Executive Dissatisfaction With Return On Innovation Investments Reaches New Peak, According to Fourth Annual Survey of Leaders

Pulling Back is not the Answer: Injecting More Discipline into the

Innovation Process is, According to Boston Consulting Group (BCG)

Innovation Experts. Fewer Than Half of Corporate Leaders Say Innovation is

Held to Same Rigor as Other Core Business Functions

While Innovation Remains a Top Priority, Many Companies May be Reining in

Innovation Spending, Thereby Putting Long-Term Competitiveness at Risk,

According to 2007 Boston Consulting Group/BusinessWeek Innovation Survey

May 15, 2007, 01:00 ET from The Boston Consulting Group

    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.
     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
     --  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
     "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.
     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
     About the Boston Consulting Group
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 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
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SOURCE The Boston Consulting Group