Senior Executives Give Increasingly High Priority to Innovation

Some  76%  of  senior  executives  responding  to  a  recently-published  survey*  carried  out  by the  Boston Consulting Group  consider  that  innovation  and  product  development  are  among the three top priorities at their companies. In fact the innovation indicator has never been so high by close to a quarter of the 1,500 senior company executives polled. “This year we also found that companies are planning to put their money where their priorities are,” write  the  BCG experts.  More  than  two  thirds  of  respondents  reported  that  they  were  planning  to  increase their  investment  in  innovation  during  the  year.  This  represents  a  considerable  increase  on 2010.  (BCG  did  not  publish  a  survey  on  the  year  2011.)  But  there’s  clearly  considerable geographical  variation,  with  “companies in emerging markets ascribing higher priority to innovation”.

India and South America out in front

In India and South America close to 90% of respondents put innovation among their top three priorities. This was also true for China during the years to 2010, but in 2012 the percentage fell  to  “only”  80%.  In  Europe  the  percentage  also  worked  out  at  80%,  but  the  surprising figure  was  that  of  the  United  States,  where  the  senior  executives  responding  to  the  survey were  rather  cautious,  barely  two  thirds  ranking  innovation  in  their  top  three  priorities.  By contrast  US  firms  shine  in  the  final  ranking  of  2012’s  most  innovative  companies,  with Apple,  Google,  Microsoft  and  Facebook  all  among  the  top  five  and  only  the  South  Korean firm Samsung managing to muscle in on the US domination. While the top rankings remain the preserve of high-tech companies, BCG points out that “the importance of innovation has increased for most industries in recent years”.

Innovation across all industries

The automobile, financial services, energy, industrial products, and media and entertainment industries  are  the  ones  where  innovation  has  grown  most  markedly  in  importance  in  recent years,  but  the  global  financial  crisis  has  had  a  significant  impact  on  plans  to  increase investment.  Based  on  BCG’s  experience  with  clients  and  additional  research  outside  the survey,  the  firm  offers  some  advice  to  company  decision-makers  who  need  to  continue innovating on a restricted budget. For example, they suggest “getting the customer involved early”  in  innovation  processes,  the  thinking  here  being  that  if  a  new  idea  is  not  going  to work  out  well,  it’s  better  to  “fail fast and fail cheap”.  Another  piece  of  advice  is  to  “think strategically about tradeoffs”,  making  explicit  decisions  about  how  to  deploy  innovation investments  across  businesses,  markets,  regions,  and  other dimensions.  As  a  basis  for  this advice,  BCG  points  out  that  its  list  of  top-50  innovators  features  an  increasing  number  of companies which operate across multiple industries. As regards innovation in the future, BCG underlines  that:  "Best practice companies do not make these decisions in reference to last year’s budget, but rather on the basis of the size of the future opportunities”.
 
*The Most Innovative Companies 2012: the State of the Art in Leading Industries; Boston Consulting Group, January 2013; a survey among 1,500 senior executives representing a wide variety of industries worldwide.