The US is Wasting Up to $620 Billion a Year on Missed Opportunities for Innovation

NEW YORK, Oct. 5, 2015 /PRNewswire/ -- Half of senior executives in the public and private sectors confess to seeing a brilliant idea fail for avoidable reasons, according to PA Consulting Group's global survey of 750 organizations.  Almost half (47 percent) of senior leaders describe their innovation activity as, at times, a costly failure.  In the US, this amounts to organizations flushing up to $620 billion down the drain each year.

Innovation – where an organization takes an idea or invention and converts it into a new product or a service – is failing not because of governments or regulators, but because of limitations within organizations. Lack of budget, people or skills, difficulty in scaling up ideas and a risk averse culture are the top three reasons innovation is failing. 

Improving productivity is one of the biggest challenges facing the US economy. Innovation is central to fixing this challenge and organizations across all industries have a role to play in stemming the flow of wasted investment in innovation.

"Innovation needs to go back at the top of the boardroom agenda," says Peter Siggins, innovation expert at PA Consulting Group.  "Executives must develop an appetite for bold ideas and risk-taking.  Companies need to find ways of embedding innovative thinking at all levels, learn quickly from failure and harness the right mix of talent to implement new ideas."

PERFORMANCE ACROSS COUNTRIES

• Senior executives in the US reported the biggest focus on innovation in business strategy over every other country at 36 percent
• Half of US organizations put innovation at the heart of their corporate culture and mission, compared to 71 percent of all countries surveyed
• Mexico then Sweden followed by the US are best at embedding a culture of innovation, while the UK lags behind Norway, Germany and Denmark
• Only 16 percent of US organizations provide rewards or bonuses to staff to encourage innovation, compared to 26 percent in Sweden.  However, the UK ranked  at only 7 percent

PERFORMANCE ACROSS SECTORS

• Life sciences is the most innovative sector and defense the least. 
• In the energy sector, over half of sector respondents (52 percent) say they get more value from incremental innovation than from breakthroughs and major changes.
• When ideas fail for avoidable reasons, the single largest 'innovation killer' cited by healthcare respondents is lack of resources (42 percent).
• In our survey, three-quarters (74 percent) of consumer goods and manufacturing organizations say digital is helping them become faster and more efficient. While this is encouraging, a lower proportion (58 percent) says they are actively developing digital capabilities to disrupt or lead their sector.
• In defense, 71 percent of executives surveyed say they learn quickly from their mistakes in innovation.

INNOVATION LEADERS

Our survey data also identifies the traits shared by a small group of 'innovation leaders'. These respondents strongly believe their leadership is good at encouraging and nurturing innovation.  In fact, 71 percent had seen their profitability increase in the last 12 months. Furthermore, 35 percent of this group had delivered over 10 percent earnings before interest, tax, depreciation and amortization (EBITDA) growth in the same period and are more than twice as likely to report growth at, or exceeding, 10 percent over the last 12 months. Here are just a few examples of what separates the best from the rest:

• Often back high-potential but risky innovations (57 percent of leaders vs 36 percent of the rest)
• Learn quickly from mistakes in innovation (89 percent of leaders vs 60 percent of the rest)
• Harness digital technology to accelerate their innovation initiatives (87 percent of leaders vs 64 percent of the rest)
• Put innovation at the heart of their corporate culture and mission (71 percent of leaders vs 43 percent of the rest)

HOW TO GET INNOVATION RIGHT

PA is at the forefront in helping our clients become innovators.  Here are some key ways clients can get ahead of the pack:

• Innovation has to move beyond the R&D department and cannot be treated in isolation, with a single department tasked to come up with bright ideas. It is something that has to be embedded in the business, from the boardroom to customer service
• Consider Chief Innovation Officers to provide the focus and drive. They must have a seat on the board to reflect the strategic priority that is required to embed a culture of innovation
• Incentivise innovation by rewarding all staff from top to bottom through rewards and bonus
• Avoid over-zealous return on investment assessments that can stifle new innovation, especially in the early stages. Success should be measured by value and not just by financial calculation
• Go beyond token digital and adopt a 'disruption mindset' to ask whether digital technologies could make tried-and-tested approaches more effective

US SCORECARD

About the survey

Our innovation study is based on an international survey conducted with Longitude Research between March and May 2015. In total, 751 senior business and government executives from 15 countries and eight sectors completed the survey.

About PA Consulting Group

PA is an employee-owned firm of over 2,500 people, operating globally from offices across North America, Europe, the Nordics, the Gulf and Asia Pacific. Our specific expertise is in energy and utilities, financial services, health, life sciences, consumer and manufacturing, government, defence and security, transport and logistics.

Our deep industry knowledge together with skills in management consulting, technology and innovation allows us to challenge conventional thinking and deliver exceptional results with lasting impact.  www.paconsulting.com

SOURCE PA Consulting Group

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