6 secrets to innovation that actually work
Terms like ‘innovation’ and ‘disruption’ have been bandied around so much in the last few years that they have arguably lost much of their currency. How do you measure it? What does successful innovation look like for a company?
This is the question that PwC’s strategy consulting arm aimed to answer in a major study that looked at 1000 publicly listed companies that spent the most money on research and development.
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Distilling its findings into six characteristics, here are the qualities shared by an elite sub-group of 88 companies that make them “high-leverage innovators” who outperform their peers – without spending more on their research and development department.
1. Innovation strategies and business strategies are aligned
According to the global survey, 77 per cent of respondents revealed their innovation strategy were highly or closely aligned with the business strategy.
Furthermore, the innovation models were able to be placed into three categories: ‘need seekers’ (who innovate by engaging with customers and providing original solutions), ‘market readers’ (who are ‘fast followers’ and innovate by making incremental updates to their products) and ‘technology drivers’ (who depend on internal talent to create new products and services).
“65 per cent of need seekers report they have higher profitability than their peers, as compared with 38 percent of market readers and 43 percent of technology drivers,” the survey said.
On top of that, 84 per cent of need seekers said their innovation strategies were aligned with their business strategies.
2. The corporate culture supports innovation
The numbers don’t lie – 71 per cent of respondents who reported faster growth in revenue compared to competitors’ said their corporate culture was highly or very aligned with the company’s innovation strategies.
“We also found differences in cultural support by innovation model,” the report said. “Need seekers are far better at turning their corporate culture to their advantage: 82 percent said their organization’s culture was highly supportive of the innovation strategy”.
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Unconvinced? Apple CEO Tim Cook said in an interview in 2013 that the technology giant hired people who “are not political” and could work across departments.
“You look for wicked smart people…who appreciate different points of view…. The reason Apple is special is we focus on hardware, software, and services. And the magic happens where those three come together….
“It’s unlikely that somebody that’s focused on one of those in and of itself can come up with magic, and so you want people collaborating in such a way [that] you can produce these things that can’t be produced otherwise.”
3. Innovation is driven by the top-down
78 per cent of respondents whose companies reported higher revenue growth also said that the executive team was highly or closely aligned with the research and development investment and strategy.
“Among innovation models, most need seekers reported that their leadership teams were plugged into their innovation programs: 84 percent of need seekers reported that their executive team was highly involved in decision making regarding R&D investment and strategy, compared with 63 percent of market readers and 57 percent of tech drivers,” the report said.
4. Putting customers first
Customer insights was highly valued by all respondents across the board. However, those who reported slower revenue growth than peers felt most competent in this area, while respondents reporting faster revenue growth felt it was their second-highest area of competency.
“This may seem counter-intuitive, but actually makes a good deal of sense,” according to the report.
“Those who reported slow or similar growth compared with their peers’ growth seem to think that they have done enough in this area. Those who reported fast growth see further opportunities for improvement.”
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5. Failing in the right way
As it turns out, where you fail matters. Project selection was deemed the most important stage of the innovation process (35 per cent), followed by ideation (31 per cent).
“This ‘front end’ of the innovation process is indeed critical to success. For one thing, most of the long-term costs of product development — as much as 70 percent, in our experience — are locked in at the ideation and project selection phases,” the report said.
“And even great operational capabilities and business management cannot overcome poor decisions about which ideas to move into development and production.”
6. Innovation across the board
It’s not enough for companies to simply be best-in-class for just a couple of characteristics anymore; greater competition is raising the bar.
“Companies that aspire to the highest level of innovation leadership today need to excel at every aspect of innovation,” said the report.
“And they need to make them converge in a way that pushes the boundaries of market expectations and transforms the customer experience.”
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