The Innovators

The innovators
How successful companies drive
business transformation

An Economist Intelligence Unit briefing paper
Sponsored by SingTel

The innovators:
How successful companies drive business transformation

Contents

Preface 3

Executive summary 4

Introduction 6
Burning platforms 8
Mountains beyond mountains 10
Innovation enablers 13
Culture
Tools and technologies
Looking outside

Conclusion 19
Appendix: Survey results 20

© The Economist Intelligence Unit 2008 1

The innovators:

© 2008 Economist Intelligence Unit. All rights
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Neither this publication nor any part of it
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2 © The Economist Intelligence Unit 2008

The innovators:

Preface

The innovators: How successful companies
drive business transformation is an Economist
Intelligence Unit report, sponsored by SingTel.
The Economist Intelligence Unit bears sole
responsibility for this report.
The Economist Intelligence Unit’s editorial
team conducted the survey, gathered data,
conducted interviews and wrote the report. The
findings and views expressed in this report are
those of the Economist Intelligence Unit alone.
Matthew Shinkman was the author of the report.
Claire Beatty was the editor.
Our thanks are due to all survey respondents
and interviewees for their time and insights.

September 2008


The innovators:

Executive summary

I
nnovation has become a popular term in identify the business areas on which they would
the corporate vocabulary. Innovating, be focusing their innovation efforts, survey
in a company setting, is to create or respondents most frequently cite those that
change something—be it a product, a directly affect their clients and customers: new
route to market, or even a back-office business product development, sales and marketing and
process—to generate revenue or provide a cost- customer service. Despite a gloomy outlook for
savings opportunity. In a highly globalised and the global economy, executives are maintaining a
commoditised world, companies must fiercely focus on growth and innovation.
defend their market position, continuously
streamline business processes and aggressively • Generating good innovation ideas is hard;
pursue new opportunities for growth. Having an getting them to adoption is even harder. Some
effective innovation process is vital to remaining 60% of survey respondents report a shortfall
competitive. of ideas in their innovation pipeline, but only
Browsing corporate websites, it would be easy 14% cite this as the most challenging part of
to believe that when it comes to innovation, the innovation process. Most companies see the
companies have it cracked. However, as this process of bringing ideas through to adoption as
research shows, the real picture is not quite so the highest hurdle. The greatest barriers in this
rosy. Innovation success rates are very mixed process include resistance to change, shifting
and executives reveal that innovating well is strategic priorities and a lack of project ownership.
as challenging as ever. Nonetheless, there are
also many success stories of firms that do drive • Survey respondents say that a culture of
innovation throughout their organisation and innovation is critical, yet they disagree over
have been able to overcome the barriers to what exactly it means. There are significant
bringing about change. differences of opinion across the survey sample
This report, sponsored by SingTel, analyses the over what are the most important elements of an
main challenges that companies face with regard innovation culture. Innovation leaders place more
to innovation; assesses where they are focusing importance on cross-functional collaboration
their efforts over the next two years; and asks than other respondents. Respondents based in
what executives consider to be the most crucial Asia prioritise appetite for risk as an important
factors necessary to support their innovation element of a culture of innovation, while those in
initiatives. The research, based on a survey of Europe and North America emphasise learning and
261 senior executives globally, also compares the cross-functional collaboration.
responses of those companies that report the most
success at innovating—“the leaders”—against • Technology investments are being directed
those respondents that acknowledge less success. towards tools that will increase information
The research reveals the following key findings: sharing and boost productivity. Executives
report that they will be looking to deploy content
• Customer-facing business processes are management and business intelligence tools
the main targets for innovation. When asked to over the next two years. Workflow automation


The innovators:

technologies are also in demand for enabling the greatest barrier is that senior executives
employees to concentrate on core business are unsure about the benefits of technologies.
processes. From their investments, executives Innovation leaders (as well as executives in Asia)
are mostly hoping to reduce business process are more concerned about security implications of
complexity and achieve scale in processes. Survey deploying technologies than the rest of the survey
respondents are more interested in maximising sample.
productivity than they are in reducing upfront
investment costs or lowering headcount. • Companies are looking to increase their
level of collaboration with research bodies and
• Inability to prove return on investment universities, while scaling back their consulting
(ROI) continues to prevent wider deployment expenditure. Companies will continue to partner
of innovation tools. Survey data shows that with customers, competitors, consultants and
executives based in Asia find proving ROI on suppliers for innovation projects, although
technology investments to be a far greater several trends are emerging. Joining forces with
challenge than those in other regions. However, universities is a far more established practice
Asia respondents say that their workforces are in Europe than in North America or Asia, but
more technology savvy and they report fewer companies will be more active in this area in
difficulties in encouraging the use of new the future. With the exception of those based
technologies. In North America, executives were in Asia, survey respondents plan to scale back
twice as likely to find employees resisting newly their involvement with consulting firms, most
introduced tools and technologies. In Europe, noticeably in North America.

Who took the survey?
In March 2008, the Economist Intelligence Unit America, 27% in Europe, 36% in Asia-Pacific,
conducted an online survey of 261 executives and 14% in Latin America, the Middle East and
worldwide to understand better how they drive Africa. Approximately 60% of respondents worked
innovation in their organisations and the chal- at organisations with annual revenue of more
lenges they face in this process. Of the respond- than US$500m, while the other 40% came from
ents to our survey, 45% were senior executives companies with revenue below that amount. In
(board-level or C-level), and 55% were directors, addition to the survey, qualitative interviews were
business unit heads and other managers. World- conducted with senior executives in Europe, North
wide, 23% of respondents were based in North America and Asia.


The innovators:

Introduction

W
ith storm clouds gathering over slowdown in the US, six out of ten still believe
the global economy in 2008, and that increasing top-line growth and sales is more
the world’s blue-chip companies important to them than cutting costs—and three
signalling profit warnings in out of four say that innovation is crucial to the
increasing numbers, it would be understandable competitiveness of their businesses.
if senior executives were becoming more wary Having an effective internal innovation
of making investments into projects with engine can generate both substantial cost
speculative returns—as required in all aspects savings and lucrative customer opportunities.
of innovation. However, the opposite appears The term “innovation” tends to conjure up
to be the case; forced into a corner by the images of iPods, Xboxes and other technological
combination of a tougher trading environment gadgets. Indeed, 70% of survey respondents say
and rising competition in both developed and product innovation is critical or very important
emerging markets, executives today increasingly to maintaining corporate competitiveness.
see innovation as the only way to protect profit However, an even higher proportion (74%)
margins. Rather than adopting a defensive stance, suggest that business process innovation—
market leaders like Google and Amazon are vocal rethinking the internal systems and processes
about plans to increase investment in their firms’ for how their firms operate and deliver goods
innovation capabilities in the current downturn. and services to customers—is a crucial driver of
Respondents to a survey conducted by the success. Ram Charan, a strategy consultant and
Economist Intelligence Unit on this subject in author of several management books, including
March 2008 agree. Despite the fact that almost The Game Changer, says that “companies simply
80% of the senior executives who took part in the aren’t going to be able to protect their margins
survey expect their firms to be either severely in the current environment without being able to
or moderately affected by the current economic innovate effectively.”

How successful are the following areas of your company in driving innovation? Percentage of respondents selecting
successful or very successful.
Innovation leaders Others

Product quality 90
33
88
New product development
50
88
Customer service
36
82
Sales and Marketing
31
70
Internal IT systems 25
53
Manufacturing processes
20
41
Distribution
13

Source: Economist Intelligence Unit


The innovators:

What is clear from this research is that success product quality, distribution, customer service,
at innovation varies greatly across the companies manufacturing processes and internal IT
that took part in this survey. The survey asked systems. Of all the respondents, we isolated the
respondents to rate how effective they are at 50 companies that are most successful across the
driving innovation in seven business areas: board to compare their responses with the rest of
sales and marketing, new product development, the sample in this report.

Who are the leaders?
Of the 261 respondents to the survey, we separated difference is that the successful innovators have
the responses of the 50 companies who ranked a more global reach than the others. Some 70% of
themselves as most successful at innovating the leaders have operations in North America com-
across seven business areas. Financial services pared to 58% of the rest of the sample; 54% have
and technology companies are highly represented operations in the Middle East and Africa compared
amongst the leaders. In terms of size, the leader to 41% of the rest, and 44% conduct business in
companies are not necessarily any larger or smaller Australia and New Zealand compared to 35% of the
than the rest of the sample, but one significant rest.


The innovators:

Burning platforms

C
ompanies that innovate most successfully There is some truth in the mantra “innovate
make it a top corporate priority. However, or die”. One of the companies examined in this
this change in mindset often does not report, Denmark’s LEGO Group, a leading toy
happen without a burning platform— manufacturer, found itself in just that position
meaning that companies are forced to innovate after racking up huge losses over several quarters
because they are losing market share, or the due to overstretching itself in product lines and
competitive landscape of their industry or product inefficient manufacturing processes. While this
is changing so rapidly that it is threatening the provided the impetus for a global restructuring
existence of their business. It is often forgotten of its manufacturing and logistics functions,
that in the pre-iPod days, Apple lost almost half its cutting costs was not the only driver. Of crucial
market share and posted a loss of over US$700m importance was that the restructuring provided a
in early 1997. benefit to the customer too.
Successful companies use innovation to
respond to trends that affect consumer behaviour
How important are the following types of innovation to maintaining your company’s
competiveness? Respondents answering critical or important. and buying patterns—take General Electric’s
Innovation leaders Others ecoimagination initiative, which aims to focus
Business process innovation
86 all parts of the US$330bn company on innovative
70
solutions to the world’s growing environmental
86
Product innovation
65 challenges, or Tata Motors’ much-hyped US$2500
Source: Economist Intelligence Unit car.

Which processes or functions will be the main target areas for innovation or re-engineering at your company in the next
two years?

68
New product development
51
Sales and marketing 54
processes 50
46
Customer service 41

20
Finance and reporting
27
24
HR processes
19

Supply chain 20
20

Manufacturing 10
13

Purchasing 4
10

IT help desk 8
5



The innovators:

When asked which areas of the business development, customer service, and sales and
are most likely to be the focus of innovation marketing. This trend is universal, although the
efforts in the coming two years, respondents leaders seem to be more focused on invigorating
overwhelmingly pointed to those processes new product development than firms that are less
that touch customers, such as new product successful at innovating overall.


The innovators:

Mountains beyond mountains

T
he wildly varying success rates that generate enough innovative ideas to build a
companies report for their innovation pipeline of new products or support ongoing
efforts demonstrate how difficult this process change. To fill this pipeline, 56% of
process is. Short-term focus and shifting respondents suggest that their organisations rely
strategic priorities make it difficult for companies on cross-functional teams, while some 40% work
to allow staff enough freedom to do things with consultants. But even with these teams in
differently. Frequently, the natural process of place, results are often disappointing.
organisational growth throws up barriers to But it gets worse: when asked about the most
change. As companies expand, hierarchies emerge difficult part of the innovation process, very few
to control the way work is carried out and ensure companies suggest that ideation is the biggest
that processes are followed—preventing agility bottleneck. Almost 60% of respondents report
and flexibility. that taking good ideas and bringing them to
One of the first challenges in the innovation implementation—whether introducing a new
process is to generate ideas. Almost 60% of product or transforming a business process—is
respondents suggest that they are unable to by far the most challenging aspect of corporate

How do you generate ideas for innovation?

Forming cross-functional 60
project teams 55
Forming global project 42
teams 42
Attending cross-industry 40
conferences 37
36
Working with consultants
40
Networking with executives 28
from other firms 37
24
Suggestion box scheme
25

Which stage of the innovation process is most challenging in your view?
(% respondents)

Bringing ideas through to adoption
59

Prioritising the value of innovation ideas
27

Generating ideas for innovations
14


The innovators:

innovation. respondents, but they have less difficulty in
Patrick Gelsinger, senior vice president at engaging stakeholders.
Intel Corporation and general manager of the Perhaps most fundamental barriers to
company’s Digital Enterprise Group—its largest innovation in large companies are the implications
business group, accounting for more than half of of growth itself. Shona Brown, senior vice
the corporation’s revenue—agrees. The process president for business operations at Google,
of turning great concepts into sellable products is considered one of the world’s most innovative
“agonisingly painful,” according to Mr Gelsinger. companies, describes the enviable situation as
“We work hard to get the commercialisation Google managed rapid growth. “When we were
process right, but it’s an area that can always use on one floor in one building, it was easy to make
improvement.” In part, the difficulty is driven by decisions. Spreading across two floors made
the size and scope of the research being done at it tougher. The big change, though, was when
Intel. “We run technology research investments we moved into more than one building. This is
of anywhere from a few hundred thousand dollars when most companies see a step change in their
up to US$15m, and when turned into products ability to stay co-ordinated, manage information
these can yield revenues of anywhere from US$5m flow, and the like. In most cases, the natural
to US$300m, so it’s important we get it right. It’s response is to impose hierarchy and structure,”
tough when we’ve got a full product schedule and she says. “Companies at this stage of growth
a sudden disruptive idea comes along which forces get highly stressed and want to maintain some
us to adjust at short notice.” control over the situation, and so they introduce
In addition to the inherent complexity in the strict reporting structures, bureaucracy and
innovation process, basic organisational issues hierarchy. It’s the simplest way of making sure
get in the way. The biggest barrier to innovation, things continue to get done—but it squelches
according to 52% of survey respondents (not innovation.”
including innovation leaders), is resistance to This view is supported by the survey
change, followed by shifting strategic priorities respondents, 47% of whom say that “lack of
(36%) and a lack of project ownership (29%). visibility across business units or geographies” is
The leaders cite a lack of project ownership as either a significant or very significant barrier to
more of a challenge than the rest of the survey innovation.

What are the main challenges to bringing ideas through to adoption?

50
Resistance to change
52
38
Shifting strategic priorities
36

Lack of project ownership 38
27
24
Inadequate project piloting
22
18
Inability to engage stakeholders
29
8
Fear of public failure
15


The innovators:

Innovation is also more firmly etched in the culture of innovation, the smallest companies are
ethos of smaller companies, according to Ms substantially more likely to cite “customer-centric
Brown. Start-ups are, by definition, born out of mentality” and “emphasis on learning”, while
an innovative idea and are intimately tied to their respondents from the largest companies point to
customers. As the company grows, this customer risk appetite and cross-functional collaboration
focus and emphasis on regeneration can be (concepts which are part of the everyday
more difficult to maintain. In the survey, when experience of most small companies).
asked about the most important elements of a

Rebuilding LEGO: a case study in overcoming resistance to change
In 2004, Denmark’s LEGO Group was in and was leading to sizeable losses. trimming headcount to 5,000 employees,
trouble. The family-owned toy company, The solution was a radical one: the down from 6,500 in 2003.
which produces of one of the world’s firm opted to close the ten European “It was a difficult process,” says
most well-known and loved products, distribution centres, replacing them Mr Nielsen, “but the fact that we
had posted its biggest-ever loss of nearly with one centralised distribution centre had a burning platform made all the
US$300m in the financial year 2003, and for Europe in Prague (at the same difference.” That the company was almost
it registered an even larger loss in 2004. time as the company was planning to facing extinction was crucial in focusing
The firm had strayed unsuccessfully into streamline its manufacturing operations the minds of senior executives and those
several new areas and product lines that in Europe) and in North America the firm working within the operations centres,
resulted in unprofitable growth. moved manufacturing to Mexico with a whose own jobs were at risk.
At the same time, the company’s distribution centre in Dallas. The LEGO Mr Nielsen points to two factors
manufacturing and distribution Group outsourced logistics to DHL, and which helped underpin the successful
operations were outdated and expensive part of its manufacturing to a US firm, strategic transformation and overcome
to run, forcing management to radically Flextronics, and other manufacturing the resistance to change within the
rethink both the product it was delivering partners. This allowed the company to organisation. First, “we were very
to customers and the way that it gets focus on its core competency: the design active in communicating with all staff
those products from concept to market. and creation of children’s toys. what we were doing: we needed to
Egil Møller Nielsen, the LEGO Group’s Mr Nielsen also believes that switching generate awareness of the need to
senior director of logistics for Europe and to centralised but regional sourcing change, otherwise we wouldn’t have got
Asia, joined the company in 2004 and will be a great source of competitive anywhere.” Second, he suggests that
was tasked with developing a strategy advantage in the future. “Being closer to bringing new blood in to the organisation
for turning around the logistics function. the market [relative to competitors who was important. “I and several others came
In part, that meant going around to all largely source from China] means we have in with a clean slate, which made it easier
of the company’s logistics and transport less inventory tied up in shipment at any to see what needed to change. If the
suppliers and convincing them to squeeze given moment, but more importantly it process had been left only to those who
out cost savings for the company. The means we are closer to our customers. We had grown up with the company, it would
bigger issue, though, says Mr Nielsen was can react to the latest fad in the market have been harder for them to step outside
that “within the company there was just more quickly,” Mr Nielsen says. their own experiences and really look for
too much complexity.” Managing product These process innovations led the radical solutions.”
flow, inventories and intelligence across company from record losses to profits of
the Group’s ten European distribution over US$200m in both 2006 and 2007.
centres was creating a major headache— At the same time, though, they meant


The innovators:

Innovation enablers

T
he challenge for large companies is how although Ms Brown points out that even in
to emulate their more spritely smaller Google’s case “not everybody gets to make all
competitors. Survey respondents and senior decisions”—it also becomes more important
leaders at the world’s most innovative to tolerate mistakes. “We have an approach of
companies agree that having a leadership group deliberate experimentation, which means we need
and corporate culture that support innovation is to be more tolerant of failure.”
most important. While companies that are heavy This appetite for risk is another recognised
on bureaucracy, hierarchy, structure and process element of a successful innovation culture,
tend to suppress innovation, the right set of especially in the technology field, says Mr
shared values among company staff, along with Gelsinger of Intel. “Risk-taking is one of our core
appropriate messages coming from senior leaders, values. The day we stop taking risks is the day we
can have the opposite effect. know that some other technology company will
take advantage of technology innovation better
Culture than we do.”
Companies like Google and Apple best typify Cultural transformation has to start at the top.
the corporate culture that actively generates Culture is a function of how senior management
innovative activity. At Google, says Ms Brown, thinks and acts—64% of survey respondents say
one of the key factors is the ability to accept some that leadership commitment is the most important
loss of control. “All companies face a trade-off element of a culture of innovation. And this can be
between control and adaptability. At Google, we as much about what leaders don’t do as what they
are explicit about our willingness to live with a do. “At Google, we’re blessed to have company
bit less control in exchange for more flexibility.” leaders who are comfortable getting out of the
This loss of control isn’t really a loss—it’s largely way of the smart people they’ve hired. They’re
a transfer from senior managers to the wider comfortable with a degree of messiness,” says Ms
Google community. As responsibility for coming Brown.
up with exciting new process and product ideas While leading is important, it’s also crucial to
gets pushed out further into the organisation— get the right people in the door in the first place—

How important are the following as enablers of innovation? Respondents answering critical or important

100
Executive support for innovation
92
98
Innovation culture
89
Tools and technologies that 78
facilitate communication 57
Close collaboration with 70
customers 66
37
Flat organisational structure
30


The innovators:

staff who are flexible and enthusiastic about innovation.
change. At Genentech, a leading biotechnology What constitutes a culture of innovation
company, research staff are allowed to publish differs depending on geography. Europe and
their studies in academic journals—a rare practice the Asia-Pacific region showed the greatest
across most scientific industries, given firms’ differences. While European executives prize
fears of losing control over their intellectual cross-functional collaboration and emphasis on
property. Genentech’s opinion is that by offering learning, executives based in the Asia-Pacific
research staff this benefit, and allowing scientists region value an appetite for risk as a foundational
to maintain a reputation within academia, the enabler for innovation to take place. Having a
company is better able to compete with the top customer-centric mentality was considered more
universities for talent. important by executives in North America than by
The critical ingredient to a culture of respondents in other regions.
innovation is the remuneration and incentive
structure. Mr Charan, the innovation author, puts Tools and technologies
it this way: “What is company culture? It’s what Companies that are most successful at
people do routinely without being told. Once innovation—the leaders—consider tools and
innovation is integrated into the firm’s main technologies to be of greater importance for
decision-making process, and people are being enabling innovation than rest of the survey
evaluated on and praised for their innovative sample. The trends relating to where companies
activities on a regular basis, a culture of are investing in technology are broadly the
innovation will emerge naturally.” Having worked same across the two groups. The highest areas
with the CEOs of many of the world’s largest of investment are around technologies that ease
companies, he suggests that this is something information sharing and boost productivity. Eric
few companies do well—and survey respondents Lauzon, chief information officer (CIO) of Nortel
agree. Just under half listed a mismatch between Networks for Asia, says: “In Nortel, initially we
staff incentives and operational metrics as either piloted Unified Communication [integration of
a “very significant” or “significant” barrier to fixed and mobile voice, e-mail, instant messaging,

In which technology areas do you think improvements and wider delopyment are most necessary now? Select up to two.
Content & knowledge 28
management technologies 26

16
Business intelligence tools
25
Workflow automation 16
technologies 21
HR/Finance management 16
technologies 7
Remote connectivity 10
technologies 5
Web 2.0 (blogs, wikis, social 10
networks) 3

Workforce mobility tools 2
7


The innovators:

When redesigning business processes, what do you think are the most important benefits that your company is hoping to
achieve? Select up to two.

44
Reduce process complexity
51
Achieve additional scale in 42
business processes 33
Concentrate on core business 36
functions 37
28
Empower users
22
Eliminate obsolete 16
technologies 12
Lower upfront investment 16
costs 11
10
Reduce headcount
16

desktop and other applications] across 5,000 When redesigning business processes, the
lead adopters in the organisation globally before most important benefit that survey respondents
making the service available to all employees. We hope to achieve is to reduce process complexity.
estimate that the new technology has increased The leaders placed more importance on achieving
productivity by 15%. And we’d probably see even scale in business processes, whereas companies
bigger gains if suppliers and customers were that are less successful at innovation chose the
opened up to multimedia convergence; this is only ability to concentrate on core business functions
the start.” as the second most critical benefit. Fears of
At the moment they are only just appearing process reengineering as a Trojan horse for cost-
on the radar, but as technologies that facilitate cutting and layoffs appear less well-founded in
interaction—wikis, virtual team environments, today’s market—only 15% of respondents suggest
and the like—become as ubiquitous as computers that reducing headcount is among the most
and mobile phones today, high-performing important benefits of their process innovation
companies will look to these tools to create new efforts. And cost cutting isn’t the primary
ways for individuals and teams to interact, and motivator either, as proved by its low ranking on
ultimately to create value for the enterprise. the list of reengineering benefits. Again, as with
Embryonic technologies that are touted as the innovation more broadly, a focus on improving
“next big thing” include prediction market the organisation’s ability to understand and meet
applications (statistical models for assessing customer needs is the key driver—not cost.
risk and linking asset values to specific dates Like innovation in general, it can be difficult
and events) to forecast sales, product launch to measure the benefits of implementing new
dates, market share growth rates, manage technologies. Of all the barriers to deploying
manufacturing capacity and influence business new technologies, it is the inability to prove
decisions. Companies as diverse as Hewlett- ROI on these investments that is the greatest
Packard, Renault, Pfizer, Masterfoods and Arcelor obstacle. Survey data shows this to be a far
Mittal are known to be using predictive market greater challenge for executives based in Asia
applications. than elsewhere in the world. However, when they


The innovators:

Technology-led innovation at Actelion
Innovation isn’t always about achiev- from patients involved in clinical drug solution that was the least ‘invasive’
ing the biggest shake-up possible. With trials and was seeking a way to increase possible.”
resource constraints and the inevitable the speed of collecting and processing The company chose to introduce
resistance to seismic change, sometimes this information while maintaining Anoto’s digital pen and paper technology,
it’s more useful to tinker “under the full compliance with strict regulatory providing its clinical trial investigators
hood” while minimising the disruption requirements about how data can be with pre-printed case report forms on
to the daily work of a set employees gathered. There was a challenge to doing Anoto’s digital paper and a special digital
engaged in a vital business process. The this, as Massimo Raineri, Actelion’s pen for entering data. The information
example of Actelion, a Swiss pharma- head of systems development, explains: captured by the 500 pens is uploaded
ceutical company which focuses on the “Our goal was to reduce data collection daily, integrated and processed.
discovery, development and commerciali- time without changing the way that the Regulatory requirements mean that the
sation of synthetic small-molecule drugs, doctors who are conducting the trials are data must later be re-entered manually
provides a case in point. The company has used to working. Many doctors told us into Actelion’s systems, but the increased
won several innovation awards, includ- that they felt uncomfortable typing data speed and accuracy with which Actelion
ing the 2007 Process Innovation Vision on a keyboard during trials; the use of gets a first look at the trial data can shave
Award for its collaboration with Anoto pen and paper was actually an important precious days off the approval process.
Group AB, a world leader in digital pen part of developing a natural and relaxed For a blockbuster drug, cutting the time to
and paper technology. interaction between the nurse and approve by one week can mean a savings
Actelion collects large amounts of data subject, so we decided to propose a of US$1.5m or more, says Mr Raineri.

do introduce technologies, they experience fewer increasing willingness to look outside the four
problems around encouraging staff to use them. walls of the company for help. “We are well aware
In North America, executives were twice as likely that not all of the brightest people work at Intel,
to find employees resisting newly introduced so we are very aggressive in our engagement
tools and technologies. Innovation leaders with external partners,” says Mr Gelsinger of
appear far more concerned about the security Intel. The thousands of external projects Intel
implications of deploying technologies than the shares with the academic community and smaller
rest of the survey sample. corporate partners “provide a rich set of ideas
and prevent the ‘not invented here’ syndrome
Looking outside from developing.” He also notes that working
Successful innovators know that to bring about with universities—Intel has small laboratories on
change in products, processes and technologies a number of campuses around the world—helps
they must draw on the best skills and knowledge keep the company accountable. “If the academic
available, whether inside or outside the community is consistently getting better results
organisation. They rely on collaborative but than us, we’d better do something different!”
carefully structured relationships with a range of Companies are putting ever greater burden
third parties, including customers, consultants on their suppliers to find innovative solutions to
and even competitors. their business problems. Loncin, a motorcycle
Over the past decade there has been an company from China, sets broad specifications for


The innovators:

Which of the following parties is involved in product and/or process innovation at your company?

78
Customers
68
56
Consultants
53
44
Competitors 41

Suppliers 42
43
24
Research institutes
28
18
Universities
21

its products and leaves it to its suppliers to work as well. “We established an IT Laboratory, and
together to design the actual components in a invited customers to come and do experiments
cost-effective way. And in this case, technological together,” says Dr Bai Sho, CTO of the Shanghai
advances have also been vital: the rise in open- Stock Exchange, describing a recent collaboration
standards computing has made it easier for initiative. “After the launch of our new trading
Loncin’s suppliers to collaborate with each other system, our customers were required to make
and with their end customer, and for Loncin to some adjustments to their front-end systems, and
maintain control over the process in real time. they did it on site with us at the IT Laboratory. This
When asked how they plan to change the mix is a new model of cooperation—opening up our
of collaboration arrangements in two years, all systems to customers, as we have, will continue to
respondents agree that customers will remain be the key to even better offerings.”
the most important of collaborators. Ways of In the future, survey respondents report that
working with customers may be as simple as they plan to significantly increase their levels
soliciting product feedback and advice, or in the of collaboration with research institutes and
case of high-performing innovator companies, universities, but scale back their level of use of
implementing defined processes for regular consultants. Among the innovation leaders, there
sharing of insights with key customers. “Working was an 18% drop in the number of respondents
with our customers is particularly crucial for Intel, who said they would work with consultants in two
because ours is a building-block business—the years time compared to current usage.
experience of our end users is determined by the Globally, there are some differences in how
input and expertise of our customers. With that in companies collaborate with third parties.
mind, Intel has initiated a broad set of customer- Respondents in Asia work most closely with
Intel activities to help foster mutual innovation, their customers (78%), but are much less used
including ‘CTO to CTO’ and ‘lab to lab’ engagements to partnering with consultants and suppliers for
in which our CTO [chief technology officer] meets innovation than respondents in North America
regularly with his counterparts to look for mutual or Europe. Partnering with universities is a far
laboratory research programmes.” more established practice for companies in
Services companies are getting in on the act Europe (35%) than for those in North America


The innovators:

(20%) or the Asia-Pacific region (12%). That said, relationships in the future; by 2010, 34% say they
respondents in Asia do have plans to build these will be collaborating with universities.

A commercial approach: Business process reengineering and
technology at DHL
Germany’s Deutsche Post World Net research bodies and technology employee to a measurable improvement
(DPWN) is one of the world’s leading mail companies. Staff at the Innovation in customer satisfaction—be it internal
and integrated logistics companies, and Centre, a futuristic building emblazoned or external customers—and provides
is the parent company for DHL. The firm in DHL’s signature red and yellow staff with a structured methodology for
has two strategies for innovation: a “blue livery—“it’s like a science museum,” says thinking about their own processes and
sky” approach to thinking of ideas for Mr Muench—are currently working with how to make them better. First Choice
radical change and fine-grained process- technologies like RFID (radio-frequency relies on DPWN staff themselves to create
improvement initiatives across its opera- identification), satellite navigation and and implement solutions. “This is a
tions. “Given the massive throughput emissions-free engines to find ways to culture change for our company and key
we deal with, any small reduction in the integrate them into DPWN’s operations. for ensuring that our staff really engages
cost of our processes, or improvement in One of the keys to the Innovation with the change being made,” says Tom
speed, can make a big difference to the Centre’s success, says Mr Muench, is Schaefer, a communications manager in
bottom line,” says Stephan Muench, the that it’s run on a commercial basis. “The the firm’s Singapore office.
head of the company’s in-house consult- Innovation Centre has to go out and find The portfolio approach taken by
ing arm in Asia. a business unit that is willing to buy the DPWN to its innovation efforts is partly a
The company relies on its DHL solutions they develop. That keeps them function of its size. Mr Muench says “we
Innovation Centre (DHL is one of DPWN’s on their toes.” call it slicing the elephant. This company
three brands) in Troisdorf, Germany While the Innovation Centre takes is so big [500,000 employees, the sixth-
to scour the academic and technology care of the science of DPWN’s innovation largest employer in the world] that we’re
worlds for exciting new technologies efforts, the company also realises the not going to be able to tackle it all with
that can be adapted and applied to importance of getting all employees big-bang innovation. We need to break
the company’s core mail and logistics involved in the less glamorous end of the problem of process improvement
businesses. The centre collaborates the innovation spectrum. The company- and innovation down into manageable
with the Massachusetts Institute of wide process improvement programme, pieces.”
Technology (MIT) and a host of other First Choice, ties the incentives of every


The innovators:

Conclusion

C
ompanies that innovate most successfully need to learn to tolerate things being done
don’t rely on it solely for “big bang” differently around the world. For those firms
product or process revolutions. that do have it, resisting the urge to impose too
“Innovation is often evolutionary, not much hierarchy or structure in periods of rapid
a ‘rip and replace’ process,” says Mr Lauzon expansion is vital to keeping the culture in place.
of Nortel. The best integrate innovation At the same time as having an open and
activities fully into their everyday way of doing risk-tolerant culture internally, firms have
business and link any process improvement to tap external sources of expertise in order
to a genuine customer benefit. Process and to provide customers with the best solutions
product changes must be focused on improving available. Being open and sharing knowledge or
customer satisfaction and increasing revenue and strategy with outside parties such as research
organisational growth. institutes, suppliers, consultants and customers
To achieve this, innovation isn’t something is increasingly necessary for driving innovation.
that’s done just by a small group of high-flyers The concerns companies have about maintaining
with privileged access to the CEO (although in competitive advantage, minimising security
many cases such structures are useful). It must be threats and loss of control over the innovation
embedded in the company culture, such that all process are natural, but accepting these risks is
employees see the value of, and are rewarded for, all part of the mindset shift required to innovate
taking risks and speaking up to propose change. effectively.
Creating this culture is not easy and managers


The innovators:

Appendix: Survey results

1. To what extent do you think the credit crunch and prospect of a recession in the US will affect your company’s revenue
growth?
(% respondents)
Severely affect 15

Moderately affect 63

Not affect 18

Don’t know/not applicable 4

2. Which of the following is more of a priority for your company over the next two years?
(% respondents)

Increasing sales and topline growth
60

Cost reduction and creating
internal efficiencies
40

3. How important is product and process innovation to your company in maintaining your competitiveness?
(% respondents)
Critical 1 2 3 4 5 (Not at all important)

Product innovation 32 38 20 8 2

Process innovation 31 43 20 6 1


Survey results
The innovators:

4. Which of the following parties is involved in product and/or process innovation at your company?
(% respondents)
Product innovation Process innovation

70
Customers 69

Consultants 53
48

Suppliers 43
45

42
Competitors 43

28
Research institutes
39

20
Universities 33

5. Which of the following pose the greatest risks in collaborating with third parties for innovation?
(% respondents)

Loss of intellectual property 46

Loss of control over the innovation process 37

Leaking of information on corporate strategy 35

Difficulty sharing knowledge 33

Cultural differences 24

Undue reliance on other firms in areas
23
which are core to the company’s success

Reputational risk 22

6. How important do you think the following are as enablers of innovation?
(% respondents)
Critical 1 Critical 2

Executive support for innovation 70 23

Innovation culture 56 35

Tools and technologies that
facilitate communication 20 42

Flat organisational structure 5 26

Close collaboration with customers 29 38


Survey results
The innovators:

7. What do you think are the most important elements of a culture of innovation?
(% respondents)
Leadership commitment 64

Cross-functional collaboration 48

Customer-centric mentality 43

Appetite for risk 36

Emphasis on learning 34

Providing staff incentives for innovation 25

Wide use of technologies 18

Lack of hierarchy 10

Internal staff mobility 10

8. Which stage of the innovation process is the most difficult, in your view?
(% respondents)

Bringing ideas through to adoption
59

Prioritising the value of innovation ideas
27
Generating ideas for innovations
14

9. How does your company generate ideas for innovations?
(% respondents)
Forming cross-functional project teams 56

Forming global project teams 42

Working with consultants 39

Attending cross-industry conferences 38

Networking with executives from other firms 36

Suggestion box scheme 25

Other, please specify 14

Don’t know/Not applicable 4


Survey results
The innovators:

10. How significant are the following as barriers to generating ideas for innovations at your company?
(% respondents)
Critical 1 Important
Staff incentives are not aligned to
16 32
operation metrics
Lack of visibility across business
units or geographies 13 34

Insufficient time to generate ideas 17 23

Ideas are too generic 9 29

It’s hard to achieve global collaboration 12 24

11. How would you describe the number of innovation ideas generated at your company?
(% respondents)

Too many–it’s hard to identify which ones to pursue 17

The right number 24

Too few 56

Don’t know 4

12. What are the main challenges for your company in bringing ideas through to adoption? Select up to two.
(% respondents)
Resistance to change 52

Shifting strategic priorities 36

Lack of project ownership 29

Inability to engage stakeholders 27

Inadequate project piloting 22

Fear of public failure 13


Don’t know 1


Survey results
The innovators:

13. Which business processes or functions will be the main target areas for innovation or re-engineering at your company
over the next two years? Select up to three.
(% respondents)
New product development 54

Sales and marketing processes 51

Customer service 42

Finance and reporting 25

HR processes 20

Supply chain 20

Manufacturing 13

Purchasing 9

IT help desk 6



14. When redesigning business processes, what do you think are the most important benefits that your company is hoping
to achieve? Select up to two.
(% respondents)
Reduce process complexity 50

Concentrate on core business functions 37

Achieve additional scale in business processes 34

Empower users 23

Reduce headcount 15

Eliminate obsolete technologies 13

Lower upfront investment costs 12




Survey results
The innovators:

15. In which technology area do you think improvements and wider delopyment are the most necessary now and in
two years’ time?
(% respondents) Now Two years’ time

26
Content & knowledge management technologies 22

24
Business intelligence tools 21

20
Workflow automation technologies
15

9
HR/Finance management technologies
11

6
Workforce mobility tools
9

6
Remote connectivity technologies
8

4
Web 2.0 (blogs, wikis, social networks)
7

2
Don’t know/Not applicable
2

16. What do you think are the main factors that prevent technologies from being deployed more widely at your company?
Select up to two.
(% respondents)
Inability to prove ROI on technology investments 34

Senior executives are unsure of technology benefits 29

Employees don’t know how to use technologies effectively 28

Security concerns about sharing sensitive information 26

Employees resist introduction of new technologies 20

Employees don’t know what technologies are available 20

Technologies prove unreliable 10

Don’t know 3


Survey results
The innovators:

17. How does your company measure the effectiveness of innovation efforts? Select all that apply.
(% respondents)
Standard return on investment 48

Qualitative feedback 46

We do not measure innovation effectiveness 21

Innovation scorecard 15

Don’t know 3

18. What is the greatest challenge to measuring the effectiveness of innovation efforts?
(% respondents)
Innovation isn’t systematic enough to measure 29

Benefits difficult to quantify 27

Difficult to track return on investment 26

Measurement can stifle innovation 9

Don’t know 6

19. How successful are the following areas of your company in driving innovation? Rate on a scale of 1 to 5,
where 1=Highly successful and 5=Highly unsuccessful.
(% respondents)
Highly successful 1 2 3 4 Highly unsuccessful 5

Sales and marketing 11 32 32 15 4

New product development 17 40 23 14 2

Product quality 12 33 36 13 1

Distribution 3 15 44 17 5

Manufacturing processes 6 21 32 14 2

Internal IT systems 9 25 34 21 6

Customer service 10 36 39 9 2


Survey results
The innovators:

Which is your company’s main business?
(% respondents)
Financial services 50

Professional services 37

IT and technology 34

Healthcare, pharmaceuticals and 23
biotechnology

Energy and natural resources 15

Manufacturing 13

Consumer goods 12

Telecommunications 3

Chemicals 12

Construction and real estate 3

Transportation, travel and tourism 12

Logistics and distribution 3

Aerospace and defence 12

Education 3

Entertainment, media and publishing 12

Automotive 3

Retailing 3

What is your company’s annual revenue?
(% respondents)
Less than US$500m 39

US$500m to US$750m 6

US$750m to US$1bn 7

US$1bn to US$5bn 17

US$5bn to US$10bn 6

More than US$10bn 25


Survey results
The innovators:

Which of the following best describes your job title?
(% respondents)
Board member 3

CEO/president/managing director 23

CIO/Technology director 5

CFO/Treasurer/Comptroller 7

Other C-level executive 5

Senior vice president/vice-president/director 15

Head of department 8

Head of business unit 7

Manager 22

Other 7

In which geography are you located?
(% respondents)
Asia-Pacific 31

Europe 27

North America 23

Middle East/Africa 8

Australia/New Zealand 6

Latin America 4

In which geography does your company have business operations? Select all that apply.
(% respondents)
Asia-Pacific 64

Europe 63

North America 61

Middle East/Africa 44

Latin America 43

Australia/New Zealand 37


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