The Boston Consulting Group's (BCG's) fourth annual global survey and report on innovation illuminates deepening executive frustration with innovation returns. It also shows continued recognition that innovation is an imperative for performance and growth.
BOSTON (BusinessWire EON) August 2, 2007 --
The Boston Consulting Group’s (BCG’s)
fourth annual global survey and report on innovation illuminates
deepening executive frustration with innovation returns. It also shows
continued recognition that innovation is an imperative for performance
and growth.
Of the nearly 2,500 executives BCG surveyed worldwide, only 46% said
they were satisfied with returns on innovation spending, compared with
52% in 2006. Two-thirds (66%) said they considered innovation a
top-three priority, versus 72% the prior year, and 67% said they plan to
increase innovation spending, versus 72% the year before.
“Most companies consider innovation important,
often critical, to their business. Yet they’re
increasingly frustrated,” said BCG Senior
Partner James P. Andrew, the lead author of Innovation 2007. “They
feel they should be getting more from their innovation efforts: more and
better new products and services; stronger internal processes; improved
customer experiences and more effective business models. Yet, in many
cases, these benefits remain elusive.”
Andrew leads BCG’s Innovation practice and
co-authored the recent best-seller, Payback: Reaping the Rewards of
Innovation (Harvard Business School Press, January 2007) with Harold
L. Sirkin, one of the report’s co-authors. “Based
on the 2007 survey,” Andrew continued, “companies
seem to believe it’s getting harder to
innovate. That’s not the case. Innovation has
always been hard. Creating an innovative company takes a lot of work –
often rewiring the DNA of the organization. It’s
worth the effort; successful innovation is the surest way to build asset
value and shareholder return.”
Innovation 2007 is a report on and analysis of findings of a
survey, completed earlier this year, of nearly 2,500 executives
worldwide. Insights from the survey are expanded upon in a companion
report, Measuring Innovation 2007. The survey was conducted in
conjunction with BusinessWeek, which published a ranking of the
most innovative companies.
Following are selected findings and insights from Innovation 2007:
Nothing Helps a Company Like Successful Innovation
-
Leading global innovators – the
companies survey respondents said are most innovative –
outperform their peers by nearly 400 basis points per year in terms of
stock price.
Executives Care More About Innovations for Existing Customers Than
Breakthroughs to New Markets
-
Nearly all executives (92%) said the kind of innovation they think is
most important is “new offerings for
existing customers,” followed by “offerings
that allow expansion to new customers”
(85%).
The Biggest Obstacles to Innovation: Risk-Averse Culture and Failure
to Focus on Speed
-
When asked what’s preventing better
innovation returns, executives most often cited “risk-averse
corporate culture” (38%) and “overly
lengthy development times” (36%).
-
Most executives (54%) said their companies did a poor job moving from
idea generation to initial sales quickly enough. This view was
particularly true among industrial and manufacturing executives (65%),
energy companies (64%), and consumer products makers (61%).
Frustration May be Linked to Not Having the Right Innovation Metrics –
Ones That Could Prompt Better Innovation Performance
-
Among the measures companies use to gauge innovation effectiveness,
the least popular, i.e., least used, ones could be the metrics that
would drive better performance: time to
market (used by only 18%) and return
on innovation investment (used by only 22%). The most popular
metrics are customer satisfaction (57%) and overall revenue growth
(51%).
Tech, Telecommunications and Travel Companies Are the Most Satisfied
with Innovation Returns
-
More than half (51%) of technology, telecommunications, and
travel/hospitality executives were satisfied with their companies’
innovation efforts; the least satisfied were financial services
executives (41%) and retailers (43%).
Asian and European Companies Are Most Likely to Increase Innovation
Spending
-
76% of Asian companies and 74% of European companies anticipate
innovation spending increases. Only 64% of North American companies
said they’ll spend more on innovation.
In Terms of Industries, Automakers Will Spend the Most
-
76% of automotive companies said they’ll
increase spending, followed by entertainment and media (73%); energy
(71%), and healthcare (including biotech and pharmaceuticals) and
manufacturing (70%).
Companies Are Ratcheting Up Innovation Investments in China, India
and Other Rapidly Developing Economies (RDEs)
-
38% of executives said their companies are increasing innovation
spending in RDEs – mainly for the purpose
of product development.
The Most Innovative Companies, According to Global Executives
-
For the third year in a row, executives said Apple is the world’s
most innovative company. It’s followed by
Google, Toyota, General Electric, Microsoft, and Procter & Gamble.
“The most innovative organizations excel not
just at idea generation – although they’re
strong there – but also in the capabilities
necessary to transform those ideas into profits,”
added Andrew. “In our experience, the vast
majority of companies have an abundance of ideas. But only a handful are
capable of consistently generating profit from those ideas. Companies
that can do that are the true innovators.”
About The Boston Consulting Group
Since its founding in 1963, The Boston Consulting Group has focused on
helping clients achieve competitive advantage. Our firm believes that
best practices or benchmarks are rarely enough to create lasting value
and that positive change requires new insight into economics and markets
and the organizational capabilities to chart and deliver on winning
strategies. We consider every assignment to be a unique set of
opportunities and constraints for which no standard solution will be
adequate. BCG has 64 offices in 38 countries and serves companies in all
industries and markets.
To receive a copy of Innovation 2007 and the
metrics report Measuring Innovation 2007, or to schedule
an interview with Jim Andrew, please contact Alexandra Corriveau at
Sommerfield Communications, Inc. (212) 255-8386 or alexandra@sommerfield.com.
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