Warc Blog

Risk-averse innovation proves inadequate

15 May 2013
NEW YORK: Businesses are investing more in innovation but top executives are unhappy with the results, which tend to favour line extensions rather than fresh and original products and services, new research has revealed.

Accenture, the consultancy, surveyed of 519 companies across more than 12 industry sectors in France, the UK and the US for its report Why Low Risk Innovation Is Costly. It found that 51% of companies had increased funding in this area, but just 18% of respondents thought the resulting efforts delivered a competitive advantage.

Despite this, most saw innovation as an important area. Fully 93% of executives said it was vital to long-term success, while 70% put in in their top five priorities.

The risk-averse nature of many firms' approach to innovation became apparent with 64% of respondents saying they were focused on product line extensions rather than big ideas.

Just 27% regarded the introduction of a new product category as a primary goal for innovation compared with 42% in a similar survey in 2009.

"Many companies take a low-risk approach to innovation that can jeopardize results because they lack a prudent, disciplined approach for innovation risk management," said Wouter Koetzier, managing director for Innovation and Product Development at Accenture.

"It's a situation compounded for many by an inability to rapidly scale inventions," he added.

The study showed that companies with a formal innovation management system were significantly more likely to report satisfaction with the return on their innovation investments and to see this strategy as delivering a competitive advantage.

At the same time, however, a substantial 38% lacked such a formal approach to innovation management, with travel and transport, communication and utilities the three worst performing sectors in this regard.

By contrast, respondents in the consumer goods & services, electronics & high tech and health provider sectors most frequently said they had a formal approach to innovation.

Accenture's recommendations included the application of risk management to help drive innovation with analytics, processes and tools, while frugal innovation could, it suggested, shorten time to market, reduce the cost of innovation and serve the emerging middle class in developing countries.

Data sourced from Accenture; additional content by Warc staff

 
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