CHICAGO, May 15 /PRNewswire/ -- Business leaders' frustration with their innovation efforts has reached new levels. According to a new survey of 2,468 senior executives from around the world, fewer than half of executives (46%) are satisfied with the return on their innovation investments. That's down from 52% in 2006, according to the 2007 Boston Consulting Group (BCG)/BusinessWeek Innovation Survey. Innovation Fatigue? The survey shows that dissatisfaction may be leading to an innovation pullback: This year, only 66% of executives ranked innovation as a top-three priority, compared with 72% last year. And only 67% said they plan to increase innovation spending, down from 72% last year. But the results also suggest that better management of innovation programs could lead to better results: Only 46% of executives say innovation at their company is held to the same measurement rigor as other core business functions. Innovation Opportunity Is About How the Process is Managed - Not Just Ideas and Creativity "Companies seem to believe it's getting harder to innovate. But that's not the case. What is true, however, is that creating an innovative company takes a lot of work - and often means rewiring the DNA of the organization. While it's no harder than ever, there is no easy fix," said BCG Senior Partner James P. Andrew, leader of the firm's innovation practice and co-author, with BCG Senior Partner Harold L. Sirkin of Payback: Reaping the Rewards of Innovation (Harvard Business School Press, January 2007). "Instead of taking their foot off the gas, they should accelerate: Successful innovation, and the profitable organic growth that results, is probably the surest way to build asset value and shareholder return." Improving Innovation is not Beyond Leaders' Control "Everything that managers need to do to improve innovation is under their control. It's not as though they have to wait for some new technology or process to arrive from the lab," said Mr. Sirkin, who is the global leader of BCG's operations practice. "They need to recognize that innovation is not just about ideas or creativity. It's a business process that can be - and needs to be - managed with the same rigor as all business processes in a company." Key Innovation Mistakes: Not Emphasizing Speed, and Not Managing with Discipline and Aggressiveness The survey findings underscore that leaders have trouble (a) aligning innovation efforts for speed and (b) managing the process aggressively, and with discipline, according to Mr. Andrew and Mr. Sirkin. "We believe that if leaders were to truly internalize the fact that innovation is the process of using new knowledge to create profitable organic growth - and isn't just about creativity and ideas - they'd be better able to tackle the management problems that are at the root of innovation frustration and fatigue," said Mr. Andrew. Speed Bumps Innovation speed matters. Lack of speed increases the time required to generate the necessary innovation payback, and usually results in more start- up costs. But executives admit they're lax about timeframes, according to Mr. Andrew and Mr. Sirkin. -- The innovation capability that executives are most likely to cite as a weakness at their companies is "moving quickly." (54% say not moving quickly is a weakness.) -- Well over a third of executives (36%) say the biggest obstacle to improving innovation ROI at their companies is that "development times are too long." "Speed has been discussed as an imperative for profitable innovation for at least two decades, but we clearly have a long way to go," said Mr. Sirkin Discipline Gaps The survey also identified a failure to lead innovation aggressively. -- Nearly half of executives - 46% - cite "enforcing hurdles" as a weakness when it comes to innovation capabilities at their companies. -- The innovation obstacle executives are most likely to cite is a "risk-averse culture" (38%). The findings also illuminate gaps in discipline - especially when it comes to assessing and measuring the success of innovation efforts. -- Only 22% of executives say their companies use "innovation ROI" as a way to measure innovation success, and only a quarter (25%) say their companies use "projected vs. actual performance" as a measurement variable. -- Only 8% of executives chose "number of projects that meet planned targets" as a top-three metric for an innovation portfolio. -- Only 16% of executives said employee behavior at their company is tied to innovation ROI, whereas over half (56%) said it's tied to innovation revenue growth. Companies Are Also Doing a Lot of Things Right When it Comes to Innovation "While there are some key problems with how companies manage innovation, executives are also doing a lot of things right, and the findings bear that out," said Mr. Andrew. Companies have a clear understanding of their customers, which, according to Mr. Andrew and Mr. Sirkin, is essential for innovation payback. The vast majority of executives - 69% - say their companies' performance is strong when it comes to "deep customer understanding." In addition, 69% of executives say that innovation efforts at their company have executive-level sponsorship. "Executive-level sponsorship is critical, and the fact that it exists at a high level at so many companies means that fixing innovation is do-able - if those leaders really back up their support with actions" said Mr. Sirkin. Finally, there's no shortage of ideas. Only 17% of executives cited "not having enough great ideas" as a barrier to innovation. Call to Action "Innovation is clearly hard work. And many executives will be feeling pressure to cut back on innovation. But if what you want is a legacy - and valuation - that reflect real growth, as opposed to cost cutting, it's time to show true leadership and fortitude and make the tough decisions and tradeoffs that will enable your innovation efforts to pay back," said Mr. Andrew. To receive a copy of Payback: Reaping the Rewards of Innovation and/or the results of the 2007 BCG/BusinessWeek Innovation Survey, or to schedule a conversation with Mr. Andrew or Mr. Sirkin, please contact Alexandra Corriveau at Sommerfield Communications, Inc. at (212) 255-8386 or firstname.lastname@example.org. About the Boston Consulting Group Since its founding in 1963, The Boston Consulting Group has focused on helping clients achieve competitive advantage. Our firm believes that best practices or benchmarks are rarely enough to create lasting value and that positive change requires new insight into economics and markets and the organizational capabilities to chart and deliver on winning strategies. We consider every assignment to be a unique set of opportunities and constraints for which no standard solution will be adequate. BCG has 61 offices in 36 countries and serves companies in all industries and markets. For further information, please visit our Web site at www.bcg.com .
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