Companies are finding it increasingly difficult these days to come up with products and services which disrupt the market. Instead, today’s market innovations are more likely to be incremental extensions of current product lines – a risky approach, warns Accenture.
While one in five (18%) of the executives responding to a recent survey rate innovation as their top strategic priority, and two thirds say their company depends strongly on innovation for the success of its long-term strategy, more than half feel the firm has a sluggish innovation process. The survey*, carried out by management and technology consulting firm Accenture among more than 500 executives in the US, UK and France, reveals that, in spite of a growing stated commitment to innovation, plus extra funding and organisational accountability, many companies are disappointed by the returns they are deriving from their investments. The result is that they tend to adopt a low-risk approach to innovation, which yields very little in the way of improvement, while it risks opening up the business to competitors from both inside and outside their industry. The Accenture consultants argue that putting a formal system in place to manage innovation will help companies to prosper in the new markets they manage to create.
Putting in place a formal system
According to the consultants, a formal approach to innovation will entail five key aspects. First, firms should run innovation as an end-to-end value chain, emphasising speed and flexibility. Second, they should move from product to business innovation – integrating elements of product, service, technology and personalisation. Thirdly, they should also apply risk management practices specifically tailored to innovation so as to identify future opportunities and properly evaluate the innovation portfolio. Fourth, they should “leverage the digital power of Big Data and social media to integrate the voice of the customer into the development processes and drive a high level of personalised experience.” Lastly, the Accenture experts advise firms to pursue “frugal innovation” with a view to both capturing middle class consumers in emerging economies and disrupting markets in developed economies. Some 43% of respondents surveyed whose firms had put such systems in place said they were “very satisfied”, compared with just 24% who said the same thing where there was only an informal innovation system in place.
Cautious approach can cost dear
At the present time, the recession seems to have resulted in companies “restricting themselves to incremental innovation rather than focusing on a broader portfolio of bold, big ideas,” the survey indicates. Accenture recognises that taking a cautious attitude to innovation is understandable, given the relatively disappointing results, but warns nevertheless that this cautious approach may in fact make a firm even more vulnerable to risk. A conservative approach focusing on “individual line extension and renovation” is for example unlikely to provide sufficient revenue opportunities. Moreover, it is not always sufficient to have a brilliant idea or a clever invention. If a firm is to bring its good ideas to scale, it will require the support of a “robust business model, a unique customer experience and an ecosystem that further expands the market potential,” underline the Accenture consultants.
*Why Low-Risk Innovation is Costly: Overcoming the Perils of Renovation and Invention, by Wouter Koetzier and Adi Alon, a survey of 519 executives at large US, UK and French companies with revenues greater than US$100 million