Innovation survives the downturn in US and UK

16 November 2009

NEW YORK: Innovation remains a major priority for companies in sectors ranging from consumer goods to the automotive industry, despite the on-going pressures of the financial crisis, according to a study undertaken by Accenture in the US and the UK.

The consultancy interviewed 630 executives in these two countries, and found that 32% of respondents regarded innovation as being more important during the downturn, compared with 11% arguing the opposite, and 57% that saw its prominence as being unchanged.

Some 48% of the sample said their expenditure levels in this area had increased in the last six months, while 28% reported they had been given more resources to foster "large innovations or new ventures" over this period.

A third of participants had seen no change to the funding dedicated to this aspect of their activity, while 19% had seen budgets fall.

In terms of responsibility for driving innovation, 45% of business leaders said this process was part of the brief for their research and development operations, while 29% had established a formal innovation unit.

By contrast, in 16% of cases there was no single department designated with this task, while marketing took on such a position 10% of the time.

Almost 40% of contributors saw the primary role of innovation as being to help them perform ahead of their rivals, meaning that they "constantly renovate" around their "core activities".

Moreover, 25% agreed with the statement that "we intend to transform our business in the next three to five years, primarily with innovations." However, just 3% regularly introduced new products or services in order to "satisfy customers and be competitive."

This was despite the fact that 52% of firms regarded their most successful innovation over the last two years as taking the form of an original product of service, rising to 68% in the consumer goods sector.

New processes and business models were accorded such a status by 31% of those polled, a figure that fell to 17% when it came to improving an existing offering.

A third of Accenture's cohort also argued that their organisation was "looking for the next silver bullet" rather than pursuing a broad range of proposals.

More specifically, 53% stated that the main goal of innovation was to increase share in existing markets – rising to 70% for automotive brands – while 49% wanted to add value to a current product.

Four in ten were hoping to enter new markets or product categories, while 30% were seeking to "disrupt" their segment via a new "process or model", reaching a high of 42% for consumer goods and services.

In identifying why NPD launches had not been successful in the past, incorrect pricing was cited as a central factor in 35% of cases, followed by inadequately meeting customer needs, on 34%, and being late to market, on 33%.

A failure to deliver a unique value proposition also played a key role, according to 27% of people, as did unsuccessful forecasts.

During the next two years, the main challenges in this field were seen to be predicting future trends, on 42%, with reducing time to market, on 34%, and leveraging new technology, securing funding and identifying change customer behaviour all, on 32%.

Overall, Accenture said, "what distinguishes successful innovators is not the level of spending per se, but rather the way in which they manage innovation with rigor, structure, repeatable processes, and an ROI mentality."

Data sourced from Accenture; additional content by Warc staff