global innovation survey

Global Innovation Survey

Innovation Leader versus Laggard Study

December, 2010

2Copyright © 2010 Capgemini. All rights reserved.


Contents

About the study

Key findings related to:

I. Strategic outlook

II. Capabilities

III. Technology

IV. Innovation function

V. Spending outlook

Implications for executives



About the study (1/2) – Background

As the knowledge partner of the World Innovation Forum, Capgemini has

recently completed its innovation leader versus laggard study

Study background Key research areas

As we started off this study on the occasion of the World Innovation Forum,

the objectives were twofold: not only did we want to understand the current

state of innovation, but we also wanted to identify what drives the success of

companies that view themselves as successful innovators. The result is our

second innovation leader versus laggard study. It covers five key areas that

affect a company’s innovation success:

I. Amidst ongoing economic uncertainty, but with increasing indicators of

economic recovery, survey respondents were asked about their strategic

outlook with regard to innovation.

II. We specifically looked at the current state of affairs concerning an

organization’s capability to innovate: innovation strategy, innovation

management, and the involvement of external parties in the process.

III. In an era of digital transformation, it is unthinkable to do research on

innovation leadership without taking into account the role of technology.

We asked respondents about the impact of technological innovation.

IV. How is the innovation function within companies fulfilled? This global

innovation survey also addresses the innovation function – as a key area

for innovation leadership.

V. Finally, the spending outlook for innovation completes this innovation

leadership study. It unveils what drives the success of companies that

view themselves as successful innovators.

STRATEGIC OUTLOOKI.

CAPABILITIESII.

TECHNOLOGYIII.

INNOVATION FUNCTIONIV.

SPENDING OUTLOOKV.



About the study (2/2) – Methodology

Our methodology differentiates between innovation leaders and laggards,

based on their innovation success rate

As the knowledge partner for the World Innovation Forum,

Capgemini Consulting conducted an online survey using

HSM’s network of conference participants and attendees¹,

plus a selection of Capgemini Consulting’s client base.

The online survey, in the field from April 07 to May 07, 2010,

generated responses from 375 executives around the world,

representing the full range of industries, regions, functional

specialties, and seniority. In addition, 13 follow-up interviews

were conducted to get a better understanding of the context

of the findings and to add depth to the result interpretation.

The methodology differentiates between innovation leaders

and laggards based on a self-assessment by survey

respondents of their innovation success rate. The innovation

success rate is determined by the percentage of innovation

efforts that has a positive material impact on the company’s

business results.

We distinguish between 4 categories of innovation success

based on this rate: ‘Less than 25%’, ‘25-49%’, ‘50-74%’ and

‘Over 75%’ of innovation efforts having a positive material

impact on the business results. The ‘Less than 25%’ category

represents the innovation laggard group and the ‘Over 75%’

category the innovation leader group of analysis.

Innovation success rateStudy methodology

24

40,8

24,5

10,7

Less than 25% 25-49% 50-74% Over 75%

% of respondents, n = 375

What percentage of your innovation efforts has a positive

material impact on the business results?

LEADERS

10,724

LAGGARDS

¹Event organizer.



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook




24,5

52

20,5

2,9

Top priority Top-three priority Top-ten priority Not a priority

% of respondents,¹ n = 375

Where does innovation rank among your organization’s

strategic priorities?

TOP-3 PRIORITY

76,5

¹Figures do not sum to 100% because of rounding.

I. Strategic outlook (1/3)

Companies consider innovation a top strategic priority and primarily focus on

identifying new business opportunities

Identifying new business opportunities is the primary area of focus

Innovation is considered a top strategic priority


As the global economy begins to rebound, what is your

organization’s primary area of focus?

10

20

23

46

Preparing for hyper growth in a new business cycle

Increasing productivity of existing assets

Maintaining cost control and lean operations

Identifying new business opportunities to take advantage of the upturn




Interestingly, innovation leaders are preparing themselves for hyper growth,

whilst laggards are focusing on increasing productivity of existing assets

Organizations are preparing differently for growth, to take advantage of an economic upturn

Leaders are preparing for hyper growth, whilst laggards focus on existing assets

5

31

21

44

35

10

13

42

Preparing for hyper growth in a new business cycle

Increasing productivity of existing assets

Maintaining cost control and lean operations

Identifying new business opportunities to take advantage of the upturn

Over 75% 50-74% 25-49% Less than 25%

As the global economy begins to rebound, what is your

organization’s primary area of focus?



-21%

+30%

Laggards focus on optimizing current operations through

lean operations and increasing the productivity of existing

assets, as a platform for growth.

Leaders, who have already created a lean organization

during the downturn, focus on expanding into emerging

markets through: a) building up their sales force; b)

development of go-to-market & product launch

capabilities; c) the creation of new business and

operating models.

Companies that have not cut back on innovation and R&D

efforts during the downturn are clearly better positioned to

outperform their peers in the long-term.

Leaders are heavily betting on an upturn. This could

potentially result in sustainable competitive advantages in

terms of early-mover advantages and the capture of

market share in new or emerging markets.




Most innovation efforts are put into customer-focused innovation, with leaders

putting relatively more effort into business model innovation than others

…but leaders put relatively more effort into business model innovation than others

Most innovation efforts are put into customer-focused innovation…

14

18

20

23

24

Business model innovation

Business process innovation

Incremental product improvement

New product development

Customer focused innovation

% of resources allocated to the following,¹ n = 352

How does your organization allocate its innovation

efforts?


13

18

23

23

24

18

18

18

22

24






Over 75% 50-74% 25-49% Less than 25%


efforts?


-5%

+5%



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook




II. Capabilities (1/3)

With regard to innovation capabilities, most concern among respondents

exists around the formal innovation governance structure

Most concern exists around the formal innovation governance structure

Executive level commitment and the idea generation process are the best developed capabilities

Noteworthy is the issue of formal innovation

governance structure; the highest

percentage of respondents – twenty percent

– strongly disagree that they have a formal

governance structure (versus 21 percent

strongly agreeing to the statement).

Follow-up interviews confirm that

respondents are either very content with how

innovation is governed within their

organization or see ample room for

improvement.

In particular, areas of concern include:

- Balancing between long-term and short-

term innovation success.

- Finding alignment between corporate and

business unit-level innovation.

- Improving the funding mechanism.

7

13

13

14

14

15

16

21

33

24

26

28

27

36

30

39

27

32

28

20

26

22

21

21

24

12

15

29

29

21

26

19

25

15

21

13

12

13

12

12

9

9

6

20

7

Employees at all levels have a clear understanding of how technology changes impact our innovation efforts

We have well-defined processes for promoting and harvesting innovation in our organization

We have a clearly defined way to manage our innovation portfolio and prioritize innovation efforts in our organization

We have well understood metrics and methods to evaluate innovation performance and success in our organization

We have strong new product development capabilities to drive innovation in our organization

Employees at all levels and functions in our organization are involved in the process of innovation

We actively facilitate the idea generation and enablement process with appropriate culture and tools

We have a formal innovation governance structure to govern innovation in our organization

We have a high degree of executive level commitment to innovation

Strongly agree Somewhat agree Neither agree nor disagree Somewhat disagree Strongly disagree


Please rate how strongly you agree or disagree with the following

statements related to your innovation management capabilities:




Key opportunities for innovation laggards lie in the involvement of external

parties in the innovation process, including customers

This includes the involvement of customers, although a higher level can still be obtained here

Leaders have advanced to a high level of utilizing external third parties for their innovation efforts

44

25

25

6

24

31

39

6

20

32

33

15

14

35

39

13

We actively engage a broad cross section of external partners in formal

and informal ways to support our innovation efforts

We use a few select partners in well-defined relationships to support our

innovation efforts

We engage third parties on an ad-hoc basis for specific innovation projects

We do not use external parties to support our efforts at innovation

Over 75% 50-74% 25-49% Less than 25%

To what extent do you use external third parties to support

your innovation efforts?


35,0

11,5

31,7

21,8

How involved are your customers in your innovation

efforts?


15

37

38

11

Our customers work closely alongside our employees, even integrated with our

project teams, to support innovation

We maintain ongoing dialogue with our customers to support multiple elements

of the innovation process

We consult customers on their changing needs and gather feedback on ideas

which are generated in-house

We do not actively engage customers in our innovation efforts

14

32

33

21

25

44

19

13




Innovation leaders particularly engage customers in the new product

development process

…but respondents with high innovation success rates particularly involve customers in NPD

Respondents engage customers in multiple parts of the company’s internal value chain…

6557

66

We engage customers in Marketing & Sales

We engage customers in Service and After Sales

Support

We engage customers in New Product Development

In which parts of the value chain do you engage your

customers?


¹Multiple answers possible.

29 27

44

33 30

3735 33 32

40

26

35

Over 75% 50-74% 25-49% Less than 25%

At first sight there does not seem to be one particular area

where respondents involve their customers in the

innovation process; all three suggested areas - new

product development, marketing & sales, service and

after sales support - are mentioned by a significant

percentage of respondents.

However, leaders particularly involve their customers in

new product development, whereas laggards put most

effort into involving customers in marketing & sales

activities.

Possibly, involving customers in new product development

has a higher impact on the innovation success rate than

involving them in marketing and sales, or service and

after sales support.

In other words, to realize a direct material impact on the

business results from your innovation efforts, involving

customers in NPD is ought to prevail above all other

areas.



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook




III. Technology

There is a discrepancy between the anticipated impact of emerging

technologies and the extent to which companies are prepared for this change

38

42

13

7

Emerging technologies will fundamentally alter the way we do business and interact with our customers and business partners

Emerging technologies will provide incremental productivity/service

enhancements in targeted areas of our value chain

Emerging technologies will have only a limited impact on our value chain

It is unclear how technological innovation will impact our value chain

What do you anticipate to be the primary impact of

technological innovation on your organization’s value chain?


…however, few companies feel highly capable of adapting rapidly to anticipated changes

Emerging technologies are expected to have a significant impact on company’s value chains…

10

53

29

9

40

50

10

How capable is your organization of adapting rapidly to

emerging technological innovations in the short / mid-term?


18

56

24

3

Highly capable and prepared

Somewhat capable

Not very capable

Not at all capable and unprepared

13

18

23

23

24

18

18

18

22

24






Over 75% 50-74% 25-49% Less than 25%


efforts?


-5%

+5%



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook




IV. Innovation function (1/2)

Only one-third of the companies surveyed – but nearly sixty percent of the

innovation leaders – has an accountable innovation executive

…who is responsible for the innovation strategy and innovation portfolio management

Only one-third of the companies surveyed has an accountable executive for innovation…


Does your organization have someone at the executive

level who is formally accountable for innovation?

33,1

66,9

Yes No

59

4132

68

32

68

27

73

Yes No

Over 75% 50-74% 25-49% Less than 25%


What types of innovation decisions are made by the

corporate innovation function / executive?


23

46

49

56

58

59

67

80

M&A decisions

Commercialization decisions

Setting of innovation budgets

Go/no-go decisions during the innovation process

Definition of innovation performance metrics

Setting target and scope for innovation

Allocation of funds and innovation portfolio management

Determining the focus of innovation efforts, the innovation strategy



IV. Innovation function (2/2)

A wide variety of innovation constraints have been identified by our study,

which need to be tackled by the innovation function

Interview findings offer additional insights into potential innovation constraints – and solutions

Survey findings indicate day-to-day business demands and financial constraints as key hurdles

Interview respondents say that they are constrained by a

lack of clear innovation portfolio targets, and inadequate

monitoring of progress towards these targets.

They also mention too rigid operating models that hamper

their innovation efforts and success. Inflexible operations

limit the ability to innovate and adjust to the new

requirements imposed on the organization.

Attaining and keeping the right talent for innovation is a

challenge as well. Recruiting and keeping enough

talented individuals who can truly make a difference

proves to be hard.

Respondents say they are looking at the possibilities for

the in-sourcing of talent through M&A and other ways of

working with partners to get access to the specific

resources and capabilities they lack themselves, or that

are difficult to change within their existing operating

model.


What most constrains your organization’s ability to

achieve its innovation targets?


10

16

18

20

22

24

41

54

Failure to gain buy-in at lower levels of the organization

Inability to leverage innovative technology

Inadequate understanding of market demands

Lack of formal processes

Inadequate leadership commitment

Lack of skills within the organization

Financial constraints

Urgency of pressing day-to-day business demands



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook




V. Spending outlook (1/2)

The large majority of respondents anticipates an increase in their innovation

spending, particularly in NPD and customer focused innovation

Leaders plan to invest more in customer focused-and business model innovation than others

The large majority of respondents is planning an increase in innovation spending


How do you anticipate that your organization will change

its innovation spending over the next 12 months?

22,1

41,4

32,9

3,30,3

Increase significantly

(>10%)

Increase (0-10%)

No change Decrease (0--10%)

Decrease significantly (>-

10%)

SPENDING INCREASE

63,5


In which innovation areas is your organization most likely

to invest?


31

43

47

54

59






14

22

21

22

22

18

15

18

26

24

+4%

-7%

+4%

13

18

23

23

24

18

18

18

22

24






Over 75% 50-74% 25-49% Less than 25%


efforts?


-5%

+5%



V. Spending outlook (2/2)

More than half of the companies surveyed are planning to increase innovation

investments in rapidly developing economies (RDEs)

Innovation leaders are more tended towards increasing investments in RDEs than laggards

China and India are considered the most attractive economies to invest in for innovation purposes

Innovation laggards are less willing to invest in RDEs in

general, with 36 percent of laggards saying they are not

planning to increase investments in RDEs, versus only 19

percent in the most successful group of innovators.

Leaders focus in particular on China (24 percent of the

leader group) for innovation investments. Laggards also

fall behind when it comes to investment plans in

Southeast Asia, with only 8 percent of laggards versus 15

percent of leaders planning to increase innovation

investments there.

Nearly half of the respondents are likely to invest in

mergers & acquisitions to improve their innovation

capabilities, in particular to gain access to new markets

(32,7 percent).

Other most common reasons for M&A include gaining

access to new technologies (26,8 percent) and to a lesser

extent gaining access to talented people (19,3 percent).


In which rapidly developing economies is your organization

planning to increase its innovation investments?


15 1824

3037

44

Eastern Europe

Southeast Asia

Latin America India China Not planning to increase investments

in RDE's

1115 15 16

2419

8 812

18 19

36

-17%+7% +5% 13

18

23

23

24

18

18

18

22

24






Over 75% 50-74% 25-49% Less than 25%


efforts?


-5%

+5%



Contents

About the study



II. Capabilities

III. Technology


V. Spending outlook





What does all this mean for innovation executives?

1. It is time to match the importance of

innovation with the degree of formal

governance allocated to it.

2. The ability to work effectively with

external partners will determine

who will be the new innovation

leaders and laggards.

3. Business model innovation will be

the next big differentiator for

companies aspiring to innovation

leadership.

Given the strategic priority companies

allocate to innovation and their

corresponding spending plans, it is

highly remarkable that only a few

companies have organized innovation

in the mature fashion it deserves.

Many of the innovation bottlenecks

regarding internal alignment,

prioritization, funding, balancing long-

and short-term objectives and the

definition of an innovation strategy can

be solved by establishing a formally

accountable innovation function.

Leaders have advanced beyond other

innovators by having an accountable

innovation executive or other form of

innovation governance structure that

deals with this kind of decision-making.

If one thing became clear in this

innovation leadership study, it is the

enormous underutilized potential for

innovation generated by the

involvement of external parties into the

innovation process.

This can take many forms: from the

involvement of suppliers, customers

and other third parties in the innovation

process, to the acquisition of missing

capabilities or resources – such as

technology and talent.

Innovation leaders may have outpaced

their peers by simply being better at

integrating external parties into their

innovation process, leveraging the

broader innovation potential as a

result.

Innovation leaders are slowly but

steadily breaking away from the pack

by allocating increasingly more

resources to business model

innovation.

Our findings suggest that more value,

in terms of impact on business results,

is to be expected from business model

innovation than from any other form of

innovation.

New ways of doing business often

require changes to current operations.

One prerequisite for successful

business model innovation is the ability

to follow up with adequate changes to

the existing operating model, in order

to deliver the value as designed by the

new business model(s).

www.capgemini.com/consulting

Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group Copyright © 2009 Capgemini. All rights reserved.

Dianne InnissManaging Consultant – Strategy & Transformation

Mob: +1 404 806 4986

[email protected]

Freek DuppenSenior Consultant – Business Innovation

Mob: +316 2900 7957

[email protected]

For additional information regarding this study, please contact: