Innovation is such a buzzword these days. But what are the
key challenges facing companies looking to innovate? In order to get some answers, Innosight, an
innovative consulting firm co-founded by Clayton Christensen (he’s a Harvard Business School professor and author of several books, notably ‘The Innovator’s
Dilemma: When New Technologies Cause Great Firms to Fail’) surveyed 823
Strategy & Innovation subscribers online. These people spanned more than 20
industries ranging from financial services, healthcare, telecommunications and
consumer goods.
Sixty percent of respondents were in senior management (with
the largest category being CEO/ Managing Director). Another 53% were in
strategy or general management roles, and 15% were in marketing or product
development. Twenty-three percent of
respondents worked in organizations with revenues exceeding US $1 billion,
while 19% worked in organizations with revenues between $50 million and $1
billion.
The survey results were published in a paper called
‘Strategic Readiness Survey’. It revealed that for most, developing ideas is
not much of an obstacle (only 11.3% felt it was), but 22% felt scaling them and
bringing them to market was a challenge. Another 19.5% felt commercialising ideas was an issue. Sixteen percent felt getting the right talent
and resources was a headache. While 14.3% felt securing funding was problematic
and 10.8% felt the lack of leadership support for innovation.
The paper highlighted other factors, such as which of these five –
disruptive lower cost solutions, changing consumer behaviour, new technologies,
commoditisation, and globalisation - would make a significant-to-medium impact
on their business in the next five years.
Around
75% respondents said commoditisation will have significant-to-medium impact
while 68% said globalisation would have a similar effect. But a huge 93% said
that disruptive, lower cost solutions will have a significant-to-medium impact
on them. This was followed by 92% who felt that new, enabling technologies will
make a big difference to them. This was consistent across different size
companies.
The
survey stated, “Of those who do use these kinds of strategy tools, about 38%
reported that they are “incredibly useful” and 56% said they are “moderately
useful.” This suggests that while the process might be difficult, more robust
and precise tools typically do improve outcomes. Moreover, companies that use
these tools report greater confidence to respond to longer-term marketplace
disruptions. Fully 50% said they were “confident” or “very confident,” compared
with 37% who don’t use planning tools.”
The
reasons given by executives for not doing any scenario planning were that 41%
felt they didn’t have a good process for confidently envisioning the future.
Nineteen percent believe the market is too unpredictable to spend time doing
scenario analysis. Fifteen percent said they “spend most of our time fighting
fires and don’t have time to think about the future. While, 14% felt their leadership
didn’t have long-term focus.
This
lack of confidence shows up in response to the question “How confident are you
that your organisation is prepared to change in response to disruptive trends?”
This question was asked many times over different time-frames to see if people
were more optimistic or not, with their responses. The answer was that only 42% were “very
confident or ‘confident’ that they were prepared to transform within a 5-10 year time-frame.” This further reduced
to 36% among respondents in big enterprises, and a low of 27% in those very
same companies didn’t feel confident at all.
This confidence gap is further
heightened by the fact that 48% of large enterprises (with over $1 billion in
revenues) admitted that they were “much slower” or “somewhat slower” when
responding to marketplace disruptions. In a related question, 44% stated that they
were responding to newer growth opportunities “ somewhat slower” or “much
slower” than their competitors. Only 21%
said they were moving somewhat in sync with the market or were “much faster”
than it. The
writing is on the wall though, for all companies across sectors: Innovate and
get creative or get left out and go bankrupt. With only about 12% of
organisations having a long-term formal growth strategy of over 5+ years, the
choice couldn’t be more stark than this.
In
light of this, another Innosight corporate briefing called ‘Creative
Destruction Whips through Corporate America’, came up with the conclusion that
if current trends continue, then about 75% of companies on the S&P 500 list
today, will not be around, or will get acquired by 2030.
Written for Beyond Jugaad.
