Global Innovation Leadership Study - 2012

Innovation Leadership StudyManaging Innovation: An Insider PerspectiveApril 2012 Transform to the power of digital

This Innovation Leadership Study provides insight into the formal and informalmechanisms for managing innovation  Introduction Results Implications Demographics Introduction (1/3) Innovation Leadership Study Paddy Miller Koen Klokgieters Professor of Managing Vice President People in Organizations Business Innovation Dear Participant, Dear Participant, This Innovation Leadership Study aims to understand how those This joint research by IESE Business School and Capgemini leading and managing innovation in their organizations think about Consulting provides insight into both the formal and informal the innovation function. mechanisms for managing innovation. When looking at the informal mechanisms for managing innovation With respect to the formal part of managing innovation, we see we notice that the accountability for realizing growth is the main that even though innovation is considered a highly strategic topic it motivational driver for senior executives to be involved in is not organized in such a way. Innovation leaders understand the innovation. Many of the innovation leaders and managers we need to have an explicit innovation strategy and to support it with surveyed have been tasked with creating a culture of innovation formal innovation governance mechanisms. However, only a but interestingly enough it is the CEO and peers that are considered minority of respondents agree they have an innovation strategy or the main drivers of an innovation culture within companies. I would an effective governance for innovation. I hope you will find these like to thank you for your contribution to this research. survey results useful for leading and managing innovation. Best regards, Best regards, Paddy Miller Koen Klokgieters Copyright © 2011 Capgemini Consulting. All rights reserved. 3

The study aims to understand how those leading and managing innovation in theirorganizations think about the innovation function  Introduction Results Implications Demographics Introduction (2/3) Study Overview Objectives FORMAL MECHANISMS  The Innovation Leadership Study aims to understand how those leading and managing innovation in their organizations think about the innovation STRATEGY GOVERNANCE function. Content  It looks at both formal (strategy, governance) and informal (leadership, culture) mechanisms for managing innovation. Approach Managing  It is based on both qualitative (interviews) and quantitative research (survey). Innovation  We have conducted in-depth interviews with innovation leaders from various industries on how they lead and manage innovation.  Subsequently a broad-scale survey targeting innovation leaders has been carried out to validate our hypotheses and generate additional insights. Process LEADERSHIP CULTURE  25 interviews have been conducted, most between July and September 2011.  The online survey, in the field from September 12 to October 12 2011, INFORMAL MECHANISMS generated responses from 260 executives around the world, representing the full range of industries, regions, functional specialties, and seniority.  The final report – integrating all findings – is to be expected in early 2012. Copyright © 2011 Capgemini Consulting. All rights reserved. 4

Our leader versus laggard methodology allows us to uncover good practices inmanaging innovation  Introduction Results Implications Demographics Introduction (3/3) Innovation Success Rate Leader versus Laggard Perspective% of respondents, n = 260 Survey MethodologyCould you please estimate your organization’s innovation  The methodology differentiates between innovation leaders andsuccess rate? laggards based on a self-assessment by survey respondents of their innovation success rate.  The innovation success rate is determined by the percentage of innovation efforts that have a positive material impact on the company’s business results. 38% 37%  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 positive material impact on the company’s business results. 18%  The ‘Less than 25%’ category represents the innovation laggard group and the ‘Over 75%’ category the innovation leader group of analysis. 7% Survey Population Less than 25% 25-50% 50-75% Over 75%  The exhibit to the left shows how respondents are distributed over these four categories. Thirty-eight percent of respondents LAGGARDS LEADERS fit the innovation laggard profile, whereas seven percent belong to the innovation leaders group. Copyright © 2011 Capgemini Consulting. All rights reserved. 5

Forty-three percent of respondents have a formally accountable innovation executive Introduction  Results Implications Demographics Results: Innovation Function (1/3) Formal Accountability for Innovation Leader versus Laggard Perspective% of respondents, n = 260Does your organization have someone at the executive Less than 25% 25-50% 50-75% Over 75%level who is formally accountable for innovation? +31% 72% 57% 59% 55% 49% 51% 43% 45% 41% 28% Yes No Yes No 43% of respondents have someone at the executive level 59% of innovation leaders have an accountable executive who is formally accountable for innovation versus only 28% in the laggard peer group Copyright © 2011 Capgemini Consulting. All rights reserved. 7

Developing an innovation ecosystem and strategy are considered to be the innovationfunction’s main role Introduction  Results Implications Demographics Results: Innovation Function (2/3) Innovation Function’s Role% of respondents, n = 260What do you consider to be the innovation function’s main role? Top-1 Top-2 Top-3Formulating and communicating the innovation strategy 31% 15% 11% Monitoring and analysis of the external environment 7% 11% 9% Optimizing the innovation processes and governance 14% 16% 18% Building and nurturing an innovation ecosystem 32% 19% 13% ‘Selling’ of innovation within the organization 5% 12% 12% Motivating employees to innovate 6% 9% 13% Running innovation workshops/events 2% 4% 7% Developing employees’ innovation skills 5% 14% 17% The innovation function’s main role is considered to be the development of an innovation ecosystem and strategy Copyright © 2011 Capgemini Consulting. All rights reserved. 8

The absence of a well-articulated innovation strategy is the biggest constraint toreaching innovation targets Introduction  Results Implications Demographics Results: Innovation Function (3/3) Innovation Constraints% of respondents, n = 260What most constrains your organization’s ability to achieve its innovation targets? Top-1 Top-2 Top-3 The absence of a well-articulated innovation strategy 24% 9% 13% Lack of understanding of the external environment 13% 15% 11% No formal innovation governance structure 7% 12% 7% Lack of formal innovation processes 7% 9% 12% Inadequate innovation budget allocation 11% 10% 10% Lack of top management commitment to innovation 11% 9% 11% No innovation-friendly culture 11% 12% 9%Lack of clarity on what innovation behaviors actually are 9% 12% 11% Inadequate innovation skills within the organization 6% 12% 16% The absence of a well-articulated and/or communicated innovation strategy is the top-1 innovation constraint Copyright © 2011 Capgemini Consulting. All rights reserved. 9

The majority of respondents do not have an explicit innovation strategy Introduction  Results Implications Demographics Results: Innovation Strategy (1/3) Innovation Strategy Leader versus Laggard Perspective% of respondents, n = 241Does your organization have an explicit innovation Less than 25% 25-50% 50-75% Over 75%strategy? +36% 71% 65% 58% 53% 55% 45% 47% 42% 35% 29% Yes No Yes No 65% of innovation leaders have an explicit innovation 42% of respondents have an explicit innovation strategy strategy versus only 29% of the laggards Copyright © 2011 Capgemini Consulting. All rights reserved. 11

The innovation strategy most frequently includes statements on alignment withcorporate strategy, technology and markets Introduction  Results Implications Demographics Results: Innovation Strategy (2/3) Innovation Strategy Elements Leader versus Laggard Perspective% of respondents,¹ n = 98Does it include statements on any of the following? Less than 25% 25-50% 50-75% Over 75% Alignment with corporate strategy 80% 38% Technology 64% 37% Targets +17% Markets 62% 57% Innovation culture 58% 55% Innovation processes 55% 46% Internal capabilities 47% 18% Partners +9% Targets 44% 61% Partners 40% 55%¹Multiple answers possible; Respondents who answered ‘Other’ are not shown. Targets and partners are the least frequently included Leaders are more keen to include statements on targets and elements of an innovation strategy partners in their innovation strategies than laggards Copyright © 2011 Capgemini Consulting. All rights reserved. 12

It is often developed by a combination of top management and innovation experts, andcommunicated widely inside the organization Introduction  Results Implications Demographics Results: Innovation Strategy (3/3) Innovation Strategy Development Innovation Strategy Communication% of respondents,¹ n = 98 % of respondents,¹ n = 98How is your innovation strategy developed? How is your innovation strategy communicated in your organization? Developed by top management 13% Not communicated at all 2% Developed by top management and BU 6% heads Developed by top management, BU heads, Communicated to top management 30% 18% and internal innovation experts layers only Developed by top management, BU heads, 11% internal and external innovation experts Communicated widely inside the 44% Developed by employees, approved by top organization 2% management Developed by employees, validated by BU Communicated widely inside the 9% organization and used as a daily 15% heads, approved by top management Developed by BU heads, approved by top guideline for innovation 2% management Communicated widely inside and Developed by innovation experts (internal 19% 20% outside the organizationand external), approved by top management¹Respondents who answered ‘Other’ are not shown. ¹Respondents who answered ‘Other’ are not shown.The development of an innovation strategy is predominantly 19% of respondents communicate their innovation strategy a top-down exercise also outside the organization Copyright © 2011 Capgemini Consulting. All rights reserved. 13

Only thirty percent of respondents agree they have an effective organizational structurefor innovation Introduction  Results Implications Demographics Results: Innovation Governance (1/4) Organizational Structure% of respondents,¹ n = 227How strongly do you agree or disagree with the following statements regarding your organizational structure forinnovation? We have an effective organizational structure for innovation 9% 36% 21% 23% 7% We have a formal organizational structure for innovation 15% 30% 15% 25% 12% We have a well defined governance structure to manage 12% 33% 19% 24% 11% innovation in our organization We have clearly defined roles and responsibilities with 9% 31% 24% 25% 9% regard to innovation Strongly disagree Disagree Neither disagree, nor agree Agree Strongly agree¹Respondents who answered ‘Not Applicable’ are not shown. 45% of respondents do not have a formal organizational structure for innovation Copyright © 2011 Capgemini Consulting. All rights reserved. 15

Thirty-nine percent do not have a formal decision-making process for managinginnovation Introduction  Results Implications Demographics Results: Innovation Governance (2/4) Decision-making Process% of respondents,¹ n = 227How strongly do you agree or disagree with the following statements regarding your decision-making process forinnovation? We have an effective decision-making process to manage 8% 31% 26% 25% 8% innovation We have a formal decision-making process for managing 10% 29% 15% 30% 14% innovation We have a well defined process to prioritize, and allocate 8% 33% 20% 26% 11% time and funding to, innovation projects We have a clearly defined process for stage gating, and 9% 26% 18% 30% 15% making go/no go decisions Strongly disagree Disagree Neither disagree, nor agree Agree Strongly agree¹Respondents who answered ‘Not Applicable’ are not shown. Respondents disagree most with having a well defined process for prioritization and funding of innovation projects Copyright © 2011 Capgemini Consulting. All rights reserved. 16

A stunning fifty-four percent of survey participants indicate not having a formal KPIsystem for promoting innovation Introduction  Results Implications Demographics Results: Innovation Governance (3/4) KPI System% of respondents,¹ n = 227How strongly do you agree or disagree with the following statements regarding your KPI system for innovation? We have an effective KPI system to promote innovation 15% 41% 21% 17% 4% We have a formal KPI system for promoting innovation 15% 39% 14% 24% 6% We have well defined targets and scope for innovation 11% 34% 17% 29% 7% We have a clearly defined performance measurement and 13% 39% 20% 19% 7% rewarding of innovation success Strongly disagree Disagree Neither disagree, nor agree Agree Strongly agree¹Respondents who answered ‘Not Applicable’ are not shown. Only 26% percent agree they have clearly defined performance measurement and rewarding of innovation success Copyright © 2011 Capgemini Consulting. All rights reserved. 17

Fewer than a quarter of the respondents have an effective organizational alignment ofinnovation efforts Introduction  Results Implications Demographics Results: Innovation Governance (4/4) Organizational Alignment% of respondents,¹ n = 227How strongly do you agree or disagree with the following statements regarding your organizational alignment ofinnovation? We have an effective organizational alignment of innovation 9% 36% 27% 19% 5% efforts We have a formal organizational alignment mechanism for 9% 35% 21% 24% 7% our innovation efforts We have a well defined process for alignment of our 8% 32% 19% 30% 7% innovation efforts with corporate strategy We have clearly defined how to align innovation efforts 8% 37% 22% 25% 4% across the organization and utilize internal capabilities Strongly disagree Disagree Neither disagree, nor agree Agree Strongly agree¹Respondents who answered ‘Not Applicable’ are not shown. Respondents are most positive about the alignment of innovation efforts with corporate strategy Copyright © 2011 Capgemini Consulting. All rights reserved. 18

Accountability for realizing growth is the main driver for senior executives to be involvedin innovation Introduction  Results Implications Demographics Results: Innovation Leadership (1/2) Executive Motivation for Innovation Leader versus Laggard Perspective% of respondents,¹ n = 241What do you think motivates senior executives to be Less than 25% 25-50% 50-75% Over 75%involved in innovation leadership? 46% Accountability for realizing growth 40% +19% 46% 51% 65% 15% Intrinsic creative motivation 11% 15% 19% 18% 17%Feel responsible for advancing innovation in 28% 22% the organization 23% 12% 15% Innovation is considered a high status area 17% 14% 7% 6%¹Respondents who answered ‘Other’ are not shown. Accountability for growth is the main driver for senior Our leader group stresses accountability for growth as the executives to be involved in innovation driver for senior executives to be involved in innovation Copyright © 2011 Capgemini Consulting. All rights reserved. 20

The exciting nature of innovation work, the desire to improve things, and teamworkaspects motivate employees most to be involved in innovation Introduction  Results Implications Demographics Results: Innovation Leadership (2/2) Employee Motivation for Innovation% of respondents,¹ n = 241How strongly do you agree or disagree with the following statements with respect to what motivates employees to beinvolved in innovation? Strongly Agree / Agree Disagree / Strongly Disagree Innovation is considered to be exciting work 91% 4% Desire to improve things 89% 5%Like being part of a team or task force for something new 87% 5% An opportunity for self-realization 75% 7% Like being pulled out of everyday 53% 17% Interesting travel and conferences 26% 35%¹Respondents who answered ‘Neither disagree, nor agree’ or ‘Not Applicable’ are not shown. Employees are particularly involved in innovation work because of its exciting nature, the desire to improve things and its teamwork aspects Copyright © 2011 Capgemini Consulting. All rights reserved. 21

Two-thirds of our respondents have been tasked with creating an innovation culture Introduction  Results Way Forward Demographics Results: Innovation Culture (1/3) Innovation Culture Leader versus Laggard Perspective% of respondents, n = 236Have you been tasked with creating a culture of Less than 25% 25-50% 50-75% Over 75%innovation in your organization? 86% 66% 65% 65% 57% 34% 43% 35% 35% 14% Yes No Yes No 66% of respondents have been tasked with creating a Innovators with a success rate of 50% or higher are more culture of innovation often tasked with creating an innovation culture than less successful innovators Copyright © 2011 Capgemini Consulting. All rights reserved. 23

Openness, innovation as a core value, and the sharing of information are most oftenmentioned as the elements that constitute an innovation culture Introduction  Results Way Forward Demographics Results: Innovation Culture (2/3) Innovation Culture Elements% of respondents,¹ n = 236Which elements do you think constitute a culture of innovation? Openness (to others’ ideas, to change, to exchange) 84% Innovation considered a core value of the company 74% Sharing information, ideas and results 69% Listening to ideas, pushing them forward, making sure they’re followed 59% Acting quickly even outside plan to capture opportunities 56% People throwing out ideas, discussing them, excited about them 54% Facilitating and guiding ideas 54% Code of trust 41% People are aware they have to have new ideas and bring them up 33% Going in directions you believe in 28%¹Multiple answers possible; Respondents who answered ‘Other’ are not shown. Our leader versus laggard comparison revealed that innovation leaders are more concerned with facilitating and guiding ideas than others Copyright © 2011 Capgemini Consulting. All rights reserved. 24

The CEO is considered the main driver of an innovation culture within companies Introduction  Results Way Forward Demographics Results: Innovation Culture (3/3) Innovation Culture Source% of respondents,¹ n = 236Where does an innovation culture come from? CEO 69% Peers, people you work with 59% Managers in general 51% Learning and development, training 36% Innovation managers 33% Chief Innovation Officer and innovation office 32% Executive sponsor 30% Internal social media collaboration 24%¹Multiple answers possible; Respondents who answered ‘Other’ are not shown. In addition to the CEO, peers and managers in general are most often mentioned as the source of an innovation culture Copyright © 2011 Capgemini Consulting. All rights reserved. 25

What does all this mean for executives responsible for leading and managinginnovation? Introduction Results  Implications Demographics Implications Drivers for Innovation INNOVATION STRATEGY ORGANIZATIONAL INNOVATION INNOVATION FUNCTION DESIGN LEADERSHIP CULTURE • The innovation function • Traditional strategy • Limited organizational • Real innovation • Innovation culture is a is in the spotlight to development no longer design for innovation is leadership requires highly important improve the suffices in the pursuit of impairing growth at large executives to reduce the mechanism to enable organization’s ability to sustainable growth under organizations. level of disconnect agility and be able to achieve its innovation high uncertainty – there between themselves and survive in a continuous • There is no one size fits targets by formulating a is a need to move employees. change environment. all when it comes to org well-articulated strategy development to design for innovation but • Our leader versus laggard • Our research on innovation strategy and the outer peripheries of the correlation between perspective shows the innovation culture shows improving its the company. having a formalized relation between that – among other understanding of the innovation governance company size and things – openness to external environment. and the reported reported innovation others’ ideas, to change, innovation success rate success rate, suggesting to exchange, and acting suggests that there is that it is easier to drive quickly even outside the much to gain by innovation in small plan to capture improving the formal organizations. opportunities, are mechanisms for considered important managing innovation elements of a culture. Innovation should be in the DNA of the company as well as in its leaders and employees Copyright © 2011 Capgemini Consulting. All rights reserved. 27

Two hundred and sixty respondents contributed to this survey Introduction Results Implications  Demographics Demographics (1/3) Position Role% of respondents, n = 260 # of respondents, n = 260Respondents’ position within their organizations What is your role in the organization? Chief Executive Officer 24 9% Chief Innovation Officer 23 20% Chief Operating Officer 3 10% Vice President of Innovation 11 C-Level Vice President of Strategy 8 VP Vice President of R&D 4 Director Director of Innovation 36 13% Manager Director of Strategy 422% Analyst Director of R&D 4 Other Manager of Innovation 41 Manager of Business Development 9 Manager of Marketing 8 27% Other 85 Many respondents are directly responsible for leading and 60% of respondents are at the director level or higher managing innovation Copyright © 2011 Capgemini Consulting. All rights reserved. 29

Innovation and corporate strategy functional areas represent 60% of the respondents Introduction Results Implications  Demographics Demographics (2/3) Functional Area Company Size% of respondents, n = 201 % of respondents, n = 201What is your functional area? What are your company’s annual revenues? 18% Innovation 18% 1% 37% Corporate Strategy 4% R&D 7% Marketing Less than €500m8% Operations 43% €500m - €1b IT8% €1b - €10 billion HR 24% More than €10 billion 23% Sales 15% Finance Supply Chain 16% Other (please specify) 18% 15% 60% of respondents work within innovation or corporate There is a 50/50 split between big and small companies strategy represented Copyright © 2011 Capgemini Consulting. All rights reserved. 30

The survey results represent the full range of industries and geographical regions Introduction Results Implications  Demographics Demographics (3/3) Geography Industry% of respondents, n = 201 % of respondents, n = 201Respondents per geographical region In which industry segment does your company operate? 3% 6% Professional Services 19% 2% High Tech 13% Life Sciences 13% North America Consumer Products 13% 40% South America Financial Services 12% Europe Public Sector 9% Telecommunications and Media 9% Africa Energy, Oil & Gas 7% Asia Automotive 7% Australia 46% Healthcare Providers 6% Transportation and Logistics 5% 3% Retail 4% Utilities 3% Other 19% 37 countries are represented in this study with most The majority of respondents work in professional services, respondents based in Europe and North America high tech, life sciences or consumer products Copyright © 2011 Capgemini Consulting. All rights reserved. 31

For more information regarding this study, please contact: Koen Klokgieters Vice President – Capgemini Consulting Mob: +316 5112 3259 koen.klokgieters@capgemini.com Paddy Miller Professor – IESE Business School Mob: +34 93 253 4200 pmiller@iese.edu 32

Global Innovation Leadership Study - 2012

by Koen Klokgieters on Apr 07, 2012

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