Why you should mind the innovation achievement gap
October 25, 2019
It may surprise you to hear, but although tech is everywhere, value isn’t. And the stakes are high. Our new research looked at Future Systems—interconnected systems of technologies, applications, and people that enable innovation at scale and strategic agility. We found that Future Systems Leaders are growing at twice the rate of the Laggards. And these Leaders are set to pull away faster and further from the competition. Here’s some of what our survey discovered about the widening gap between those that act now and those who don’t.
Data from more than 8,300 companies
In our largest enterprise systems survey ever, we wanted to measure the differences in performance between companies that get technology right and those that don’t. Getting it right means mastering adoption, timing and applying it to the entire organization at scale. We believed that those who were successful would be different in how they managed their culture and organizations to speed up changes.
To test these ideas, we fielded the Accenture Future Systems Survey. The survey collected data on:
- Technology adoption;
- Application of technologies at scale to organizational processes;
- Organizational and cultural readiness to adopt and create symbiotic systems of technologies;
- Multiple measures of financial and operational performance.
See the chart below for the survey demographics.
This graphic summarizes the survey demographics
What did we do?
First, we defined and grouped companies into Future Systems Leaders and Laggards. That is, we identified companies that are ahead in their evolution to Future Systems and those that aren’t, or are evolving slowly. We created a Future Systems Score made up of:
- Technology adoption.
- Extent of technology penetration across organizational processes.
- Organizational and cultural readiness for technology adoption.
The top 10 percent of the companies on this score we called Future Systems Leaders, or simply Leaders. The bottom 25 percent we called (Future Systems) Laggards. The rest of the 65 percent of companies in our sample sit somewhere between Leaders and Laggards.
Second, we looked at whether Future Systems leadership is linked to financial performance. Using the same definitions of Leaders and Laggards, we measured average revenue growth over the last three years and expected revenue growth in the next five years. We then worked out the difference in performance for every industry.
What did we find?
On average, companies that were not progressing to Future Systems fast enough (Laggards) were growing revenue at 4 percent, and companies at the leading end of Future Systems were growing at 9 percent. In other words, Leaders achieve more than 2X revenue growth, compared to Laggards, already. And this massive performance gap is set to widen in the future.
In 2018, Laggards, who use new technologies mainly as individual “point” solutions, gave up 15 percent their annual revenue. In 2023, this gap could be as large as 46 percent of their annual revenue if they do not act. We tested the results across industries, countries and company sizes—and discovered that the difference in growth rate is at least 2X but could be even more in certain industries, such as healthcare and energy (3X).
What’s the impact?
Let’s imagine two companies, both of which recorded US$10 billion in revenue in 2015.
- Company one, Laggards Inc., is struggling with silos of innovation and adopting technology as point solutions. This company recorded a revenue growth of 4 percent yearly between 2015 to 2018.
- Company two, Leaders Inc., has embraced the Future Systems vision. This company recorded revenue growth of 9 percent yearly between 2015 to 2018.
- Organizations like Leaders Inc. told us that they expected to grow at 11 percent from 2019, while organizations like Laggards Inc. expected a growth rate of 5 percent.
In 2016, Leaders Inc. made about US$11 billion in revenue, while Laggards Inc. made US$10.5 billion. Not a massive difference. What’s more, a fix in 2016 would have only cost the Laggard Inc. US$500 million in lost opportunity.
But—and it’s a big "but"—this performance gap widens every year.
In 2018, Laggards had 15 percent in foregone annual revenue. If they don’t change, they could miss out on a staggering 46 percent of their annual revenue in 2023. Overall, by not being aligned with Future Systems, a company with US$10 billion in revenue in 2015 could miss out on adding more than US$20 billion in cumulative revenue by 2023.
I’m using an example here, but the method holds up for different sizes of companies as well. Of course, most companies have growth rates somewhere between that of Leaders Inc. and Laggards Inc. and are realizing some of the value noted above. And it will get easier as these organizations start to evolve to a Future Systems model.
Close the gap
What’s the takeaway? Well, businesses cannot afford to be complacent—despite the name, Future Systems isn’t something to attend to in the future. Every year, the opportunity cost grows, creating bigger gaps between Leaders and Laggards. So, the time to build the boundaryless, adaptable and radically human systems of the future is now. Talk to me if you’d like to know more.
With thanks to Prashant Shukla, Surya Mukherjee and David Lavieri for their contributions to this article.
Leaders achieve more than 2X revenue growth, compared to Laggards, already. And this massive performance gap is set to widen in the future.
