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Tech Execs Give Innovation Mixed Reviews

While nearly three quarters of technology executives feel their organizations are greatly dependent on innovation, only 13 percent believe innovation delivers a competitive advantage, according to a new survey.

The study by Accenture, which polled 68 execs in the electronics and high-tech sectors, reported that 74 percent of the executives felt their companies strategies were “very” or “extremely” dependent on innovation.

This is an interesting finding, to say the least. High-tech executives will continue to rely on innovation, but the their efforts don't necessarily mean they will beat the competition in the marketplace.

Think Apple. In 2010, when Apple introduced its first iPad, the company was all alone in offering an innovative tablet that either met or exceeded the needs of business clients and consumers alike. Three years on, and consumer electronics companies like Samsung Electronics, Lenovo Group, and Amazon.com have introduced tablets with similar features and lower prices, and Apple's competitive advantage in the tablet market has dwindled.

The Accenture poll
Many executives in other industries share the opinions of executives in the electronics and high-tech sector. The survey polled executives from 519 companies across 12 industries. Other sectors included energy, retail, utilities, communications, and travel and transportation services. The results showed that, overall, 51 percent of participating companies in the survey reported increased funding for innovation, yet only 18 percent of executives polled believe their companies' innovation efforts generate a competitive advantage.

Additionally, the survey revealed that 93 percent of survey participants said their companies' long-term success depends on their ability to innovate, and 70 percent rank innovation as one of their companies' top five priorities.

While executives understand that innovation is a core competency that can drive sales, the Accenture study, titled “Why Low Risk Innovation Is Costly,” also reveals that technology companies are aware of the challenges innovation brings.

A closer analysis of survey responses from participants in the electronics and technology industry found that:

Sixty-three percent of respondents indicated opportunities to exploit underdeveloped areas and markets often die. Nearly the same percentage (60 percent) revealed their organizations tend to pursue product line extensions rather than develop completely new products and services. In addition, 59 percent noted their organizations have become more risk averse regarding new ideas.

Consistent with these findings, 34 percent said they were “very satisfied” with their initial idea generation; 30 percent said they were very satisfied with their company's conversion of ideas into market-ready products, services, or business models; and just 26 percent indicated they were very satisfied with improving operations by eliminating redundant processes and lowering operating costs.

This widespread underperformance in innovation exists despite the fact that 80 percent of respondents indicated they rank innovation among the top five strategic priorities of their corporations.

Despite pervasive dissatisfaction, tech industry executives revealed a high degree of commitment and focus on innovation, compared with executives from the 11 other industries. Respondents were asked about five different areas in which they might increase investments in their innovation outcomes. The five were: cloud — software as a service; mobility — mobile technology to enable information access anywhere, anytime; big-data and analytics; scientific applications such as nanotechnology, clean technology, and genetics; and social media. Electronics and high-tech executives ranked first across all industries in two categories: cloud (74 percent) and scientific applications (43 percent).

These same respondents also showed deep commitments to innovative initiatives versus the other industries. Seventy-two percent have formal systems in place to achieve innovation, placing the sector second among all surveyed industries. Virtually the same percentage (71 percent) reported employment of a chief innovation executive or another officer designated to oversee innovation — the second highest among all industries.

“A major challenge in the high-tech sector is they are committed to investing in innovation but do not seem to be finding ways to generate significant returns on their innovation investments,” said Adi Alon, a managing director in the Accenture Innovation and Product Development practice.

A formal innovation management system
Alon also noted that the study shows that those companies that have institutionalized formal innovation management systems, compared to those that have not, are almost twice as likely to say they were very satisfied with their initial idea generation abilities (43 percent vs. 24 percent). Thirty-eight percent vs. 22 percent are very satisfied with the return on their innovation investments.

Accenture also found that companies with formal systems in place are 75 percent more likely to define their innovation strategies as delivering competitive advantage (21 percent vs. 12 percent); twice as likely to introduce a new business process or model (32 percent vs. 16 percent); and 35 percent more likely to say they are typically first to market with new products or services (50 percent vs. 38 percent).

It's worth noting that respondents in the consumer goods and services, electronics and high-tech, and health provider sectors most frequently said they have formal approaches to innovation.

What does a formal approach to innovation entail? According to Accenture, such a system must include end-to-end processes that contribute to speed and flexibility; unique, personalized customer experiences that can engender loyalty and improve revenues; the application of risk management to help drive innovation with analytics, processes, and tools; a reliance on consumers' opinions, which are gathered through the use of big-data and social media; and frugal innovation that can reduce complexity to shorten time to market, reduce the cost of innovation, disrupt business models, and serve the emerging middle class in developing countries.

6 comments on “Tech Execs Give Innovation Mixed Reviews

  1. Tom Murphy
    May 22, 2013

    Doing something original is important. It not only establishes you as a market leader — in thought, and maybe profit — but also gives customers something new that moves the entire industry forward.   It's ugly cousin, improvisation, is the next best thing and can boost profits even more than innovation at times when a company finds itself behind.

    With those two strategies, companies can conquer any supply shortage and any adverse risk.

  2. prabhakar_deosthali
    May 23, 2013

    Innovation pays. Only if the inventor company is ready to cash in early with the innovative product sales before the competition jumps in with similar looking technology and product.

     So before unveiling a new innovative idea, the company should do its homework on how the market will respond and what will be the projected sales and how much premium it should charge on the innovative product., organize its supply chain to stock up sufficient quantities of the product to meet the demand created by the aggressive marketing.

    By the time the product moves from “premium” to commodity, the company should switch over to the new innovation and keep its competition chasing!

     

     

  3. elctrnx_lyf
    May 26, 2013

    I believe companies should encourage the culture of innovation and motivate the employees to be innovative in everything do. Many such small innovations could help them to make great products for human kind. Each and every step in striving towards a great product and thought process will pay the dividends in very long term for any company.

  4. Himanshugupta
    May 27, 2013

    @Prabhakar, you are right that companies should do their homework before releasing an innovative product to markets. A lot of innovation end up being cloned or copied by other companies and the parent company do not get the benefit it intends. So probably that's why most execs think that innovation is important to keep the company in hunt buy do not give competitive advantages.

  5. Himanshugupta
    May 27, 2013

    @elctrnx, most of the companies do not know how to motivate their employees to innovate and those companies who do then unfortunately employees are so deep buried with their normal jobs that it needs extra effort to work on innovation.

    But one thing is sure that a lot of innovation is driven by improving the daily jobs. If an employee is happy with what he is doing and do not see anything to be improved in his job is not going to innovate anything.

  6. Mr. Roques
    May 28, 2013

    I liked Apple's example because it invalidates what I thought the reason was. 

    I was thinking that those companies idea of innovation is not innovative at all. That they are just keeping up with the rest, so if everyone is “innovating”, then there's no real competitive advantage. Its just business. 

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