Capgemini Consulting, in partnership with IESE Business School, the top ranked business school of the University of Navarra, has announced the findings of its annual global Innovation Leadership Study, examining innovation management strategies at organizations around the world. The study reveals that innovation leadership is becoming increasingly important, with 43 percent of respondents stating they have a formally accountable innovation executive in place, responsible for driving innovation, compared to just 33 percent last year. This rise of the ‘chief innovation officer’ suggests driving innovation is becoming a key priority for companies everywhere. However, despite this, the majority of companies (58 percent) still do not have an explicit innovation strategy in place, with most companies considered ‘innovation laggards’ (38 percent) and just 7 percent classed as ‘innovation leaders’.
The study, which surveyed over 260 innovation executives globally, suggests that while innovation is an emerging functional area within organizations, limited organizational strategies for driving innovation are impairing growth. Only 30 percent of respondents agree they have an effective organizational structure in place for driving innovation and less than a quarter (24 percent) believe innovation efforts within their companies are effectively aligned. This is mainly due to not having a formal organizational structure for innovation (45 percent) or a well-defined governance structure (45 percent) in place, or a lack of clear roles and responsibilities for innovation (40 percent). 39 percent of respondents also referenced the lack of an effective decision making process for innovation, largely due to not having a well defined process in place to prioritize and allocate time and funding to innovation projects.
The study also reveals that innovation strategy continues to be largely driven from the top-down, with only 11 percent of respondents explicitly involving employees in the strategy development process. Instead, most respondents (30 percent) indicate that innovation is driven by a combination of senior management, business unit heads and internal innovation experts, with the CEO still considered the most important source of an innovation culture (69 percent). This highlights the need for innovation strategy development in a more bottom-up manner, focused on people as the key source of competitive advantage to ensure all insights are taken into consideration.
“The study reveals a worrying lack of involvement of non-senior employees in the innovation process within most companies,” said Paddy Miller, Professor of Managing People in Organizations, IESE Business School. “But it is vital to capture all those individual insights from both managers and employees to better incorporate an understanding of the external environment in the development of any innovation strategy.”
The study also identifies the absence of a clear, well articulated innovation strategy as the most important constraint for an organization’s ability to achieve its innovation targets (24 percent), followed by a lack of understanding of the external environment (13 percent). However, while most companies lack an explicit innovation strategy, they do recognize the need to create a strong innovation culture that better enables organizational strategy. Building and nurturing an innovation ecosystem (32 percent) and formulating and communicating innovation strategy (31 percent) were cited as the most important responsibilities for innovation leaders. According to the study, for large organizations a lack of innovation governance is also a particular barrier as their size means the innovation function is often spread across the organization. The establishment of a centralized innovation office, together with thorough innovation governance that balances, aligns and enables both short and long term innovation objectives, will help large organizations to focus and streamline their innovation efforts.
“There is no one size fits all approach when it comes to organizational design for innovation, but the correlation between having formalized innovation governance in place and the reported innovation success rate suggests that there is much to gain by improving the formal mechanisms for managing innovation,” said Koen Klokgieters, Global Leader R&D and Business Innovation, Capgemini Consulting. “Although there are signs of an increased formalization of the innovation function, such as the increase in the percentage of respondents that have a formally accountable innovation executive, the levers for the formal management of innovation are largely being overlooked or underdeveloped.”
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