Global innovation survey

Global Innovation Survey
Innovation Leader versus Laggard Study

December, 2010

Contents

 About the study
 Key findings related to:
I. Strategic outlook
II. Capabilities
III. Technology
IV. Innovation function
V. Spending outlook
 Implications for executives

Copyright © 2010 Capgemini. All rights reserved. 2

As the knowledge partner of the World Innovation Forum, Capgemini has
recently completed its innovation leader versus laggard study
About the study (1/2) – Background

Study background Key research areas

As we started off this study on the occasion of the World Innovation Forum,
the objectives were twofold: not only did we want to understand the current
state of innovation, but we also wanted to identify what drives the success of I. STRATEGIC OUTLOOK
companies that view themselves as successful innovators. The result is our
second innovation leader versus laggard study. It covers five key areas that
affect a company’s innovation success:

I. Amidst ongoing economic uncertainty, but with increasing indicators of II. CAPABILITIES
economic recovery, survey respondents were asked about their strategic
outlook with regard to innovation.
II. We specifically looked at the current state of affairs concerning an
organization’s capability to innovate: innovation strategy, innovation III. TECHNOLOGY
management, and the involvement of external parties in the process.
III. In an era of digital transformation, it is unthinkable to do research on
innovation leadership without taking into account the role of technology.
We asked respondents about the impact of technological innovation.
IV. INNOVATION FUNCTION
IV. How is the innovation function within companies fulfilled? This global
innovation survey also addresses the innovation function – as a key area
for innovation leadership.
V. Finally, the spending outlook for innovation completes this innovation
leadership study. It unveils what drives the success of companies that V. SPENDING OUTLOOK
view themselves as successful innovators.


Our methodology differentiates between innovation leaders and laggards,
based on their innovation success rate
About the study (2/2) – Methodology

Study methodology Innovation success rate
% of respondents, n = 375
 As the knowledge partner for the World Innovation Forum,
Capgemini Consulting conducted an online survey using
What percentage of your innovation efforts has a positive
HSM’s network of conference participants and attendees¹,
material impact on the business results?
plus a selection of Capgemini Consulting’s client base.
 The online survey, in the field from April 07 to May 07, 2010,
40,8
generated responses from 375 executives around the world,
representing the full range of industries, regions, functional
specialties, and seniority. In addition, 13 follow-up interviews
were conducted to get a better understanding of the context 24 10,7
of the findings and to add depth to the result interpretation.
24 24,5
 The methodology differentiates between innovation leaders
and 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 has a positive material impact on the company’s 10,7
business results.
 We distinguish between 4 categories of innovation success
based on this rate: ‘Less than 25%’, ‘25-49%’, ‘50-74%’ and
‘Over 75%’ of innovation efforts having a positive material
impact on the business results. The ‘Less than 25%’ category Less than 25% 25-49% 50-74% Over 75%
represents the innovation laggard group and the ‘Over 75%’ LAGGARDS LEADERS
category the innovation leader group of analysis.
¹Event organizer.

Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


Companies consider innovation a top strategic priority and primarily focus on
identifying new business opportunities
I. Strategic outlook (1/3)

Innovation is considered a top strategic priority Identifying new business opportunities is the
primary area of focus
% of respondents,¹ n = 375 % of respondents,¹ n = 323

Where does innovation rank among your organization’s As the global economy begins to rebound, what is your
strategic priorities? organization’s primary area of focus?
76,5
52
Identifying new business opportunities to
46
take advantage of the upturn

Maintaining cost control and lean
23
operations
24,5
20,5
Increasing productivity of existing assets 20

2,9 Preparing for hyper growth in a new
10
business cycle
Top priority Top-three priority Top-ten priority Not a priority
TOP-3 PRIORITY
¹Figures do not sum to 100% because of rounding.

Interestingly, innovation leaders are preparing themselves for hyper growth,
whilst laggards are focusing on increasing productivity of existing assets

Leaders are preparing for hyper growth, Organizations are preparing differently for growth,
whilst laggards focus on existing assets to take advantage of an economic upturn
% of respondents,¹ n = 323

As the global economy begins to rebound, what is your  Laggards focus on optimizing current operations through
organization’s primary area of focus? lean operations and increasing the productivity of existing
assets, as a platform for growth.
 Leaders, who have already created a lean organization
42 during the downturn, focus on expanding into emerging
Identifying new business opportunities to
take advantage of the upturn markets through: a) building up their sales force; b)
44 development of go-to-market & product launch
capabilities; c) the creation of new business and
13
Maintaining cost control and lean operating models.
operations  Companies that have not cut back on innovation and R&D
21
efforts during the downturn are clearly better positioned to
10 outperform their peers in the long-term.
Increasing productivity of existing assets -21%
 Leaders are heavily betting on an upturn. This could
31 potentially result in sustainable competitive advantages in
35 terms of early-mover advantages and the capture of
Preparing for hyper growth in a new market share in new or emerging markets.
+30%
business cycle
5

Over 75% 50-74% 25-49% Less than 25%
¹Figures do not sum to 100% because of rounding. Global Innovation Survey

Most innovation efforts are put into customer-focused innovation, with leaders
putting relatively more effort into business model innovation than others

Most innovation efforts are put into customer- …but leaders put relatively more effort into
focused innovation… business model innovation than others
% of resources allocated to the following,¹ n = 352 % of resources allocated to the following,¹ n = 352

How does your organization allocate its innovation How does your organization allocate its innovation
efforts? efforts?

24
Customer focused innovation 24 Customer focused innovation
24
22
New product development 23 New product development
23
18
Incremental product improvement 20 Incremental product improvement -5%
23
18
Business process innovation 18 Business process innovation
18
18
Business model innovation Business model innovation +5%
14
13

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

¹Figures do not sum to 100% because of rounding. Global Innovation Survey

Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


With regard to innovation capabilities, most concern among respondents
exists around the formal innovation governance structure
II. Capabilities (1/3)

Executive level commitment and the idea generation process Most concern exists around the formal
are the best developed capabilities innovation governance structure
% of respondents, n = 310

Please rate how strongly you agree or disagree with the following  Noteworthy is the issue of formal innovation
statements related to your innovation management capabilities: governance structure; the highest
percentage of respondents – twenty percent
We have a high degree of executive level commitment to
33 32 15 13 7 – strongly disagree that they have a formal
innovation
governance structure (versus 21 percent
We have a formal innovation governance structure to
21 27 12 21 20 strongly agreeing to the statement).
govern innovation in our organization
We actively facilitate the idea generation and enablement  Follow-up interviews confirm that
16 39 24 15 6
process with appropriate culture and tools respondents are either very content with how
Employees at all levels and functions in our organization are innovation is governed within their
15 30 21 25 9 organization or see ample room for
involved in the process of innovation
We have strong new product development capabilities to improvement.
14 36 21 19 9
drive innovation in our organization  In particular, areas of concern include:
We have well understood metrics and methods to evaluate
14 27 22 26 12 - Balancing between long-term and short-
innovation performance and success in our organization
term innovation success.
We have a clearly defined way to manage our innovation
13 28 26 21 12 - Finding alignment between corporate and
portfolio and prioritize innovation efforts in our organization
We have well-defined processes for promoting and business unit-level innovation.
13 26 20 29 13
harvesting innovation in our organization - Improving the funding mechanism.
Employees at all levels have a clear understanding of how
7 24 28 29 12
technology changes impact our innovation efforts
Strongly agree Somewhat agree Neither agree nor disagree Somewhat disagree Strongly disagree Global Innovation Survey

Key opportunities for innovation laggards lie in the involvement of external
parties in the innovation process, including customers

Leaders have advanced to a high level of utilizing This includes the involvement of customers,
external third parties for their innovation efforts although a higher level can still be obtained here
% of respondents, n = 331 % of respondents, n = 336

To what extent do you use external third parties to support How involved are your customers in your innovation
your innovation efforts? efforts?

13
We do not use external parties to We do not actively engage customers in
6 6 15 13 11,5 11
support our efforts at innovation our innovation efforts
21

19
We consult customers on their changing
We engage third parties on an ad-hoc needs and gather feedback on ideas 38
25 39 33 39 35,0
basis for specific innovation projects which are generated in-house
33

We use a few select partners in well- We maintain ongoing dialogue with our 44
defined relationships to support our 25 31 32 35 31,7 customers to support multiple elements 37
innovation efforts of the innovation process
32
We actively engage a broad cross 25
Our customers work closely alongside
section of external partners in formal
44 24 20 14 21,8 our employees, even integrated with our 15
and informal ways to support our
project teams, to support innovation
innovation efforts 14

Over 75% 50-74% 25-49% Less than 25% Global Innovation Survey

Innovation leaders particularly engage customers in the new product
development process

Respondents engage customers in multiple parts …but respondents with high innovation success
of the company’s internal value chain… rates particularly involve customers in NPD

In which parts of the value chain do you engage your  At first sight there does not seem to be one particular area
customers? where respondents involve their customers in the
65 66 innovation process; all three suggested areas - new
57 product development, marketing & sales, service and
after sales support - are mentioned by a significant
percentage of respondents.
 However, leaders particularly involve their customers in
new product development, whereas laggards put most
effort into involving customers in marketing & sales
activities.
We engage customers in We engage customers in We engage customers in
Marketing & Sales Service and After Sales New Product Development  Possibly, involving customers in new product development
Support has a higher impact on the innovation success rate than
44
40 37 involving them in marketing and sales, or service and
33 35 33 32 35
29 27 30 26
after sales support.
 In other words, to realize a direct material impact on the
business results from your innovation efforts, involving
customers in NPD is ought to prevail above all other
areas.
Over 75% 50-74% 25-49% Less than 25%
¹Multiple answers possible. Global Innovation Survey

Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


There is a discrepancy between the anticipated impact of emerging
technologies and the extent to which companies are prepared for this change
III. Technology

Emerging technologies are expected to have a …however, few companies feel highly capable of
significant impact on company’s value chains… adapting rapidly to anticipated changes
% of respondents, n = 324 % of respondents, n = 326
% of resources allocated to the following,¹ n = 352
What do you anticipate to be the primary impact of How capable is your organization of adapting rapidly to
technological innovation on your organization’s value chain? How does your organization allocate its innovation
emerging technological innovations in the short / mid-term?
efforts?

24
It is unclear how technological innovation Customer focused innovation
Not at all capable and
7 3
will impact our value chain unprepared 24
9
22
New product development 10
Emerging technologies will have only a 23
13 Not very capable 24
limited impact on our value chain
18
29
Incremental product improvement -5%
Emerging technologies will provide 50
23
incremental productivity/service
enhancements in targeted areas of our 42 Somewhat capable 56 18
value chain Business process innovation 53
18
Emerging technologies will fundamentally 40
alter the way we do business and interact 38 Highly capable and prepared 18 18
with our customers and business partners Business model innovation +5%
10
13

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

Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


Only one-third of the companies surveyed – but nearly sixty percent of the
innovation leaders – has an accountable innovation executive
IV. Innovation function (1/2)

Only one-third of the companies surveyed has an …who is responsible for the innovation strategy
accountable executive for innovation… and innovation portfolio management
% of respondents, n = 314 % of respondents,¹ n = 99

Does your organization have someone at the executive What types of innovation decisions are made by the
level who is formally accountable for innovation? corporate innovation function / executive?

66,9
Determining the focus of innovation efforts,
80
the innovation strategy
Allocation of funds and innovation portfolio
33,1 67
management
Setting target and scope for innovation 59
Definition of innovation performance
58
metrics
Yes No
Go/no-go decisions during the innovation
56
73 process
68 68
59 Setting of innovation budgets 49
41
32 32 27 Commercialization decisions 46

M&A decisions 23

Yes No
Over 75% 50-74% 25-49% Less than 25%

A wide variety of innovation constraints have been identified by our study,
which need to be tackled by the innovation function
IV. Innovation function (2/2)

Survey findings indicate day-to-day business Interview findings offer additional insights into
demands and financial constraints as key hurdles potential innovation constraints – and solutions

What most constrains your organization’s ability to  Interview respondents say that they are constrained by a
achieve its innovation targets? lack of clear innovation portfolio targets, and inadequate
monitoring of progress towards these targets.
Urgency of pressing day-to-day business  They also mention too rigid operating models that hamper
54
demands their innovation efforts and success. Inflexible operations
limit the ability to innovate and adjust to the new
Financial constraints 41
requirements imposed on the organization.
Lack of skills within the organization 24  Attaining and keeping the right talent for innovation is a
challenge as well. Recruiting and keeping enough
Inadequate leadership commitment 22 talented individuals who can truly make a difference
proves to be hard.
Lack of formal processes 20
 Respondents say they are looking at the possibilities for
Inadequate understanding of market the in-sourcing of talent through M&A and other ways of
18
demands working with partners to get access to the specific
Inability to leverage innovative technology 16 resources and capabilities they lack themselves, or that
are difficult to change within their existing operating
Failure to gain buy-in at lower levels of the model.
10
organization


Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


The large majority of respondents anticipates an increase in their innovation
spending, particularly in NPD and customer focused innovation
V. Spending outlook (1/2)

The large majority of respondents is planning an Leaders plan to invest more in customer focused-
increase in innovation spending and business model innovation than others
% of respondents, n = 307 % of respondents,¹ n = 307
How do you anticipate that your organization will change In which innovation areas is your organization most likely
its innovation spending over the next 12 months? to invest? your organization allocate its innovation
How does
efforts?
63,5
24
New product development 59 24
41,4 Customer focused innovation 22
24
32,9 26
Customer focused 22
54 +4%
innovation
New product development
22
22,1 23
18
Business process 18
47
Incremental product improvement
innovation -5%
21
23
15
18
3,3 Incremental product
Business process innovation 43 -7%
0,3 improvement
18 22
Increase Increase (0- No change Decrease (0-- Decrease 1818
significantly 10%) 10%) significantly (>- Business model innovation
Business model innovation 31 +4%
+5%
(>10%) 10%) 13 14

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

More than half of the companies surveyed are planning to increase innovation
investments in rapidly developing economies (RDEs)
V. Spending outlook (2/2)

China and India are considered the most attractive Innovation leaders are more tended towards
economies to invest in for innovation purposes increasing investments in RDEs than laggards

In which rapidly developing economies is your organization  Innovation laggards are less willing to invest in RDEs in
planning to increase its innovation investments? general, with 36 percent of laggards saying they are not
How does your organization allocate its innovation
44 planning to increase investments in RDEs, versus only 19
efforts? 37 percent in the most successful group of innovators.
30
24
15 18 24  Leaders focus in particular on China (24 percent of the
Customer focused innovation leader group) for innovation investments. Laggards also
24 fall behind when it comes to investment plans in
Eastern Southeast Latin America India China Not planning22
Southeast Asia, with only 8 percent of laggards versus 15
Europe AsiaNew product development to increase percent of leaders planning to increase innovation
investments 23 investments there.
in RDE's
18  Nearly half of the respondents are likely to invest in
Incremental product improvement -5% mergers & acquisitions to improve their innovation
36 23 capabilities, in particular to gain access to new markets
18 (32,7 percent).
Business process innovation 24
19 19  Other most common reasons for M&A include gaining
16 18 18
15 15 access to new technologies (26,8 percent) and to a lesser
11 12
8 8 18 extent gaining access to talented people (19,3 percent).
Business model innovation +5%
+7% +5% 13 -17%

¹Multiple answers possible. Over 75% 50-74% 25-49% Less than 25% Global Innovation Survey

Contents

 About the study
II. Capabilities
III. Technology
V. Spending outlook


What does all this mean for innovation executives?
Implications for executives

1. It is time to match the importance of 2. The ability to work effectively with 3. Business model innovation will be
innovation with the degree of formal external partners will determine the next big differentiator for
governance allocated to it. who will be the new innovation companies aspiring to innovation
leaders and laggards. leadership.

 Given the strategic priority companies  If one thing became clear in this  Innovation leaders are slowly but
allocate to innovation and their innovation leadership study, it is the steadily breaking away from the pack
corresponding spending plans, it is enormous underutilized potential for by allocating increasingly more
highly remarkable that only a few innovation generated by the resources to business model
companies have organized innovation involvement of external parties into the innovation.
in the mature fashion it deserves. innovation process.  Our findings suggest that more value,
 Many of the innovation bottlenecks  This can take many forms: from the in terms of impact on business results,
regarding internal alignment, involvement of suppliers, customers is to be expected from business model
prioritization, funding, balancing long- and other third parties in the innovation innovation than from any other form of
and short-term objectives and the process, to the acquisition of missing innovation.
definition of an innovation strategy can capabilities or resources – such as  New ways of doing business often
be solved by establishing a formally technology and talent. require changes to current operations.
accountable innovation function.  Innovation leaders may have outpaced One prerequisite for successful
 Leaders have advanced beyond other their peers by simply being better at business model innovation is the ability
innovators by having an accountable integrating external parties into their to follow up with adequate changes to
innovation executive or other form of innovation process, leveraging the the existing operating model, in order
innovation governance structure that broader innovation potential as a to deliver the value as designed by the
deals with this kind of decision-making. result. new business model(s).


For additional information regarding this study, please contact:

Freek Duppen
Senior Consultant – Business Innovation

Mob: +316 2900 7957
freek.duppen@capgemini.com

Dianne Inniss
Managing Consultant – Strategy & Transformation

Mob: +1 404 806 4986
dianne.inniss@capgemini.com

www.capgemini.com/consulting

Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group Copyright © 2009 Capgemini. All rights reserved.

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