R&D pioneers have distinctive approach

21 November 2011

NEW YORK: Companies with the best track record when it comes to innovation display markedly different strategies to their less successful competitors, new figures show.

Ernst & Young, the business services network, and the Economist Intelligence Unit, the research group, surveyed 600 brand owners, supplementing the results with data drawn from 300 of its client-facing partners.

At present, just 16% of organisations agreed products and services developed in the last two years were "important" to their revenues, but 36% believed this would be the case by 2016.

"What gives me a lot of faith in our future is that our new product success is being driven by innovation," Bill Ford, executive chairman of Ford, the automaker, told Ernst & Young.

An additional 39% of corporations were attempting to tap new geographic markets seen as offering higher growth than their existing outlets as a way of boosting top-line sales.

A further 34% prioritised taking share from rivals, 30% outlined the aim of deriving incremental value from their established portfolio and 24% wanted to create products targeted at new customer segments.

Elsewhere, 16% of companies were seeking to exploit alternative distribution channels or find new opportunities for current assets, while 8% had introduced lower-priced goods.

To identify the most effective innovation models, Ernst & Young broke out data for "high performers" combining strong cost competitiveness, reach, operational agility and stakeholder confidence.

When analysing the potential for new products, 38% of these enterprises used customer feedback and market intelligence, 35% deployed segmentation and 32% leveraged observations from staff.

Some 30% of businesses relied on "systematic market research", inspiration from R&D teams or new technological developments, and insights from sales teams or distribution partners.

Moreover, 30% of firms fitting this description had increased their range of products by more than 20% during the last two years, thus expanding sales by gaining "more of their current client's wallet".

The leading players placed a much greater emphasis than the norm on entering new territories, enhancing customer value through up-selling and cross-selling and attracting new audiences, the study added.

"We think there are very interesting opportunities through having a local presence, in terms of continuing to grow, engaging our users and monetising the site," said Jeff Weiner, CEO of LinkedIn, the social network.

Data sourced from Ernst & Young; additional content by Warc staff