Why Businesses Are Not Seeing ROI For Innovation

by CXOtoday News Desk    Apr 20, 2017


Two thirds of global organizations believe innovation is crucial to survival; yet less than a third of them are innovating successfully to drive growth and increase revenue, according to a new study. In its global innovation survey, titled “Innovation Matters,” PA Consulting Group, over half the respondents say that innovation efforts had not been successful in helping them achieve growth and almost an equal number opine that innovation activity had not helped in attaining profitability. [Click here to download the full report.]

The hurdles of innovation

What could be the key hurdles to innovation for these companies that are US based and global in their operations with offices across the world. Majority (57%) say biggest change they had seen and expect to see in their company was its approach to innovation. This is despite the fact that the U.S is by far the global leader in R&D spend according to UNESCO, accounting for some 30% of all spending worldwide on innovation. The study shows that most of these companies were just about average when surveyed in terms of those that felt innovation efforts were producing results. 

This skeptical view of return on investment in innovation is spurring anticipation by businesses that change is coming and quickly. In fact, according to the survey, when asked what changes their company had taken over the past three years and what change they foresee taking over the next three years, 57% of respondents said the biggest was their approach to innovation – the number one issue identified. Additionally, 38% of respondents – the top response – said they see innovation change in their company ramping up quickly.

“You have many companies that are highly innovative and are highly successful as a result,” says Peter Siggins, a senior executive for PA Consulting. “However, there is a constant competitive threat for these companies and to stay in the race, they cannot stand still when it comes to sustained innovation.”

Transformation Leads to Innovation

In one of his latest speeches, David Binetti, American entrepreneur and author said, “If we think about innovation as a kind of expensive and uncertain risk we would like control, we can apply our existing tools for managing risk – financial options. Using this mental model, options measure the value of “optionality“, not financial cost, and are not a traditional investment but rather a hedging instrument based on tried-&-test option-pricing models.”

Experts believe, within the next 4-5 years, technology will transform how we sell, market, communicate, collaborate, innovate, train, and educate. Therefore, being able to transform — your company, your products, your services, and your processes — rather than merely change, is something every organization needs to embrace if they want to profit from innovation.

Learn from the leaders

The global innovation leaders in the PA Consulting global innovation survey point to a clear pathway for achieving innovation success. The research shows that successful innovators are more likely to:

Focus on the future – believe their organization can deploy technology to meet customer needs (59% versus 49% of less successful peers) and excel at measuring the business case for innovation (57% versus 41%).

Design for innovation – measure the value of innovation (61% versus 47%) and take new products and services to the market faster (61% versus 42%).

Create an innovation culture – kill off ‘zombie’ projects earlier than their less successful peers (54% versus 40%) and reward employees for innovation (81% versus 69%).

Build a network for innovation –source ideas for innovation from outside the organization (61% versus 52%) and have executive and leadership teams with a diverse range of skills and professional backgrounds (78% versus 66%).

“On a global scale, the companies that are most successful at innovation build it into the very fabric of their organization, use agile techniques across the business, and learn from their mistakes and successes,” states Hsiu Mei  Wong, one of the authors of the innovation report and a Business Design expert at PA Consulting.

“it’s evident that companies realize not only that innovation is critical to their survival, but that current approaches have not produced the return they desire.  As a result, change is ramping up in these companies and quickly. We anticípate a significant re-directed effort regarding innovation from businesses in the months ahead, which will set them up for future success in the long-term,” said Wong.

Finally, as Daniel Burrus, an innovation expert, best-selling author, founder and CEO of Burrus Research explained in an Wired article hold true for organizations. “The fact is that the ability to innovate has never been easier and has never happened faster. In transformational game changing times such as what we’re experiencing now, the key rule is this: If it can be done it will be done … and if you don’t do it someone else will,” he aptly summed up.