The Renaissance of Innovation – The Deloitte Innovation Survey

Data Nation Germany

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The Renaissance of Innovation | The Deloitte Innovation Survey

The developing digital and data driven economy presents diverse challenges and changes for companies, consumers and po­litics. As part of the “Data Nation Germany” series, Deloitte is tackling these issues with empirical investigation and trend analysis to provide fresh, new perspectives on devel­opments. This publication is the seventh in this series.

Methodology The current Data Nation Germany study, "The Renaissance of Innovation – the Deloitte Innovation Survey," examines the importance of digital technologies and processes for companies and how they relate to innovative strategies in the digital age. The study is based on a survey of Chief Innovation Officers and top management responsible for innovation in over 150 German companies drawn from all business and industrial sectors.

The survey analyzes innovation in German companies from three perspectives:

• the business perspective on new digital technologies and processes,

• role of the available types of innovation and methods, as well as,

• drivers and barriers to innovation and the implementation of digital technologies and processes.

Data Nation Germany

Simply increasing innovation budgets will not be enough to become innovative in the digital economy. Decisive will be the imple­mentation of suitable innovation strategies and methods as well as the integration of digital technologies into companies. German companies should not look to the methods of Silicon Valley for guidance. Successful in­novation strategies must be embedded into the DNA of the company.

Nicolai AndersenPartner, Head of Deloitte Innovation

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The Renaissance of Innovation | The Deloitte Innovation Survey

Digitalization is challenging established innovation strategies and new technologies are dramatically changing markets, compa­nies and innovation processes. This Data Nation Germany study analyzed the

• business perspective on new digital tech­nologies and processes,

• role of the available types of innovation and methods, as well as,

• drivers and barriers to innovation and the implementation of digital technologies and processes

The study is based on a survey1 of Chief Innovation Officers and top management responsible for innovation in over 150 German companies and drawn from all business and industrial sectors.

Despite increasing innovation budgets, companies still feel unprepared for the changeTo remain competitive under the emerging digital conditions, companies in the Ger­man economy are continually increasing their innovation budgets. According to re­spondents and Deloitte analysis, the inno­vation expenditure in companies is growing by 2.7 percent annually. This means that by 2019, the annual amount spent by companies in Germany on innovation will have risen from 166 billion Euro today to 175 billion Euro.

However, almost every second company believes that it is, at best, reasonably prepared for changes in its market. Only 30 percent feel well prepared. At the same time, 80 percent of companies that have significantly increased their innovation spending in the last two years, feel they are better positioned to deal with market changes.

Big Data and Cloud Computing are the current investment focuses, Machine Learning is looming When it comes to new digital technologies, most of the surveyed companies are currently investing in Big Data Analytics, followed by Cloud Computing, the Internet of Things and Machine Learning.

Of those companies planning to invest in new technologies over the next two years, the strongest increase is in Machine Learning. Seventeen percent of companies report that they will increase their focus in this area.

Highest potential in the Internet of Things and Machine LearningThe Internet of Things and Machine Learn­ing show the highest potential for imple­mentation. This is assessed on the relation­ship between the future importance of a technology and its relevance for businesses today. More than a third of companies see the Internet of Things or Machine Learning as important technologies for the future of their sector, but do not consider them relevant or readily implementable today.

Innovative potential lies untapped – many companies are applying very few types of innovation Forty percent of the companies surveyed broadly use more than four out of ten com­mon innovations. The remaining 60 percent of companies implement at the maximum only three innovations and leave the others unused.

1 See the annex for details concerning the Deloitte Innovation Survey 2017.

Executive Summary

56 percent of companies have invested in Big Data Analytics, 55 percent in Cloud Computing. Machine Learning has had the lar gest growth rising from 31 to 48 percent.

By 2019, the innovation expenditure of the German economy will reach 175 billion Euro.

36 percent of respondents believe R&D tax incentives have improved and 24 percent think access to IT experts has become easier. Only 16 percent report a shortage of skilled person­nel.

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The Renaissance of Innovation | The Deloitte Innovation Survey

Fig. 1 – Importance of Digital Technologies and Processes

Question: Question: Which of the following technologies and processes will have a significant impact on the sector in which your company is operating in the next five years. Which of the technologies and processes are relevant for your company and can be implemented today?

CloudComputing

Big DataAnalytics

Internetof Things

MachineLearning

Robotic ProcessAutomation

CrowdsourcingPlatforms

BlockchainTechnology

56%53%

49%

37%

25%

18% 17%46% 48%

29%22%

13%9% 6%

11%9%

12%

15%

20%

10% 5%

Future technology implementation gap Companies that consider the technology relevant and implementable today

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The Renaissance of Innovation | The Deloitte Innovation Survey

Although there is a spectrum of ten innovations, 60 percent of companies only use up to three.Most often companies innovate in net­works – i.e., in cooperations formed along a value chain, in terms of product features and functionalities, or in processes.

Fig. 2 – 10 Types of Innovation

Question: Which of the 10 Types of Innovation does your company apply?

Network

Structure

Process

ProductPerformance

ProductSystem

Service

Channel

Brand

CustomerEngagement

Profit Model

Total Manufacturing Consumer goods

Chemical industry

Pharma­ceuticals Retail Transport/

logistics Banking Technology

38% 36% 31% 40% 25% 44% 18% 38% 40%

47% 46% 46% 33% 63% 33% 64% 50% 30%

32% 21% 31% 33% 25% 44% 36% 25% 30%

42% 36% 31% 60% 50% 56% 55% 63% 25%

45% 64% 38% 20% 38% 44% 27% 50% 50%

34% 39% 54% 53% 50% 11% 27% 25% 30%

37% 36% 46% 33% 50% 67% 36% 63% 10%

20% 18% 15% 0% 13% 22% 36% 50% 20%

14% 4% 23% 7% 25% 33% 9% 13% 15%

12% 4% 8% 20% 0% 22% 9% 13% 20%

>5% above average (total) +/­ 5% relative to average (total) <5% below average (total)

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The Renaissance of Innovation | The Deloitte Innovation Survey

Those companies that assess themselves to be successful into implementing new trends in innovative products or services often use incubation and ideation as methods to strengthen their innovation capacities.

The innovation ecosystem opens possibi­lities: Innovation is increasingly emerging from wide networks of partner companies (52%), universities and research institutions (36%), agents external to the sector (35%) and start­ups (18%).

Fig. 3 – Innovation Mechanisms

Question: Which innovation mechanisms does your company use to tap into external innovation sources?

Cooperation with start­ups

31%

Online ideas generation and crowd based community challenges

31%

Analysis of social network activity

40%

Workshops with experts from own industry

40%

Cooperation withuniversities/

research centers

22%Workshops with experts from other industries

36%

Corporateventure capital

24%

Joint ventures26%

Accelerators22%

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The Renaissance of Innovation | The Deloitte Innovation Survey

The lack of time to innovate and low technological know-how inhibit imple-mentationAccording to companies, tax incentives, the support of Public Private Partnerships, access to capital as well as the cluster poli­cies have all improved significantly, which is beneficial to innovation.

Fig. 4 – External Innovation Environment

Question: How has the external innovation en­vironment changed in the last two years?

Tax incentives/ government grants

for R&D

Access to venture capital

Stimulation of public private joint research/

development projects

Bank lending conditions for

innovation projects

Strengthening of cluster politics and innovation

alliances

Access to innovationmanagers

Access to IT specialists

(data analytics, software)

Access to engineers and

scientists

40%

34%37%

35%32%

35%

40%

-16%

-11%

-7%-8%-6%

-8%

-4%

-15%

34%

36%

27%25% 25% 24%

29% 29%

19%

Improved

Deteriorated

Index value

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The Renaissance of Innovation | The Deloitte Innovation Survey

The Deloitte Innovation Survey

The Deloitte Innovation Survey is conducted with Chief Innovation Officers and top ma- nagement across all sectors who are charged with innovation in German compa­nies. The survey investigates strategies con­cerning innovation as well as the importance of new technologies.

Companies are operating in an environment of increasing uncertainty and confront ever more dynamic and shortening innovation cycles. At the same time, new technologies and processes offer enormous growth potential. In this environment, efficient inno­vation strategies are critical to the success of a company.

Findings from the Deloitte Innovation Sur­vey can assist Chief Innovation Officers and top management to assess the importance of new digital technologies and processes. They also support the development of successful digital innovation strategies and to ensure that the best technological and investment decisions are made.

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The Renaissance of Innovation | The Deloitte Innovation Survey

Andrew GoldsteinPartner | Deloitte DigitalTel: +49 (0)89 29036 7678angoldstein@deloitte.de

Nikoley KolevPartner | Deloitte DigitalTel: +49 (0)89 29036 7896nkolev@deloitte.de

Nicolai AndersenPartner | Head of Deloitte InnovationTel: +49 (0)40 32080 4837nicandersen@deloitte.de

Dr. Alexander BörschDirector | Head of Deloitte ResearchTel: +49 (0)89 29036 8689aboersch@deloitte.de

Dr. Julian BlohmkeManager | Deloitte Research & Deloitte InnovationTel: +49 (0)40 32080 8391jblohmke@deloitte.de

Contact

Katrin RohmannPartner | Head of Public SectorTel: +49 (0)30 2546 8127krohmann@deloitte.de

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Issue 11/2017