key channels for innovation, at 16% of respondents, while academic and research too are not identified by respondents as key channels for innovation.

Tech companies set the pace for breakthrough innovation

The study also sought to identify in how far respondents are focused on ‘incremental’ or ‘breakthrough’ technological advance. Different segments, the research noted, take relatively different approaches. Tech companies are primarily focused on breakthroughs, at 58%, followed by pharma and life sciences, at 51%. Other segments focused on breakthrough include communications and automotive, at 45% and 43% of respondents respectively.

Commenting on the result of the report, Volker Staack, co-author and the Global Innovation Leader of PwC’s Strategy&, said, “It’s critical for executives and business leaders to meet innovation challenges head on, but often times they are unsure of how or where to begin. This report identifies the pain points for executives across all industries to help find solutions to drive innovation that will align with business strategy and result in bottom-line success.”

Related: Research & Development spending of top firms hits $680 billion.

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Two thirds of UK employees not empowered enough to innovate

18 March 2019 Consultancy.uk

A culture of equality can drive innovation at work, but only a third of UK employees feel empowered to innovate at present. This demonstrates a significant disconnect between workers and their bosses in the UK, with 76% of business leaders also claiming they empower employees to be innovative.

Despite innovation increasingly being seen as integral to the survival of businesses, innovation remains relatively difficult to achieve. A lagging disconnect between management and staff remains the driving force behind this. One study by PA Consulting previously confirmed that while 66% of companies believe they will not survive without innovation, only 24% said they had the skills needed for that, and only half thought they had the right leadership in place to change that in time.

In order to find a way around this problem, global consultancy Accenture has completed its own study into innovation, polling around 700 bosses and workers across the UK to do so. The key finding of the research is that companies with a culture of equality can see an individual’s willingness and ability to innovate improved by seven times that of the least equitable workplace cultures. At the same time, an innovation mindset is almost twice as high in the most-equal companies as in typical ones.

91% of employees want to innovate but just 34% in typical United Kingdom companies feel empowered to

What remains clear, however, is that most companies are failing to adequately create an equal culture, where staff of all ranks feel comfortable contributing new ideas. 91% of employees want to innovate but just 34% in typical UK companies feel empowered to. That is higher in the most equal companies, where 75% of staff feel confident making suggestions, compared to just 5% of the least equal, and 34% of typical companies. Since those equal companies are comparatively fewer, when averaged out, only a third of UK staff feel they are empowered to innovate.

That figure stands in stark contrast to the perceptions of UK executives, however.  76% of business leaders in Britain believe that they do indeed regularly empower their employees to innovate. As a result, it seems that leaders mistakenly believe that some circumstances encourage innovation more than they actually do. For instance, they overestimate financial rewards and underestimate purpose.

The opportunity which is presented by addressing this divorce is enormous. Accenture calculates that global gross domestic product would increase by up to £6 trillion over 10 years if the innovation mindset in all countries were raised by 10%.Top 10 workplace culture factors - by strength of impact on innovation mindsetAccording to Accenture, the best way to impact positively on a company’s innovation mindset is through the provision of relevant training – associated with a 10.5% uplift to staff’s confidence innovating. Allowing the freedom for employees to be creative followed, contributing an 8.1% boost, while ensuring that training times are flexible and the firm allows a healthy work-life balance both see a more than 7% improvement. Similarly, remote working being available and being common practice will buoy creativity by 6.9% – further demonstrating the importance of flexible working to improve innovation culture at a firm.

Commenting on the report, Rebecca Tully, executive sponsor for Human Capital and Diversity for Accenture in the UK and Ireland, said, “Our research reveals that a workplace culture of equality is an overlooked driver of innovation within companies. By understanding what motivates their employees and fostering an environment where people feel empowered, business leaders have the opportunity to unleash the innovation required to compete effectively in an era of disruption.”

The research came as part of a global survey by Accenture, which queried more than 18,000 professionals in 27 countries and 150 C-suite executives in eight countries. The overall research determined that an empowering environment is by far the most important of the three culture-of-equality categories in increasing an innovation mindset, which consists of six elements: purpose, autonomy, resources, inspiration, collaboration and experimentation. The more empowering the workplace environment, the higher the innovation mindset score.