Every so often, a report or survey appears that challenges our beliefs about how the world works. Boston Consulting Group’s [BCG], new report, Innovation Systems Need A Reboot, a survey of how corporate leadership thinks about innovation, and how ready these organizations are to deliver on their innovation intentions, does just this. Can we imagine that in the twenty-first century, that there are still corporations where innovation has not achieved a reliably important position in the executive mindset? Sounds incredible, doesn’t it, but this is exactly what BCG’s survey is telling us. This is alarming for all of us who take corporate innovativeness for granted, but it also demands that we re-examine many of the instinctive assumptions we hold regarding how executives think, and act, regarding their strategic priorities.
One finding, alone, is staggering; not only is America’s “innovation readiness,” not ready, but the way in which innovation executives think, globally, about innovation as a corporate strategic asset is frightening. BCG’s survey, the eighteenth annual survey it has conducted on leading innovative practices, which calls upon the insights and opinons of one thousand and three senior innovation executives, from around the world, opens with the sobering recognition that: “Companies have never placed a higher priority on innovation—yet they have never been as unready to deliver on their innovation aspirations.”
The problem lies not so much with the hardware, as it does with the software; the social-side of innovation. Fascinated, as we may be, by the bling of new technology, it is a failure to adjust skills and talent, organizational processes and leadership that creates most of the disconnect between ideation and delivery. The result is that, in an era of tumultuous change, we are not prepared; and as Louis Pasteur, an innovator who changed the fortunes of our species, pointed out, “chance favors only the prepared mind.” Not being prepared extracts a high-price; and puts us all at risk.
Several findings of the BCG report merit further attention:
- We are not witnessing a decline of appreciation in innovation. Among the firms surveyed, “innovation prioritization” is actually up — “a record 83% of companies rank innovation as a top-three priority” — and, we are also told that eighty-one percent of North American firms share this ranking, which represents an eleven percent increase in prioritization of innovation among them, compared to the year before. Consider, however, that this also means that, in 2023, just a year ago, a year when AI was emerging as an powerful exogenous force to be dealt with, when climate change should have been on every corporate mind, when the Internet of Things was already bringing ubiquitous connectivity to everyone, everywhere; only seventy-three percent of the North American firms considered innovation to be a top-three priority. What else could have been more important? What were these people thinking? Meanwhile, ninety-two percent of Chinese firms had innovation included as a top-three priority.
- The study’s authors interpreted the increased prioritization of innovation as possibly indicating the emergence of longer-term strategic perspectives, replacing the survival choices that had been necessitated by the Covid-19 pandemic; yet seventy percent of those reporting noted that their innovation activities were actually seeing a renewed emphasis on efficiency, and more short-term projects; and only thirty-six percent of those surveyed felt that their strategies needed refreshing. All of this is disappointing from a long-term innovation readiness perspective. All too often, efficiency is a pernicious enemy of real innovation, and satisfaction with the future serves to dampen enthusiasm for the future; exploitation trumps exploration.
- Despite professing a belief in the power and promise of corporate innovation, a large majority of the respondents admitted that they were not adequately prepared for future innovation. When considering why such unpreparedness was characterizing their organizations, the bulk of their concerns focus on internal factors, such as: internal corporate strategic confusion, availability of funding, talent pool constraints, risk-averse cultures, and siloed innovation, etc.; all of which are inward-facing considerations. At a time when “outside-in” is the preferred orientation of forward-facing strategic thinkers, these C-suiters are decidedly “inside-out.” Inside-out is a dangerous orientation when most of the real action requiring strategic response is taking place outside of the firm, no matter which firm, industry or geography we are speaking about.
- There is also the sense that when the respondents think “innovation,” they appear to be thinking, solely, “technology.” As a result, only sixty-seven percent of the labor-intensive, and customer experience-sensitive, wholesale and retail firms surveyed, saw innovation as a top-three priority, with no indication that business model innovation, or customer-journey value-propositions, were recognized as innovation in such organizations.
The readiness of organizations to innovate, and to successfully take those innovations to the marketplace, relies upon a rich web of people-based interactions: big dreams receiving more attention than small ones; teams that are fit and eager to explore new realities; decision-makers who are up to making big calls; value-chain and ecosystem partners who buy-into innovation and add their ideas into the mix; universities educating a new generation of leaders who are will flourish in complex and multidisciplinary environments. These very human webs reflect organizations that are prepared for future challenges; that are not hostages to legacy thinking or momentary market success; and leaders who can take organizations to market positions which were formerly considered unattainable. One expects that few of these capabilities would be seen in the sample surveyed here.
Coincidentally, with the writing of this piece, a young strategy consultant friend of mine was admitting his surprise, in the field, on “ how the word “innovation” is a double-edged sword for organizations: while some love it, others fear it, as if it will kill them…” This could be what we are seeing with the firms in this survey; a strong public affirmation for being innovative, while at the same time a reluctance to do anything remotely risky. This is a form of what Steve Blank has termed “innovation theatre,” where there is a lot of activity undertaken, but not much progress in fundamental product or process change. In most instances, innovation theatre ends badly.
Besides revealing the peril that corporate organizations face by not being ready, BCG also offers several corporate examples of organizations who they feel are increasing their innovation readiness: Tata Group, for the way it links strategy, from the top, with innovation decisions at the business unit level; Novo Nordisk and Eli Lilly, for their sustained focus and persistent commitment to specific market opportunities that are built upon existing strengths; automobile technology supplier, Aptiv, for its rigorous refreshing of its innovation portfolio; and, Nvidia, for aggressiveness and daring in expanding its innovation portfolio, “shift[ing] the organization’s innovation focus away from its core in computer graphics to leading the nascent market for AI chips.” Each of these examples portray organizations that take both innovation, and the necessary preparedness for it, seriously.
In sum, we owe BCG a debt of gratitude for reminding us that while ideation may be glamorous, it’s only the beginning of a difficult journey from new idea to new ways of working and living. If there is danger ahead in this journey, this study suggests that it’s not so much the technology that will hold us back, but the organizations and leaders that we must rely upon; and, at the moment, so many of them do not appear to be ready for the challenge.
