When 500 innovation leaders were asked what they’ve learned in the past 10 years, their answers were decidedly upbeat. Forty-four percent of respondents said their companies are better innovators today than they were a decade ago, while another 32 percent said they are much better. Only six percent said they are doing worse.
But when asked about the next ten years, their optimism evaporated. Only 27 percent feel they have mastered the elements they will need for innovation success over the next ten years. “Innovating isn’t getting any easier,” concludes a just-released survey from Boston Consulting Group (BCG).
Here are five insights having to do with the “elements of innovation” that were confirmed by The Global Innovation 1000” report, along with Boston Consulting Group’s “The Most Innovative Companies 2014.”
1. Before trying to do breakthrough innovation, master the basics first.
“Too many companies want to shoot for the moon when their innovation programs are barely airborne,” concludes BCG. Senior level commitment, a well-crafted innovation strategy, and cultural alignment are critical factors that do not happen overnight. Standout firms do three things better and differently: they cast a wider net for ideas; they practice business model innovation in addition to new product, process and service innovation; and they continuously cultivate risk-taking cultures.
2. The global war for innovation talent is heating up.
Reckitt Benckiser is a little known company with well-known brands (Woolite, Dr. Scholl’s, Lysol, etc.). Yet Reckitt must compete with Procter & Gamble, Unilever and other consumer products giants in attracting and retaining creatives. “Talented people don’t want to work in bureaucracies,” says Reckitt-Benckiser CEO Rakesh Kapoor. “They want to work in companies where they can get things done. This is why we focus so much on culture. You have to act like a small company. Size can give you scale, but for innovation, speed is more critical.”
3. You need a chief innovation officer to truly systematize innovation.
The senior leader should not be responsible for delivering innovation but for enabling and coordinating it. Two thirds of all exemplary innovation firms report that innovation and product development are driven by a centralized organization, the BCG survey found.
4. Collaborate with customers and improve your new product hit rate.
Both surveys find that companies are making greater efforts to listen to their customers, and even to get out in front of them. In three years of research on this issue, BCG confirms that companies that directly capture customer insights had three times the growth in operating income and twice the return on assets of industry peers that captured customer insights indirectly, as well as 65 percent higher total shareholder returns. Exciting new tools, including big data, crowdsourcing, customer case research, and video voice of the customer show tremendous promise in revealing the unstated needs of consumers.
5. Align your innovation strategy with your business strategy.
Two thirds of respondents report that their company’s innovation strategy has become better aligned with their business strategy. Companies with tightly-aligned business and innovation strategies had 40 percent higher operating income growth over a three- year period, and 100 percent higher total shareholder returns, than industry peers with lower strategy alignment. Many companies have streamlined their R&D portfolios and reduced the number of things they were working on, especially those that had little chance of success.
Kudos to the researchers and authors of both these reports, they both are outstanding contributions to our field.