By Dan Tiemann
Rapid changes in technology have elevated innovation out of the business plan and into the forefront of business strategy. The ride-hailing industry disrupted the ground transportation industry. Social media is changing traditional journalism, while online retailers are putting brick-and-mortar stores out of business.
To compete, organizations are disrupting their own models to put innovation at the lead - "innovate or die" is the new business mantra. However, in order to strategically and successfully reap the benefits of innovation as a revenue creator and business disruptor, businesses can no longer treat innovation as a separate strategic investment. Rather, it must be integrated and budgeted within the business’s overall strategy and transformation.
Nearly 45 percent of respondents to the Innovation Leader report, Benchmarking Innovation Impact 2020, sponsored by KPMG, said innovation and strategy are only somewhat connected, or not at all connected or aligned within their organizations. Sixty percent of respondents indicated that their innovation efforts are ad hoc or emerging, with less than 40 percent having reached a stage where their innovation programs are perceived to be strategic.
What does this mean for corporate strategy?
Historically, companies have followed a 70-20-10 ratio of investment when it comes to their focus on incremental (core), adjacent and transformational innovation. Today, 50 percent of innovation initiatives are focused on adjacent and transformational activities, indicating a shift towards more transformational innovation efforts. In fact, “role model” organizations in the report – those with more mature innovation processes – are at 60 percent adjacent and transformational.
In the report, a full 80 percent of role model companies responded that their innovation teams are completely integrated or highly connected with enterprise strategy, compared with 56 percent of all respondents. Which means it’s not enough to simply enhance your innovation posture by increasing your spend. To support the integration of strategy and innovation, companies need to:
The new innovation playbook requires a clear vision of what this firm will be, a strategy to achieve that goal and an understanding of the risks. Once that is in place, companies will have the confidence to determine where to focus innovation efforts to achieve their growth objectives.
To learn more about the findings of Innovation Leader’s Benchmarking Innovation Impact 2020 report, sponsored by KPMG, or to arrange an interview with Dan Tiemann, please contact Creighton "Abe" Abrams..
Download the report.