The Corporate Struggle With Innovating

by Jack Loechner, Nov 29, 2012, 10:00 AM

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According to a study in 2012 by the Economist Intelligence Unit with Oracle, most companies struggle with innovation. It is difficult, says the report, to come up with new ideas continually, particularly ones that people will pay for.

To promote innovation, many researchers suggest executives cultivate a mindset that is more open, nimble and resilient, and willing to fail. Global companies that are furthest along the innovation path have put in place processes or cultural norms to foster good ideas and implement them quickly. By monitoring and analyzing how initiatives develop, leading firms spot trends and create opportunities for innovation.

• Companies furthest along the innovation path utilize customer data and customer participation in their product and service improvements
• Leading companies make use of disruptive technology trends to either foster innovation or improve business processes
• Many companies have no plan for learning from failed ideas

The Economist Intelligence Unit conducted a global survey of senior executives, sponsored by Oracle, to explore the characteristics of companies that are adept at promoting innovation. The principal research findings are included in this summary.

The IT department is identified in the survey as a key area of missed opportunity. According to 51% of respondents the predominant role of their IT department is to implement, rather than generate, innovation. The survey found that some executives are underestimating the role played by IT, with 13% of respondents saying the IT function is not involved in innovation at their firm. Significantly, this figure falls to 6.7% for C-suite respondents.

Respondents’ opinion of what the role is of the IT department in cultivating business innovation (% respondents)

• Supplying technologies that foster the innovation process (e.g. cloud computing, mobility)
• Enabling business units to adapt processes rapidly
• Implementing and maintaining new business ideas within business processes
• Educating business leaders on new technology trends
• Identifying pockets of innovation in the enterprise
• The IT department is not involved in our business innovation

C-level respondents similarly identified the importance of involving customers in innovation cycles. 54% of respondents in this group actively collect customer feedback and analyze customer data for clues to innovate effectively. This interaction allows companies to create specialized products for different markets, the survey found. Companies with annual revenue of US$500m or less are more likely to involve customers in product design and testing as part of their innovation efforts, according to the survey. Companies with annual revenue of US$1bn and above, also utilize customer feedback, but are more likely than smaller companies to tap into social networking in search of customer-focused innovations. 

Means Of Focusing Innovation Efforts On The Customer (Select all that apply; % respondents)
Means To Focus	% of Respondents
Collecting customer feedback via surveys or interviews	54%
Analyzing customer data for trends	53
Involving customers in product testing	44
Designing different products for different markets	43
Involving customers in product design	37
Locating product development in specific markets	32
Gathering customer ideas using social media	29
Other	5
Source: EIU, November 2012

 Among the more recent disruptive technology trends, respondents identified big data (massive amounts of data from various structured and unstructured sources) as being the most useful overall. Executives said they favored big data for:

• Developing new pricing models (60%)
• Developing new products or services (38%)
• Improving business processes (38%)

Lack of analytical talent topped the list of concerns around big data. 

• The C-suite selected social media as the emerging technology with the most potential to add value for developing new channels and improving customer experience (43%).
• Large companies were most likely to tap into social

Technologies Best Suited For Company’s Business Units To Innovate Effectively (% Respondents)
Best Technology For	Cloud Computing	Mobile Services	Social Media	Big Data Analysis
Developing new products or services	23%	17%	22%	38%
Improving business process	30	24	7	38
Developing new pricing models	12	16	12	60
Developing new channels to market	13	25	44	18
Improving customer experience	14	30	43	13
Source: EIU, November 2012

One of the surprising results from the survey, and one of the biggest missed opportunities, is how few organizations seemed to be learning from their mistakes. More than one-half of respondents reported that their organization either did not have a program to re-examine failed ideas (49%), or they did not know whether such a program existed at their company (13%). Lack of a follow-up program means respondents’ companies invested time, money and other resources in a failed innovation without finding out what went wrong. At a minimum, companies with no program to re-examine failed ideas run the risk of reinventing the wheel and failing again in the future.

The report concludes that there are a number of ways in which companies across all industries can increase business-led innovation. Respondents to the survey suggest a series of principles for business leaders to bear in mind when seeking to build a culture of business-led innovation:

• Culture comes from the top: it’s up to the leadership to set a tone that makes workers feel empowered to innovate—and allowed to fail. 
• Success in innovation is also about failure: redeploying members of teams involved in failed innovations can help to increase the prospect of success elsewhere by ensuring that learning is disseminated.
• Pushing down authority is an enabler: empowering smaller teams to build their own tools to solve business problems helps to give rise to wider innovations.
• Encourage small iterative projects. These set up an environment in which repeated experimentation and learning refine winning ideas.
• Disruptive technology trends are empowering: the IT department should play a key role in educating business leaders about new technology trends.
• Get everyone involved: look for opportunities to increase the cross-fertilization of ideas between as many business units as possible. Encourage customer participation and customer data comparisons in innovation initiatives.

A growing number of companies are identifying areas within the business to support their innovation efforts, notes the report. Departments historically tasked with developing new ideas, such as research and development, are finding fresh thinking coming from sales, customer service, IT, manufacturing, distribution, finance and human resources. By encouraging participation from more departments, leading global companies foster a culture that supports collaborative innovation.

Teams Involved in Bringing Innovative Ideas to Market (% of Respondents)
Discipline	% of Respondents
Product development	47%
Marketing	45
R&D	44
Sales	25
Customer service	24
IT	19
Manufacturing	12
Distribution	8
Finance	7
HR	7
Source: EIU, November 2012

Please visit Oracle here to access more information about the study.

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