In our latest Innovation Benchmark, PwC surveyed individuals in charge of managing innovation initiatives at leading companies. Combined with a range of recent PwC reports – on fintech and the financial services, our 20th Global CEO Survey and the Digital IQ Survey – we’ve been able to take a strong reading of both self-assessment and sentiment.
How are organisations responding to the need to innovate? And how exactly are innovating companies seeking to create business value and financial returns on their efforts?
The Innovation Benchmark revealed that the greatest focus and challenge is for organisations to be able to align innovation efforts with business strategy. But it also showed some positive evolutions such as a broadening of the innovation ecosystem to include partners and suppliers.
There are five trends that may help enterprises in their path forward:
The link between the innovation budget’s size and the company’s economic success is minimal – there’s no statistical relationship between dollars spent on research and development and financial performance. It’s how you spend it that counts.
The majority of organisations say the main objective of innovation is to drive sales growth: 69% of executives say it is their most important metric, followed by customer satisfaction ratings.
By far the greatest challenge when it comes to innovation is bridging the gap between innovation strategy and business strategy. This is true regardless of industry and becomes more of a pointed concern for companies the greater they invest.
This may be achieved by focusing on the business strategy to identify the areas where innovation is most needed, or to involve a cross section of employees – including those from a business strategy perspective.
Executives are looking further, both within and without their organisations, to source ideas, insights, talent and technology. The Digital IQ Survey indicates Australia’s digital leaders are more likely than their global counterparts to engage with startups, incubators and university labs to innovate.
Larger companies (those with US$1 billion or more in revenue) are more likely to encourage open approaches to innovation (in conjunction with other methods). They also show a greater willingness to work with technology partners, engage design thinking, and focus on breakthrough innovation than incremental improvement.
Customers have a huge role to play, too: 35% of companies say customers are their most important innovation partners, and more than half find that their customer engagement strategy helps define innovation requirements in the early stages.
Successful innovation goes far beyond just technology-driven skills and insights. It demands a range of perspectives, driven by diversity of thought – which means seeking input from across disciplines and backgrounds.
Around two thirds of innovating companies say that bringing in employees with fresh thinking and establishing the right culture are the most critical success factors for innovation – this is considered far more important than increasing budget or addressing business model. The X factor here is human experience: organisations must welcome all kinds and strive to foster the right temperament, skills and creativity in its people.
Some of the issues organisations face in this regard is finding employees with the necessary skills (32% cited this as their biggest people-related challenge) and enabling a leadership culture conducive to innovation.
Our Global CEO Survey showed that the rise of automation and robotics in the workplace is driving a greater need for people that possess qualities that can’t be replicated by machines: creativity, adaptability, emotional intelligence and problem solving – qualities that help drive innovation.
Almost a third of companies say their innovation efforts are either mostly or entirely technology led. A third say their work in innovation is a combination of being technology and market-led.
The importance of technology is undeniable, and half of companies assessed globally rate technology partners as their most important innovation collaborators. However, technology is only as good as the humans using it, and most in the field agree that the best result is technology aligned with human delivery.
Whilst many of the same terms and methods – design thinking, lean, agile – are utilised and haven’t changed in the last few years, there is a new generation or ‘edge’ on the importance of innovating with meaning, emerging tech, business models and data.
Download your copy of PwC’s Innovation Benchmark Report here.
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