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Innovation in big businesses

“Benchmarking Innovation Impact 2020” report, produced by Innovation Leader, an information and research firm in Boston and sponsored by KPMG LLP, is an insightful source of information on innovation at large companies. The report surveyed 215 innovation, strategy, and R&D executives at important firms.

Almost all the interviewees underlined the need for initial concrete results and successes (“base hits”) in order to show that an innovative enterprise can yield financial value to the company. The results presented in the report show that about 25 percent of innovation-related activities is focused on adjacent and incremental innovations and another 25 percent on transformational innovations that could provide important competitive advantage for the firm.

The report also shows that innovation is both understaffed and underfunded. Company units dealing with innovation are still in their infancy and do not have clearly determined roles. The survey shows that 43 percent of innovation-related programs have less than 10 employees working for them full-time. Nearly 60 percent of the respondents said that these programs are at a very early stadium of development and lack resources and staff. Only if they deliver some tangible results, they are provided with more support in terms of funds and human resources. The respondents highlight the importance of the ability to test cheaply and quickly, to learn and to iterate.

The report shows that one of the most important barriers to innovation efforts are cultural differences, turf wars, and politics. The dominant culture of a company may clash with the culture of innovation drivers, who aim at introducing new products, investing in startups or implementing front-line technologies. The respondents also highlighted the necessity to collaborate with business units and to bring them in at some point. Business unit leaders are assessed as the key factors that determine the success of innovation. Moreover, many of the companies surveyed report a lack of the follow-up actions on the changes influencing their businesses. The interviewees lament the fact the companies often do not act on the changes observed.

Most of the companies surveyed use some sort of award or recognition (often financial bonuses) in order to give incentives to their employees engaged in innovation activities. Some companies are trying to provide their employees with time and funding in order to enable them to carry on with innovative projects and activities. At the beginning of the innovation process, the companies are not very much concerned of any financial metrics. However, as companies move towards more advanced stages of innovation, profit generated by new products or services is measured by the majority of the companies surveyed. Moreover, many companies keep the track of cost reduction or increased efficiency. The respondents reported that many innovation units initially try to implement many new ideas, but as a result they do not generate anything with a significant impact. The report also shows that innovation units usually stop working on projects that do not have the support of senior sponsorship.

Although failure has been recently celebrated as an essential element of innovation, the report does not report the organization’s ability to accept failure well as crucial for success. Nevertheless, the respondents list other factors that prompt the success of innovation-related efforts such as support from leadership, devising the right strategy and gathering a team with the necessary competencies to implement that strategy. However, the biggest challenge is to continue with innovation activities and investment long enough to generate concrete results.

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