Global Innovation Survey 2010

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Global Innovation Survey

Innovation Leader versus Laggard Study

About the authors

Freek Duppen

Freek Duppen is a managing consultant with Capgemini Consulting
based in The Netherlands. He specializes in business innovation,
with a focus on innovation strategy, new business and operating
models, and innovation management.

Dianne Inniss

Dianne Inniss is a managing consultant with Capgemini Consulting
based in North America. She specializes in strategy and transformation,
with a focus on growth strategy, innovation and marketing strategy.

Global Innovation Survey

Innovation Leader versus Laggard Study

December 2010

Freek Duppen
Dianne Inniss

Executive Summary

As the knowledge partner of the World Innovation Forum, Innovation is considered a top strategic priority,
Capgemini Consulting has recently completed its global with a primary focus on identifying new business
innovation survey on the current state of innovation. opportunities to take advantage of an economic
The result is our second innovation leader versus laggard upturn.
study. It covers five key areas that affect a company’s inno-
vation success: the strategic outlook companies have with n Innovation is considered a top-three strategic priority
respect to innovation, their capabilities to manage the by more than seventy-six percent of the respondents.
innovation process, the overall impact of technology, the Moreover, making innovation a top priority pays off.
innovation function itself, and how these factors influence This is evidenced by the correlation found between
companies’ spending plans. The study offers a unique ranking innovation as the top priority and its positive
perspective by looking at the differences in behavior of impact on the business results, as illustrated by the
innovation leaders vis-à-vis laggards across these key leader versus laggard comparison.
areas. Finally, this report offers an overview of the most n Most innovation efforts are put into customer-focused
important implications for innovation executives – look- innovation whereas fewest resources are allocated to
ing to improve the material impact of their innovation business model innovation. Innovation leaders put
efforts on the business results. relatively more effort into business model innovation,
whereas innovation laggards allocate more efforts to
In summary, this study reveals that given the strategic incremental product improvement.
priority companies allocate to innovation and their cor- n As the global economy begins to rebound, identifying
responding spending plans, the maturity of their formal new business opportunities is the primary area of focus
innovation governance structure lags behind considerably. for 46 percent of respondents. In addition, innovation
To overcome many of the innovation bottlenecks encoun- leaders are preparing themselves for hyper growth in a
tered, it is time to establish an innovation function that new business cycle whilst innovation laggards are focus-
is able to deal with this kind of innovation governance ing on increasing productivity of existing assets.
and decision-making. Furthermore, there is an enormous
unlocked potential for innovation in the involvement of Key opportunity areas with respect to innovation
external parties in the innovation process. Innovation management are the formalization of the innova-
leaders may have outpaced their peers by simply being tion governance structure and the capability to
better at involving external parties, leveraging a much engage external parties in the innovation process.
broader innovation network and increasing innovation
potential. Also, the study shows that more value, in terms n Executive level commitment and the idea generation
of impact on business results, is to be expected from and enablement process are the overall best developed
business model innovation, than from any other form innovation management capabilities. Most concern ex-
of innovation. Targeting new business opportunities in ists around the innovation governance structure among
emerging markets is much more likely to be successful respondents.
when approached outside of the traditional competitive n Most respondents – 53,5 percent – indicate they have
landscape. developed relationships with third parties to support
their innovation efforts on an ongoing basis.
These and a wide range of other relevant findings for n The large majority of 89 percent of survey respondents
innovation and business executives are elaborated on in has made the step to somehow involve their customers
this report. The most important findings per area can be in the innovation process.
summarized as follows. n Leaders have advanced to a high level of maturity when
it comes to engaging third parties. They maintain on-
going dialogue with their customers or even integrate
them into their innovation project teams. On the other
hand, laggards are predominantly stuck at the ad-hoc
engagement of third parties for innovation and have
advanced less in terms of customer involvement.

2

Section Title

Section Intro
Emerging technologies are expected to have a Companies are increasing their spending on
significant impact on companies’ value chains, innovation across a wide variety of areas to
however few companies feel highly capable of improve their capabilities and competitiveness.
adapting rapidly to anticipated changes.
n The large majority of our survey respondents – 63,5 per-
n Technological innovation is anticipated by the majority cent – anticipate an increase in their innovation spend-
of respondents to have an incremental (42 percent) up ing over the next 12 months.
to fundamental (38 percent) impact on their organiza- n More than half of the respondents (56 percent) say they
tions’ value chains. are planning to increase their innovation investments in
n Fifty-six percent of respondents say their organization rapidly developing economies.
is somewhat capable of adapting rapidly to emerging n When it comes to innovation investment areas our
technological innovations. respondents are not intending to change the focus of
n Clearly, our innovation leader group is the best their efforts: new product development (59 percent) and
equipped for emerging technological innovations, scor- customer focused innovation (54 percent) come out on
ing thirty percent higher in the category ‘highly capable top. When making the split by success rate it appears
and prepared’ than their lagging counterparts. that innovation leaders tend to invest more in customer
focused and business model innovation, whereas lag-
Establishing accountability for innovation through gards invest relatively more in incremental product
a corporate function or dedicated executive is improvement.
part of the solution towards attaining innovation n Nearly half of the respondents say they are likely to
leadership. invest in M&A to improve their innovation capabilities,
in particular to gain access to new markets.
n When looking at the innovation function within or-
ganizations the most frequently mentioned hurdles to
innovation success are urgency of pressing day-to-day
business demands (54 percent of respondents) and
financial constraints (41 percent).
n There seems to be a clear relationship between the
appointment of an accountable innovation executive
and the innovation success rate, with 59 percent of in-
novation leaders having such an accountable executive
versus only 32 percent of the next best performers.
n The following types of innovation decisions are men-
tioned most as decisions to be made by the innovation
executive or the corporate innovation function: deter-
mining the focus of innovation efforts – i.e. the innova-
tion strategy (80 percent of respondents), and the allo-
cation of funds and innovation portfolio management
(67 percent).

Executive Summary 3

Contents

Leader versus Laggard perspective 05

Strategic Outlook 07
• Strategic Priority
• Allocation of Efforts
• Innovation Drivers
• Focus Areas

Capabilities 11
• Innovation Strategy
• Innovation Management
• Third Party Involvement
• Customer Involvement

Technology 17
• Impact on Value Chain
• Capability to Adapt

Innovation Function 19
• Innovation Executive
• Decision-making
• Constraints

Spending Outlook 23
• Anticipated Change in Spending
• Rapidly Developing Economies
• Investment Areas
• M&A Investments

Implications for Innovation Executives 27

Appendix 28

4

Leader Title
Sectionversus Laggard perspective

As we started off this
Section Intro The methodology differentiates Exhibit 1 shows how respondents are
global innovation survey between innovation leaders and lag- distributed over these four catego-
gards based on a self-assessment by ries. Twenty-four percent of respon-
on the occasion of the survey respondents of their innova- dents fit the innovation laggard
World Innovation Forum, tion success rate. The innovation profile, whereas nearly eleven per-
the objectives were success rate is determined by the cent belong to the innovation leaders
twofold: not only did we percentage of innovation efforts that group. This report summarizes the
has a positive material impact on the difference in behavior of innovation
want to understand the company’s business results. leaders vis-à-vis laggards across five
current state of affairs key areas that affect a company’s in-
regarding innovation, but We distinguish between 4 categories novation success.
we also wanted to identify of innovation success based on this
rate, namely: ‘Less than 25%’, ‘25-
what drives the success 49%’, ‘50-74%’ and ‘Over 75%’ of
of companies that view innovation efforts having a positive
themselves as successful material impact on the company’s
innovators. The result is business results. The ‘Less than 25%’
category represents the innovation
this innovation leader laggard group and the ‘Over 75%’
versus laggard study. category the innovation leader group
of analysis.

Exhibit 1: Success rate

% of respondents, n = 375

What percentage of your innovation efforts has a positive material impact
on the business results?
40.8

24 10,7

24 24.5

10.7

Less than 25% 25-49% 50-74% Over 75%

LAGGARDS LEADERS

Footer Right; Document Title Akkuratversus Laggard perspective
Leader Bold 6.5pt; maximum 1 line 5

Strategic Outlook

Amidst ongoing economic Strategic Priority Forty percent of the innovation
uncertainty, but with Innovation is considered a top-three leader group (with innovation efforts
strategic priority by over seventy-six having over 75% positive material
increasing indicators of percent of the respondents (Exhibit 2). impact on the business results) has
economic recovery, survey It is even considered the top strategic made innovation a top strategic pri-
respondents were asked priority by nearly a quarter of respon- ority, versus only eighteen percent in
about their strategic out- dents. With such a strong emphasis the innovation laggard group (with
on innovation as a strategic driver for innovation efforts having less than
look with regard to inno- improving business results, it is of 25% positive material impact on the
vation. Four specific ele- paramount importance to understand business results).
ments are addressed in the current state of affairs regarding
this context, namely the this topic and where it is heading. Perhaps equally interesting is the fact
Moreover, making innovation a top that when looking at the breakdown
strategic priority given to priority pays off. This is evidenced for innovation as a top three prior-
innovation, how innovation by the correlation found between ity by innovation success rate, it
efforts are allocated, the ranking innovation as the top prior- becomes clear that making innova-
primary drivers for inno- ity and its positive impact the busi- tion a top-three priority in itself is
ness results, as illustrated by the not enough to achieve breakthrough
vation, and finally, as the leader versus laggard comparison: business results from innovation
global economy begins to efforts. There seems to be a clear
rebound, what the orga- distinction between companies that
nizations’ primary focus
areas are. The most impor-
tant findings – taking into Exhibit 2: Strategic Priority

account the leader versus % of respondents,¹ n = 375

laggard perspective – are Where does innovation rank among your organization’s strategic priorities?
discussed below. 76,5

52

24.5
20.5

2.9

Top priority Top-three priority Top-ten priority Not a priority

TOP-3 PRIORITY
¹Figures do not sum to 100% because of rounding.

Footer Right; Document Title Akkurat Bold 6.5pt; maximum 1 line
Strategic Outlook 7

make innovation a top strategic new product development and incre-
priority, and the ones that make it mental product development.
the single most important strategic
priority. As some interviewees notes, Along these lines it is not surprising
innovation is always on the strategic that business model innovation
agenda; leaders, however, mention comes last in terms of the allocation
that the strategic agenda is built of innovation efforts – a focus on op-
around innovation as a core element. erational excellence rather than new
business, and therefore new operating
Allocation of Efforts models, seems logical in an uncertain
How does this prioritization of inno- environment.
vation translate into the allocation of
organizational resources for innova- It is however interesting to find, that
tion? Most innovation efforts are cur- when making the split by innova-
rently allocated to customer focused tion success rate, it becomes appar-
innovation (Exhibit 3). This empha- ent that innovation leaders allocate
sis on innovation focused directly on fewer resources to incremental
customer needs can be explained by product improvements and use these
the economic downturn as compa- resources to beef up their business
nies tend to identify new ways to model innovation efforts. In this way
squeeze more out of their existing they clearly distinguish themselves
clientele. This is followed closely by from their lagging counter parts,

Exhibit 3: Allocation of Efforts

% of resources allocated to the following,¹ n = 352

How does your organization allocate its innovation efforts?

24
Customer focused innovation 24
24

22
New product development 23
23

18
Incremental product improvement 20 -5%
23

18
Business process innovation 18
18

18
Business model innovation 14 +5%
13

Over 75% 50-74% 25-49% Less than 25%


8

albeit still to a moderate extent. This
does point in the direction that more Exhibit 4: Innovation drivers
value, in terms of impact on business
% of respondents,¹ n = 336
results, is to be expected from busi-
ness model innovation than from any What are the primary drivers of your organization’s innovation efforts?
other form of innovation.
58
Innovation Drivers Evolving customer needs
18
To better understand what drives
the allocation of innovation efforts,
13
respondents were asked to indicate Technological advances and changes
38
the primary drivers of their organiza-
tion’s innovation initiatives (Exhibit
13
4). Evolving customer needs is by far Executive direction/internal demands
15
the most important driver for an or-
ganization’s innovation efforts, with
5
58 percent of respondents indicating Macroeconomic/external factors
10
this. Thirty-eight percent of respon-
dents say technological advances
3
and changes are the second most Globalization
12
important driver for their innovation
efforts, followed by executive direc-
3
tion or internal demands. Changing supplier capabilities 3

Neither macroeconomic factors
Most important Second most important
nor globalization rank high in
¹Multiple answers possible
these terms, and changing supplier
capabilities closes the ranks. The
extremely low score of changing
supplier capabilities as a driver for Focus Areas preparing for growth to take advan-
innovation suggests that few orga- As the global economy begins to tage of an economic upturn, respon-
nizations are yet moving towards a rebound, the vast majority of respondents mention the following: some
more open model of innovation. This dents – forty-six percent – say iden- say the optimization of their current
seems awkward as companies such tifying new business opportunities operations through lean operations
as P&G have already been demon- to take advantage of the upturn is and increasing the productivity of
strating for some time how compa- their primary area of focus (Exhibit existing assets should function as a
nies can reduce innovation spending, 5). Managing cost control and lean platform for growth. Others – who
and increase the positive impact on operations, and increasing the have already created a lean and mean
business results at the same time, by productivity of existing assets, get organization during the downturn –
opening up the innovation process to respectively twenty-three and twenty are now focusing on expansion into
suppliers (and other parties). percent of the responses. Only ten emerging markets. They mention
percent of the respondents are pre- a variety of elements which should
There is much to gain by taking sup- paring themselves for possible hyper enable that, including; the beefing
plier-driven innovation into account growth in a new business cycle. up of their sales force; development
as a driver for innovation. It offers a of strong go-to-market and product
unique opportunity for innovation Our conversations with innovation launch capabilities; and the cre-
laggards to catch up without making executives shed some more light ation of new business and operating
huge investments in developing their on these outcomes. When asked models. These companies expect to
own innovation capabilities. exactly how their organizations are increase market share in the upturn.

Strategic Outlook 9

One important factor in this whole leaders hardly focus on increasing
story is whether or not companies the productivity of existing assets or
have cut back on innovation and on maintaining cost control and lean
R&D efforts during the downturn. operations. This means that innova-
The ones that did not are clearly tion leaders are mainly concerned
better positioned to outperform their with identifying new business op-
peers in the longer-term. This brings portunities and preparing for hyper
us to a recurring point of concern growth to take advantage of the
among innovation executives, the upturn. In other words, it is clear
challenge of how to find the right that innovation leaders are heavily
balance between optimizing business betting on an upturn and are much
results in the short-term and focus- less conservative than their lagging
ing on sustainable innovation in the counterparts in their business focus.
long-term. This could potentially result in sus-
tainable competitive advantages in
In addition, Exhibit 5 clearly shows terms of early-mover advantages and
why the gap between innovation the capturing of market share in new
leaders and laggards is likely to or emerging markets.
increase even further once the econo-
my rebounds. Thirty-five percent of
the innovation leader group are pre-
paring themselves for hyper growth
in a new business cycle versus only
5 percent in the innovation laggard
group. In contrast to the laggards,

Exhibit 5: Focus areas


As the global economy begins to rebound, what is your organization’s primary area of focus?

Identifying new businessopportunities 42
46
to take advantage of the upturn
44

13
Maintaining cost control and lean
23
operations
21

10
Increasing productivity of -21%
20
existing assets 31

35
Preparing for hyper growth in a new
business cycle 10 +30%
5

Over 75% 50-74% 25-49% Less than 25%

10

Capabilities

Another key area that Innovation Strategy changing supplier capabilities as a
defines innovation leader- When it comes to forming an innova- driver for innovation as noted earlier.
tion strategy, most respondents rely Despite the relatively low influence
ship is an organization’s on consumer trends, corporate strat- of these factors, there is much to gain
capability to innovate. We egy, industry trends and technology when considering the capabilities
specifically looked at the trends as the primary inputs into the and resources available outside of
current state of affairs process. (See Exhibit 6). Macro eco- the organizational boundaries, when
nomic trends, sociological shifts and determining the innovation strategy.
concerning the following the M&A / partnership strategy are
four elements that play an regarded of much less importance for In addition to understanding the
important role with regard defining innovation strategy. The low inputs into the innovation strategy
to innovation capabili- importance of M&A or partnerships process, we are also interested in
as an input to the strategic planning how the actual definition of such a
ties: innovation strategy, of innovation efforts is striking, but strategy takes place. From the follow-
innovation management, in line with the low importance of up interviews it became apparent
the involvement of third
parties in the innovation
process, and finally, the Exhibit 6: Innovation strategy
involvement of customers % of respondents,¹ n = 369
in a company’s innovation What are the inputs to your organization’s innovation strategy,
efforts. in order of importance? (1 – most important,…)

1 Consumer trends 31 16 14 12 9 8 12

2 Corporate strategy 25 18 15 16 8 13 6

3 Industry trends 17 20 19 12 15 6 6

Technology trends 15 19 17 16 14 10 5

Macroeconomic trends 5 6 14 17 20 20 17

Sociological shifts 4 11 12 11 17 23 26

M&A / Partnership strategy 3 10 9 16 16 20 28

1 2 3 4 5 6 7
¹Multiple answers possible.

Capabilities 11

that there is no shared understand- business cases, competitive analy- The survey results consistently show
ing of, nor a shared approach to, sis, a people case, i.e. who will that innovation leaders agree more to
innovation strategy. Interview drive this new innovation, and these statements related to the matu-
respondents commented on a wide specific metrics for the emerging rity of innovation management than
range of factors that are relevant in business areas. innovation laggards, providing clear
this context, when asked how their hints to less successful innovators for
organization defines its innovation Clearly there is no one size fits all ap- areas of improvement.
strategy. In sum, we can highlight proach to defining an organization’s
the following: innovation strategy, but there are Noteworthy is the result regarding
n Governance: There are a variety of some common challenges in doing it the statement of having a formal in-
ways in which the innovation strat- right: novation governance structure, with
egy is defined and governed within n Nearly all interview respondents the highest percentage of respon-
their organizations. The highest say balancing the more short-term dents – twenty percent – strongly
level leadership is nearly always oriented marketing insights and disagreeing (versus 21 percent
involved. In addition, some make requirements with the longer-term strongly agreeing to the statement).
use of any or all of the following to view from R&D is a daunting task. Follow-up interviews confirm that
provide input into the process: in- n Secondly, innovation executives respondents are either very content
novation councils, cross-functional have not yet found a panacea to- with how innovation is governed
steering committees, external wards managing the budget cycles within their organization or see
advisory boards, key clients and/or and funding of the innovation ample room for improvement. In
external partners. portfolio. particular, areas of concern include:
n Organization: We can distinguish balancing between long-term and
between corporate-level and busi- Innovation Management short-term innovation success, find-
ness unit-level innovation strategy. The second element that determines ing alignment between corporate and
Often companies rely on a combi- a company’s capability to innovate business unit-level innovation, and
nation of both, combining top- is the way it manages innovation. improving the funding mechanism.
down with bottom-up innovation. We asked respondents to rate how
There is also often a split made strongly they agreed or disagreed
between the organization of in- with a number of statements related
cremental and radical innovation, to their innovation management
resulting in the latter often being capabilities. The results are shown in
organized in an incubator setting. Exhibit 7.
For completely new areas, innova-
tion is sometimes sourced through Most survey respondents – 65
an acquisition strategy. percent – strong-ly or somewhat
n Approach: Interaction between the agree with the statement that they
corporate and business unit-level have a high degree of executive level
is facilitated through frequent commitment to innovation. This is
strategy meetings and dialogues. followed by the facilitation of idea
Insights are provided by R&D, generation and enablement pro-
marketing and technology gurus. cess (55 percent of respondents) as
Innovation portfolio decisions are the second most mature capability
usually taken at a corporate-level, related to innovation management.
whereas the initial analyses and Finally, 50 percent of respondents
selection procedures are performed agree they have strong new product
at a BU-level, depending on the development capabilities to drive
size of the organization. The innovation in their organization.
funnel-approach for more radical
innovation typically comprises

12

Exhibit 7: Innovation management


Please rate how strongly you agree or disagree with the following statements
related to your innovation management capabilities:

We have a high degree of executive level
33 32 15 13 7
commitment to innovation

We have a formal innovation governance
structure to govern innovation in our 21 27 12 21 20
organization

We actively facilitate the idea generation
and enablement process with appropriate 16 39 24 15 6
culture and tools

Employees at all levels and functions in our
organization are involved in the process 15 30 21 25 9
of innovation

We have strong new product development
capabilities to drive innovation in our 14 36 21 19 9
organization

We have well understood metrics and
methods to evaluate innovation performance 14 27 22 26 12
and success in our organization

We have a clearly deﬁned way to manage
our innovation portfolio and prioritize 13 28 26 21 12
innovation efforts in our organization

We have well-deﬁned processes for
promoting and harvesting innovation in 13 26 20 29 13
our organization

Employees at all levels have a clear
understanding of how technology 7 24 28 29 12
changes impact our innovation efforts

Strongly agree Somewhat agree Neither agree nor disagree
Somewhat disagree Strongly disagree

Capabilities 13

Third Party Involvement
To what extent do companies use ex- Exhibit 8: Third party involvement
ternal third parties to support their
innovation efforts? (Exhibit 8). Most
respondents – thirty-five percent – To what extent do you use external third parties to support your innovation
efforts?
engage third parties on an ad-hoc
basis for specific projects. More than
half of the respondents (53,5 per- We do not use external parties to support
our efforts at innovation 6 6 15 13 11,5
cent) indicate they have developed
relationships with third parties to
support their innovation efforts on We engage third parties on an ad-hoc
25 39 33 39 35,0
an ongoing basis. basis for speciﬁc innovation projects

We use a few select partners in
The majority of the innovation leader well-deﬁned relationships to support our 25 31 32 35 31,7
group – forty-four percent – has innovation efforts
advanced to a high level of maturity
We actively engage a broad cross section
when it comes to integrating third of external partners in formal and informal 44 24 20 14 21,8
parties into their innovation efforts. ways to support our innovation efforts
They indicate that they actively
engage a broad cross selection of
external partners in formal and Over 75% 50-74% 25-49% Less than 25%

informal ways to support their in-
novation efforts. The majority of
other innovators – segmented by
innovation success rate – are still at their employees, even becoming However, when taking the leader ver-
the ad-hoc engagement level. This integrated with their project teams, sus laggard perspective it becomes
provides a big hint that innova- to support innovation activities. apparent that leaders particularly in-
tion success is closely linked to the volve their customers in new product
ability to involve third parties in It becomes evident that innova- development, whereas laggards put
the innovation process to support tion leaders, reporting high rates of most effort into involving customers
ones efforts and increase the odds innovation success, have advanced with marketing & sales activities.
of a positive impact on the business beyond the less successful innovators
results. Innovation leaders may have in terms of customer involvement. Apparently, involving customers
outpaced their peers by being better in new product development has a
at involving external partners into There are some other noteworthy higher economic pay-off than involv-
their innovation process, leveraging findings from the leader versus ing them in marketing and sales,
a much broader innovation network laggard perspective with regard to or service and after sales support.
and increasing overall innovation customer involvement. At first sight In other words, to realize a direct
potential. there does not seem to be one par- material impact on the business
ticular area in the value chain where results from your innovation efforts,
Customer Involvement our respondents are keen to involve involving customers in NPD is ought
The large majority of survey respon- their customers in the innovation to prevail above all other areas.
dents (eighty-nine percent) have process; all three suggested areas
taken steps somehow involve their - new product development, market-
customers in the innovation process. ing & sales, service and after sales
(See Exhibit 9). Fifteen percent have support - are mentioned by a signifi-
even reached a high level of maturity cant percentage of respondents. (See
in this sense, indicating that their Exhibit 10).
customers work closely alongside

14

Exhibit 9: Customer involvement


How involved are your customers in your innovation efforts?

We do not actively engage customers 13
11
in our innovation efforts
21

19
We consult customers on their changing
38
needs and gather feedback on ideas
33
which are generated in-house

44
We maintain ongoing dialogue with
37
our customers to support multiple 32
elements of the innovation process
25
Our customers work closely alongside
our employees, even integrated with our 15
project teams, to support innovation 14

Exhibit 10: Customer involvement

In which parts of the value chain do you engage your customers?

65 66
57

We engage customers in We engage customers in We engage customers in
Marketing & Sales Service and After Sales Support New Product Development

44
40
37
35 33 35
33 32
29 30
27 26

Over 75% 50-74% 25-49% Less than 25%

Capabilities 15

Technology

In an era of digital trans- Impact on Value Chain particularly, mobile devices and
formation, it is unthinkable The majority of survey respondents – social media are mentioned to influ-
forty-two percent – expect emerging ence interaction with customers by
to do research on innova- technological innovation to provide opening new channels and enabling
tion leadership without incremental productivity or service deeper relationships. On the supplier
taking into account the enhancements in targeted areas side respondents say the interaction
role of (information) tech- of their value chain (Exhibit 11). between business partners will be in-
This is followed by a large group of tensified by improved data exchange,
nology. Companies such as respondents representing thirty-eight for instance in supply chain manage-
Apple, Google, Microsoft, percent of the total, who anticipate ment and R&D. This can even be
Amazon, etc. are contin- that emerging technologies will taken one step further to the com-
uously on top of the list fundamentally alter the way they plete outsourcing of R&D and (in-
do business and interact with their formation) technology to suppliers.
when it comes to most customers and business partners. The rationale here is that suppliers
innovative companies. Just Thirteen percent of executives sur- often are able to deliver the required
think of the new business veyed expect only a limited impact technologies better or more cheaply
models and value proposi- from emerging technologies on their than the companies can themselves,
value chain, and for seven percent due to an increase in complexity or
tions they have introduced. it is unclear how their value chain standardization of the technologies
We asked survey respon- will be impacted by technological in question.
dents about the impact innovation.
on their company’s value What does this imply? This trend
Interview findings provide some requires companies to be able to
chain and their capability examples of how technological in- quickly scout new technologies and
to adapt to technological novation can impact companies’ potential partners, become better
innovation. value chains. On the customer side at managing the interdependencies

Exhibit 11: Impact on value chain


What do you anticipate to be the primary impact of technological innovation
on your organization’s value chain?

It is unclear how technological
7
innovation will impact our value chain

Emerging technologies will have only
13
a limited impact on our value chain

Emerging technologies will provide
incrementalproductivity/service enhance- 42
ments in targeted areas of our value chain

Emerging technologies will fundamentally
alter the way we do business and interact 38
with our customers and business partners

Technology 17

between business partners – for On the lower end, three percent feel
instance the alignment of individual unprepared and not at all capable,
technology roadmaps – which in its while twenty-four percent appear
turn requires reliable partnerships. to believe their organization is only
Also, a targeted acquisition strategy marginally capable of adapting rapid-
to acquire missing capabilities and ly. On the higher end, only eighteen
technologies might offer a solution to percent indicate that their company
the ever increasing pace with which is highly capable and prepared for
technological innovation is imposing technological innovations.
change on the organization’s value
chain. Clearly, our innovation leader group
is the best equipped for emerging
Capability to Adapt technological innovations, scoring
Being able to anticipate change is thirty percent higher in the category
one thing, but being capable to adapt ‘highly capable and prepared’ com-
rapidly to this change is another. As pared with their lagging peers.
Exhibit 12 shows, more than half
of the innovators surveyed – fifty-
six percent – say their organization
is somewhat capable of adapting
rapidly to emerging technological
innovations in the short to mid-term.
This fifty-six percent of respondents
is evenly distributed across our inno-
vation leader to laggard spectrum.

Exhibit 12: Capability to adapt


How capable is your organization of adapting rapidly to emerging technological innovations in the short / mid-term?

Not at all capable and unprepared 3
9

10
Not very capable 24 -19%
29

50
Somewhat capable 56
53

40
Highly capable and prepared 18 +30%
10

18

Innovation Function

How is the innovation Innovation Executive Nevertheless it seems both logical
function within compa- Exhibit 13 shows that only one-third and sensible, as with most other
of respondents say their organiza- vital business functions, to have a
nies fulfilled? This global tion has an executive who is formally dedicated and accountable executive
innovation survey also accountable for innovation, versus in charge of it. This is further evi-
addresses the innovation almost sixty-seven percent without denced by the leader versus laggard
function – as an emerg- such a formalized role. This seems comparison: when making the split
very unusual in light of the impor- by innovation success rate it becomes
ing functional area within tance and therefore strategic priority clear that nearly 60 percent of in-
organizations – as a key given to innovation as found earlier. novation leaders have an accountable
area for innovation leader- This can be partly explained by the executive versus only 27 percent in
ship. Do companies have fact that often the CEO is the driving the laggard peer group. Even the dif-
force, and in that role, serves as the ference with the next best perform-
an accountable innova- accountable executive for innovation. ing peer group – 50-75% success
tion executive, what types Survey respondents indicated the rate – is striking. Although this also
of innovation decisions following executives to be in charge suggests that relatively high success
are made by the corpo- of innovation: (in order of times rates can be attained without such an
mentioned, n=90) executive, it is clear that in order to
rate innovation function n Chief Innovation Officer become a true innovation leader this
and which constraints do n Chief Executive Officer might just make the difference.
respondents experience n Vice President Innovation

that inhibit their organiza-
tion from achieving busi-
ness innovation targets? Exhibit 13: Innovation executive


Does your organization have someone at the executive level who is formally
accountable for innovation?
66.9

33.1

Yes No

73
68 68
59

41
32 32
27

Yes No

Over 75% 50-74% 25-49% Less than 25%


Decision-making get the most value from innovation requirements imposed on the orga-
What types of innovation decisions efforts? How to make sure that the nization from ongoing innovation.
are made by the corporate innovation organization is investing money in Respondents say they need more
function or executive? (Exhibit 14). the right initiatives? How to assess flexibility to scale up their innova-
Determining the focus of innovation and prioritize innovation efforts on tion capacity where it is needed.
efforts – the innovation strategy – is an ongoing basis during the innova- The impact on the organization of
mentioned most often as a decision tion process? These are the kinds new business and operating models
taken by the corporate innovation of questions innovation executives is difficult to manage due to lack of
function or executive (by eighty struggle with. time, knowledge and capabilities in
percent of the respondents). The this area.
allocation of funds and innovation They also mention too rigid operat-
portfolio management as the second ing models that hamper their innova- Finally, respondents say they have
most often cited innovation decision tion efforts and success. Inflexible a challenge with respect to attain-
(67 percent of the respondents). operations are limiting the ability ing and keeping the right talent for
to innovate and adjust to the new innovation. Bringing in and keeping
Interestingly, as noted earlier, defin-
ing the innovation strategy and an
appropriate funding mechanism for
Exhibit 14: Decision-making
the innovation portfolio pose seri-
ous challenges for many companies. % of respondents,¹ n = 99
Since these are exactly the kind of What types of innovation decisions are made by the corporate innovation
decisions made by a formally ac- function / executive?
countable innovation function or ex-
ecutive, these survey results suggest
Determining the focus of innovation
that establishing such executive lead- efforts, the innovation strategy
80
ership is part of the solution towards
attaining innovation leadership.
Allocation of funds and 67
innovation portfolio management
Constraints
The most frequently mentioned hur-
Setting target and scope for innovation
dles to innovation success by survey 59
respondents are urgency of press-
ing day-to-day business demands Deﬁnition of innovation
– 54 percent of respondents – and performance metrics 58
financial constraints - 41 percent.
(See Exhibit 15). Follow-up interview
Go/no-go decisions during
results offer additional insights into the innovation process 56
what constrains organizations to
achieve their innovation targets.
Setting of innovation budget
49
Interview respondents say that in
addition to the constraints displayed
Commercialization decisions
in Exhibit 15, they also experience 46
the lack of clear innovation portfolio
targets, and inadequate monitoring M&A decisions
of progress towards these them, as a 23
barrier to achieving their innovation
targets. How to manage the portfolio ¹Multiple answers possible.

of innovation projects in order to

20

enough talented individuals who
can truly make a difference is hard. Exhibit 15: Constraints
Innovation personnel need to show
entrepreneurship and be able to
What most constrains your organization’s ability to achieve its
drive change, while also having
innovation targets?
specific content knowledge relevant
to the business. Additional compli-
cating factors are the lack of financial Urgency of pressing day-to-day 54
resources for training of key staff and business demands
the need to stay flexible in terms of
headcount. Financial constraints
41

The findings also offer some sugges-
tions on how to overcome these con- Lack of skills within the organization
24
straints. With regard to improving
innovation portfolio management,
the setting of clear innovation targets Inadequate leadership commitment
22
and key performance indicators
seems obvious. Furthermore, moni-
toring against these KPI’s and install- Lack of formal processes
20
ing a decision-making mechanism
which allows for the actual stopping
of innovation projects, when appro- Inadequate understanding of
18
market demands
priate, makes all the difference.

Inability to leverage
The hurdles with respect to inflex- innovative technology 16
ible operating models and lack
of talent for innovation could be
Failure to gain buy-in at lower
addressed through various forms of levels of the organization 10
partnerships. Respondents say they
are looking at the possibilities for the
in-sourcing of talent and entrepre-
neurship through M&A and other
ways of working with partners to
get access to the specific resources
and capabilities they are lacking
themselves, or that are difficult to
change within their existing operat-
ing model.


Spending Outlook

Having looked at the Anticipated Change in Spending Rapidly Developing Economies
current state of affairs Sixty-three percent of respondents When we asked respondents about
indicate they anticipate increased their innovation investment plans in
regarding the strategic innovation spending over the next rapidly developing economies, fifty-
outlook, capabilities, tech- 12 months. (Exhibit 16). More than six percent of respondents indicate
nology and the innovation forty-one percent expect an increase plans to increase innovation invest-
function of our survey in spending of up to 10%, whereas ments in rapidly developing econo-
twenty-one percent expect to be mies versus forty-four percent not
respondents, the spend- spending even more than an ad- planning to do so. (See Exhibit 17).
ing outlook for innova- ditional 10% on innovation in the China and India are considered the
tion is the final chapter to coming year. most attractive economies to invest
complete this innovation in, for innovation purposes, with
Only 3,6 percent of the executives respectively 37 and 30 percent of
leadership study. Again, surveyed expect their organization survey participants indicating these
the leader versus laggard to decrease spending on innovation as areas of focus.
perspective will help to in the coming period. Clearly, a posi-
unveil what drives the suc- tive economic outlook leads organi- Furthermore, it becomes clear from
zations to increase their spending the leader versus laggard compari-
cess of companies that on innovation in order to prepare for son that innovation laggards are less
view themselves as suc- new business opportunities in the willing to invest in RDE’s in general,
cessful innovators, in this economic upswing. with 36 percent of laggards saying
specific area. It addresses they are not planning to increase
the anticipated change
in innovation spending,
Exhibit 16: Anticipated change in spending
planned investments in
rapidly developing econo- % of respondents, n = 307

mies, innovation focus How do you anticipate that your organization will change
its innovation spending over the next 12 months?
areas and finally spending
plans with regard to M&A. 63,5

41.4

32.9

22.1

3.3
0.3

Increase Increase No change Decrease Decrease
signiﬁcantly (0-10%) (0-10%) signiﬁcantly
(>10%) (>-10%)

SPENDING INCREASE

Spending Outlook 23

investments in RDE’s, versus only
19 percent in the most successful Exhibit 17: Rapidly developing economies
innovators’ group. Leaders focus in
particular on China (24 percent of
the leader group) as a rapidly devel- In which rapidly developing economies is your organization planning
to increase its innovation investments?
oping economy target for innovation
investment. Also, it should be noted
that the laggard group lags behind 44
37
when it comes to investment plans in 30
24
Southeast Asia, with only 8 percent 18
15
of laggards versus 15 percent of lead-
ers planning to increase innovation
investments there. Eastern Southeast Latin India China Not
Europe Asia America planning
to increase
Investment Areas investments
When it comes to innovation invest- in RDE’s

ment our group of respondents is
not intending to change the focus of
their innovation efforts. New product 36
development and customer focused
innovation come out on top with 24
fifty-nine and fifty-four percent of re- 18 19 19
16
15 15
spondents respectively (Exhibit 18). 11 12
Although they have swapped places, 8 8

this is in line with earlier findings
that most innovation efforts are allo- +7% +5% -17%
cated to these two forms of innova- ¹Multiple answers possible.
tion, implying that respondents are
not intending to change the focus of
their innovation efforts. innovation capabilities, our survey investing in M&A to gain access to
shows that 30,4 percent are not likely new markets. The most successful
Another consistent finding is that to utilize M&A for this purpose and innovators (top quartile) anticipate
business model innovation ranks 20,9 percent do not know if their using M&A mainly to get access to
last on the innovator’s agenda when organization is considering M&A new technologies (27.5 percent of
it comes to the extent to which activity to this end. (See Exhibit 19). innovation leaders).
companies are willing to invest in
this area, both now and in the near This leads us to the finding that
future. What is also consistent is that nearly half of the respondents are
innovation leaders tend to invest less likely to invest in M&A to improve
in incremental product improvement their innovation capabilities. Most of
and more in business model innova- this investment will aim at acquiring
tion than others. This also implies access to new markets (32,7 percent)
that the gap in this area between the followed by gaining access to new
leaders and laggards will continue to technologies (26,8 percent) and to
grow moving forward. a lesser extent to gain access to tal-
ented people (19,3 percent).
M&A Investments
Looking at the field of mergers and Innovators with a success rate higher
acquisitions as a means to improve than 50% are particularly keen on

24

Exhibit 18: Investment areas


In which innovation areas is your organization most likely to invest?

24
New product development 59
22

26
Customer focused innovation 54
+4%
22

18
Business process innovation 47
21

15
Incremental product improvement 43 -7%
22

18
Business model innovation 31 +4%
14

Over 75% 50-74% 25-49% Less than 25%

Exhibit 19: M&A investments


Is your organization likely to invest in M&A to improve its innovation capabilities?

32,7
30,4
26,8
19
31
19
25 20,9
19,3
22 22 18
14
32 13
17 18 18

10 22
25 27.5
15 22.5
10

Yes, to gain Yes, to gain Yes, to gain access No Don’t know
access to new access to new to talented people
markets technologies

Over 75% 50-74% 25-49% Less than 25%

¹Multiple answers possible; Figures do not sum to 100% because of rounding; Respondents who answered ‘Other’ are not shown.

Spending Outlook 25

Implications
Section Title for Innovation Executives

Section Intro mean for innovation executives? If you
What does all this 3. Business model innovation will be the next big
take away only three findings from this innovation leader differentiator for companies aspiring to innova-
versus laggard study, we recommend you take away the tion leadership.
following implications:
Innovation leaders are slowly but steadily breaking away
1. It is time to match the importance of innovation from the pack by allocating increasingly more resources
with the degree of formal governance allocated to business model innovation. And there is a good
to it. reason for that. Our findings suggest that more value,
in terms of impact on business results, is to be expected
Given the strategic priority companies allocate to in- from business model innovation than from any other
novation and their corresponding spending plans, it form of innovation. Targeting new business opportuni-
is highly remarkable that only a few companies have ties in emerging markets – whether these are geographi-
organized innovation in the mature fashion it deserves. cal or digital – is much more likely to be successful
Many of the innovation bottlenecks regarding internal when approached outside of the traditional competitive
alignment, prioritization, funding, balancing long- and landscape by means of new, game-changing models for
short-term objectives and the definition of an innova- value creation.
tion strategy can be solved by establishing a formally
accountable innovation function. Our innovation leader However, new ways of doing business often require
versus laggard comparison shows that in-novation lead- changes to the way a company currently operates.
ers have advanced beyond other innovators by having Therefore one prerequisite for successful business model
an accountable innova-tion executive or other form of innovation is the ability to follow up with adequate
formal innovation governance structure that deals with changes to the existing operating model, in order to
this kind of decision-making. deliver the value as designed by the new business
model(s). Companies should be very concerned with
2. The ability to work effectively with external developing the capability to transform their operating
partners will determine who will be the new models when required.
innovation leaders and laggards.

If one thing became clear in this innovation leader-
ship study, it is the enormous underutilized potential
for innovation hidden in the involvement of external
parties into the innovation process. Although not a new
phenomenon, very few companies have yet mastered the
skill of working together effectively with external part-
ners to improve their innovation results. This can take
many forms: from the involvement of suppliers, custom-
ers and other third parties in the innovation process, up
to the acquisition of missing capabilities or resources –
such as technology and talent.

Innovation leaders may have outpaced their peers by
simply being better at integrating external parties into
their innovation process, leveraging the broader innovation
potential as a result. The good news is that there is much to
gain for innovation laggards. Improving capabilities in this
area offers a unique opportunity to catch up without mak-
ing huge investments in developing a company’s internal
innovation capabilities, but focusing on what it does best.

Footer Right; Document Title Akkurat Bold Innovation Executives
Implications for 6.5pt; maximum 1 line 27

Appendix

Survey Methodology For Further Contact
As the knowledge partner for the World Innovation For additional information regarding this study or
Forum, Capgemini Consulting conducted an online Capgemini Consulting’s thinking on innovation, please
survey using HSM’s network of conference participants contact one of the following innovation experts:
and attendees, plus a selection of Capgemini Consulting’s
client base. Europe

The online survey, in the field from April 07 to May 07, Freek Duppen
2010, generated responses from 375 executives around the Managing Consultant
world, representing the full range of industries, regions, +31 6 2900 7957
functional specialties, and seniority. In addition, 13 Capgemini Consulting – The Netherlands
follow-up interviews were conducted to get an even better freek.duppen@capgemini.com
understanding of the context of the survey findings and to
add depth to the survey result interpretation. The Americas

The methodology differentiates between innovation lead- Dianne Inniss
ers and laggards based on a self-assessment by survey Managing Consultant
respondents of their innovation success rate. The innova- +1 404 806 4986
tion success rate is determined by the percentage of in- Capgemini Consulting – North America
novation efforts that has a positive material impact on the dianne.inniss@capgemini.com
company’s business results.

We distinguish between 4 categories of innovation success
based on this rate, namely: ‘Less than 25%’, ‘25-49%’, ‘50-
74%’ and ‘Over 75%’ of innovation efforts having a posi-
tive material impact on the company’s business results.
The ‘Less than 25%’ category represents the innovation
laggard group and the ‘Over 75%’ category the innovation
leader group of analysis.

Acknowledgements
We would like to thank the 375 innovation executives
from around the world who responded to Capgemini
Consulting’s Global Innovation Survey 2010. We would
like to express our gratitude for their participation in this
survey – you have played an important part in supporting
this research.

We would specifically like to acknowledge the innovation
executives who generously shared their time and insights
with us in the follow-up interviews.

Finally, we would like to thank Koen Klokgieters, Eline
Vermeulen, Rachida Bouzidi and the entire Business
Innovation team for their support and contribution to
the development of this survey. Also, we would like to
acknowledge Roy Lenders and Michael Schulte for their
executive support.

28

About Capgemini
®
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