Innovation: A Priority for Growth in the Aftermath of the Downturn

Innovative ideas change the world. Think of life before the iPhone or email. While the vast majority of businesses will never come up with such transformative products or ideas, they still must innovate to grow. That requires a strong pipeline of innovation to spur growth by attracting new customers and increasing market share. But to realize a healthy return on their investments, companies must manage innovation like any critical business process—and that is a step that many companies fail to take despite significant investments being made.

Innovation is a top priority for companies seeking to grow in the wake of the economic downturn, but flaws in managing innovation may hinder their progress. Research goes further to suggest that in the United States and United Kingdom many companies had, in fact, increased funding for innovation during the downturn, demonstrating its perceived business value as a driver of growth. However, poor returns on investment will be the norm until companies are systematically managing innovation with the same rigor and discipline as other critical business processes.

To further understand how companies are addressing innovation in this economic climate, Accenture conducted an online survey of more than 630 executives in May, 2009 in the United States and United Kingdom. Respondents represented a broad cross-section of industries – including automotive, banking, capital markets, consumer goods and services, electronics and high tech, insurance, manufacturing, pharmaceutical and medical products, and retail.

Almost half of respondents said they increased funding for innovation in the preceding six months, while one-third said there was no change in funding for innovation. Additionally, nearly nine out of 10 these respondents said that innovation is as important, if not more important, than cost reductions to their company’s ability to achieve future growth. 

However, the Accenture study found flaws in corporate management of innovation, including process shortcomings and a lack of business discipline that result in internal barriers to success. Additionally, there is widespread risk-aversion and a failure to learn from past mistakes. Past innovation failures are most commonly attributed to incorrect pricing, failure to meet customer needs and being late to market, which can be mitigated by approaching innovation with the appropriate structure and rigor.

A systematic approach to innovation helps companies consistently anticipate their customers’ needs and provide the products and services their customers want before their competitors do. This is one of the few levers companies can pull in mature markets to grow revenues. Without a strong focus on building a consistent and long-term innovation program, companies become stagnant and lose market share.

In addition, the portfolio of innovation projects must be lean and focused on strategic priorities. This may sound obvious, but in their zeal to innovate, many companies tend to create far too many innovation projects at the same time and often projects are not aligned to overall strategy. This results in wasteful R&D spending and disappointing results.

Discipline allows companies to be as good at innovation every day as they are now on their best day, helping them on their journey to high performance. While a single entrepreneur can build his or her success on one big idea, leading companies need a predictable flow of successful innovations to consistently outgrow competition in the market place, which will help grant both superior cash flows and a favorable "future value" premium on their stock price.

Wouter Koetzier is the managing director for Innovation in the Accenture Process & Innovation Performance consulting group. In that capacity, he oversees the global and European Innovation groups. Wouter, whose areas of expertise include innovation, marketing and business transformation, brings more than 20 years experience in consumer goods and services to his roles. Over the years, Wouter has worked with clients in the consumer goods, electronics, telecommunications and transportation industries, and other industries, helping them transform their innovation processes, manage complexity, develop marketing and brand strategy, and develop  corporate strategy. Prior to joining Accenture, Wouter was a vice president of marketing at Unilever. He earned his master’s degree in business economy at the Free University of Amsterdam.