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As digital transformation and disruption becomes extremely real for many companies, Rialto continues to champion the importance of putting in place both a strategy and culture for innovation. For it is new ideas, new products, new services, new thinking as well as new ways of working, that will be the protector of companies in the next few years and ensure they remain fit for the future.
New research published this week confirms that many are now expanding the scope and scale of innovation within their organisations. According to a report by Innovation Leader, a media and events company that covers innovation inside global companies, innovation and R&D teams inside the Fortune 1000 companies are spending about 50 per cent of their efforts on incremental innovation, 30 per cent on adjacent innovation and 20 per cent on transformational innovation.
The Benchmarking Innovation Impact 2018 report, sponsored by professional services firm, KPMG, and which surveyed 270 executives responsible for innovation, R&D and strategy, highlights that this is a change from the 70-20-10 ratio that has been considered conventional wisdom for several years.
The study found companies pursuing innovation focus on three foundational elements: aligning strategically; funding deliberately; and delivering impact. Respondents cited executive leadership support as the top enabler of innovation success, followed by the ability to test, learn and iterate, align the correct team and have the correct strategy.
Surprisingly, it also pointed out though that while revenue was the most commonly cited metric for measuring success, one quarter of respondents said they do not track financial impact. The top three non-financial metrics that companies track are: progress or stage-gate metrics; learnings or insights generated; as well as number of ideas generated.
Despite the increasing importance being placed on innovation by a rising number of companies, the report also found many companies still face obstacles, citing politics and turf wars, cultural issues, inability to act on market signals and lack of strategy among the biggest challenges to innovation within their organisations.
As John Farrell, national managing partner of innovation & enterprise solutions, KPMG, rightly puts it, “innovation is complex”, and organisations can get it wrong. “To have an impact, it’s vital to get strategic and create the time, focus, and accountability for innovation,” he says. “While methods and approaches will vary, finding the right combination is what’s critical to measuring success.”
So what is the key to getting innovation right? Having a culture for innovation is without doubt one of the bedrocks required. If individuals fear the consequences of failure, they will feel stymied and innovation will be suppressed. Leaders must also become less risk averse when it comes to trying new ideas and, if an idea fails or falls short first time round, see it as an opportunity to learn and improve.
Also, leaders must stop thinking that innovation only happens in certain parts of the company: it should flow freely everywhere, and leaders need to ensure the right environment exists within the organisation to make this happen.
While the change in ratio is great news the shift needs to be more marked. I would advocate that the effort put into transformational innovation needs to be far higher than that revealed in the benchmarking report. This will only happen if leaders mentally and practically place innovation right at the top of their corporate agendas and priorities.
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