A new era of innovation
The belief among US executives that innovation is a critical tool for growth and market differentiation is stronger than ever. 2015 Accenture research— the third in a series of surveys we first conducted in 2009 and again in 2012—confirms that today’s companies are increasingly embracing innovation as a tool to drive their businesses forward over the long term. They need to focus on the complex challenge of making it successful. The discipline of innovation is maturing and key principles, such as two-speed innovation and collaborative innovation, are emerging to help companies achieve a competitive edge.
2015 US Innovation Survey: Clear Vision, Cloudy Execution
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US executives are unrealistic in believing they have the capabilities they need to achieve their bold innovation goals. The truth is that most struggle to generate the returns they seek from their innovation investments. To execute effectively, they need to adopt new approaches to innovation, learn from their past mistakes, and set reasonable goals that they can actually achieve.
Proof that companies are investing more in innovation can be found in the management systems and tools they are putting in place to enable and accelerate a change agenda:
74 percent of our respondents have now established formal processes—up 10 percentage points since 2010 and 12 since 2012.
Utilities (90 percent), insurance (86 percent) and retail (82 percent) companies are the leaders when it comes to formalizing their approaches. This is not entirely surprising, since these industries also have a particularly keen interest in using innovation to create entirely new product and service categories. In addition, both the utility and insurance industries typically lack the innovation culture and heritage of their consumer goods or high tech counterparts. It is likely, therefore, that utilities and insurers see a more pressing need to establish a formal process to drive innovation.
The number of such appointments has grown by 9 percentage points since 2009. Retail companies, which operate in a highly dynamic market, are leading the charge. The momentum around executive appointments demonstrates companies’ growing recognition that innovation is a c-level issue. However, if companies feel that appointing an executive is the only action they need to take, they will fail to address the core challenges of innovation. As our research shows, superior innovation performance requires more than c-level oversight. It demands engagement from all levels of the organization.
90 percent apply emerging technologies to improve or add new features and/or functionality to products and services, and 86 percent apply capabilities such as analytics to optimize their product portfolios.
Nearly as many use new technologies to support the innovation process (see sidebar). It’s clear that business leaders believe digital technologies have a role in all aspects of innovation. But these enabling technologies can do little on their own. They need to be part of a clear innovation strategy and support well-defined innovation processes to be most effective.
Hitting the innovation wall: Many companies do not have the execution capabilities they need to achieve their innovation goals.
Executives we surveyed claim to be less interested in incremental iterations of existing products. Instead, they are aggressively pursuing innovation opportunities they feel will generate significant value (see Figure 4). The near doubling of interest in “silver-bullet” innovations since 2012 is surprising, given how much we have learned about how difficult it is to launch these types of initiatives. One possible explanation is the media and business communities’ belief that “disruption” is a necessary prerequisite for growth and profitability. That thinking is certainly consistent with the fact that nearly a third of our survey respondents are counting on innovation to disrupt their current markets by enabling them to introduce new processes or business models—something that has been notoriously difficult for incumbents to do.
Additionally, 47 percent of our respondents want to use innovation to create new product categories. The enthusiasm for this type of innovation is well founded. Forty-four percent of respondents acknowledged that their most successful innovations over the past two years have involved new product and service introductions. Yet, 72 percent admit that such innovation opportunities often languish because they have no organizational “home” to nurture them.
It is also interesting that the perceived success of product and service introductions has been declining since 2009. The success of smaller-scale innovation programs aimed at improving existing products, on the other hand, has jumped 10 percent. That may help explain why executives’ stated desire for transformational change is at odds with their actual record: 72 percent of respondents indicated that their organizations tend to pursue product line extensions rather than develop totally new products or services.
Why are companies’ stated intentions to pursue “big” innovation not materializing? Our survey results indicate it’s not due to a lack of enthusiasm, confidence, or investments in formalized programs. It is due, rather, to how they innovate. Specifically, we found that 82 percent of respondents do not distinguish how they innovate from how they go about achieving incremental performance gains. A single approach to managing small, incremental improvements and large-scale changes to business models and product categories rarely delivers the innovation outcomes that leaders seek. Distinct approaches, on the other hand, make it likelier that companies will generate more value from their innovation investments and stand apart from their peers as innovation leaders.
Flexing the innovation muscle
Successful innovation requires new thinking, new collaboration models and new approaches to execution.
While many companies are creating the building blocks of successful innovation, few have assembled those foundational elements in a way that drives the change—and generates the investment returns. To get more from their innovation programs, companies need to fundamentally change how they approach innovation and execute their innovation initiatives. The first step, which we believe is also the hardest for many companies, involves taking an honest look at their innovation goals, their innovation capabilities, and the financial performance of their existing innovation programs. Such an assessment will help companies understand what is working, what is not, and what they can do to more effectively align their innovation abilities with their innovation ambitions. Armed with those insights, companies can focus on boosting the value of their innovation programs. We believe three actions are particularly important:
View innovation through new “lenses”
Break down industry barriers
Build a two-engine approach