When you make a major investment in innovation, you want a good return on your investment, right?
Well, hundreds of senior executives admit to disappointment over their innovation efforts despite making increased investments, according to an Accenture report.
Only 18 percent are satisfied and the consulting firm says the reasons are obvious.
If you want strong results from your investment in product and service development, don’t use a risk-averse approach.
That’s the conclusion from a 2013 Accenture study of 519 companies in France, Britain and the U.S. – of which 51 percent have increased their investments in innovation.
Ironically, 93 percent of responding executives because their sustainability hinges on innovation, and 70 percent say innovation is one of their five salient goals.
The report entitled, “Why ‘Low Risk’ Innovation Is Costly,” shows 46 percent of respondents admit to being risk averse in new initiatives.
“Additionally, only 46 percent of the companies had an effective, holistic approach to the development and introduction of new products or services, and 64 percent of them tend to pursue product line extensions rather than the development of totally new products or services,” according to an Accenture news release.
“Many companies take a low-risk approach to innovation that can jeopardize results because they lack a prudent, disciplined approach for innovation risk management,” says Wouter Koetzier, who is managing director for Innovation and Product Development at Accenture. “It’s a situation compounded for many by an inability to rapidly scale inventions.”
“However, the research suggests that those companies that have a formal, end-to end management system to nurture, scale and launch innovations tend to be more satisfied with their results as they achieve stronger outcomes,” he maintains.
Indeed, such companies are more satisfied with their capabilities than those that haven’t installed formal programs by 43 percent to 24 percent, respectively.
Companies that have formal systems are generally in these sectors: Consumer goods and services, electronics and high tech, and health providers.
Such companies tend to experience competitive advantages, introduce new processes and products, and are ahead of the curve in being first to market in new products and services.
“The bottom line is that innovation can work better when a formal system exists to streamline processes, manage risks and mine the data needed to generate new products, services and business models to foster growth,” says Adi Alon, a managing director in the Accenture Innovation and Product Development practice.
“Approached correctly, innovation can be executed at scale, with speed and balance between renovation and game changing initiatives; driving higher strategic and commercial value,” the consultant explains.
Accenture’s recommendations for creating a formal innovation system:
- Develop end-to-end processes that contribute to speed and flexibility
- Create unique, personalized customer experiences that can foster loyalty and enhance revenues
- The application of risk management to help drive innovation with analytics, processes and tools
- Integration of the customer voice through the use of big data and social media
- Frugal innovation that can reduce complexity to shorten time to market, reduce the cost of innovation, disrupt business models and serve the emerging middle class in developing countries
Accenture’s study is reminiscent of a report on strategic planning – profit lessons from companies that focus long term.
From the Coach’s Corner, suggested reading:
Increase Your Business Value with 5 Basic BPO Strategies — For your company to achieve higher performance, you often need to enhance your business processes. In essence, this means turning your attention to business process optimization (BPO), which is a holistic approach. The benefits: With BPO, you’ll be able to evaluate and authenticate your existing practices and create new processes via imagined situations.
How to Avoid Failure in Risk Management and Strategic Planning — Incredible as it might seem, companies fail because they underestimate strategic risks – yes, strategic blunders instead of common sense – according to an authoritative study.
“The best way to predict the future is to create it.”