Commentary by James Todhunter

BCG Innovation 2008 Report

The Boston Consulting Group has released their latest report on innovation, “Innovation 2008: Is the Tide Turning?” As always, the BCG report provides some great insights on the state of innovation in business.

There are plenty of very interesting insights in the report. It is a quick read and definitely worth it. Some highlights of the report are:

• Innovation remains at the top of corporate agendas. Roughly 2/3 of respondents identify innovation among there top three priorities.
  
• However, executive satisfaction with return on innovation is on the decline with only 43% of respondents saying they are satisfied with the financial return on innovation. Yet, there is a disconnect with the top of the executive hierarchy. Chairpersons, CEOs, and president as a group expressed overall satisfaction.
  
• The three biggest impediments to innovation were reports as long development time, risk-averse cultural bias, and difficulty with selection of the right ideas to pursue.

There is a lot of good detail in the report that shed further light on some of the initial observations. Of course, it comes as no surprise that innovation is still a top of mind urgency with companies. With leading companies fending off the multiple challenges of aging products and intellectual property, loss of key expertise due to shifting workforce demographics, new and determined competitive threats from emerging participants in the global economy, and financial pressures of a difficult economic climate, innovation is a necessary element in the prescription for corporate health.

The trend of the past few years showing continued erosion in satisfaction levels with the return on innovation is of great concern. Coupled with the corresponding decline in companies planning on increasing investment in innovation, it suggests that many companies are finding it difficult to establish sustainable innovation programs. Too many companies are spinning their wheels as they find driving their companies out of the mud and muck of accidental innovation to be harder than they first thought.

One clue as to what is behind this can be found in the results of the survey’s question about how companies measure innovation success. The top three responses were customer satisfaction, percentage of sales from new products, and overall revenue growth. These are all very important measures of a company’s management execution, but they are not necessarily accurate measures of innovation success. Innovation metrics must be both specific and verifiably incremental. (That is to say if your innovation isn’t making a measurable difference, what’s the point?) Even more to the point is that measures such as new product success ratios and time to market ranked near the bottom of the list.

A quick look at the top three impediments to innovation underscores the importance of good sustainable innovation practice. Systematic innovation shortens development cycles. Innovation best practices reduce and eliminate risks. Sustainable innovation is built upon alignment of innovation with corporate objectives, customer aspirations, congruence with the opportunity space, and maximally leveraging available technology and knowledge—all making optimal idea selection a natural process.

You can find the report here.

[Crossposted from www.InnovatingToWin.com]

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