With all the furor around the innovation imperative to pull the global economy out of the doldrums, one might think we’ve forgotten how to innovate. We have not. However, evidence suggests that we may have been distracted from it, failing to capture dramatic improvements in our ability to innovate more effectively.
And while innovation has become a top-of-mind issue for public officials seeking elusive job growth, it has long been a leading issue for CEOs. At McKinsey and Company we have been capturing an instructive fact base for years, focused on executive views on the subject. The good news from our recently released results, is the continued focus on, and importance of innovating. The less encouraging news — at a time when we are counting on innovation more than ever — is that we have not gotten markedly better at it.
In that spirit and for my first contribution here, I’d like to share some of our recent findings. Hopefully these help in coloring much of the current rhetoric with fact — at least how our client executives see the subject. What follows are highlights from a McKinsey Quarterly administered survey that was in the field from July 13 to 23, 2010. It captures the responses from 2,240 executives around the world, representing the full range of industries, regions, functional specialties, and seniority.
- Just over half of all respondents, 55 percent, say their companies are better than their peers at innovation, a figure that hasn’t budged since 2008. Another consistent pattern is that far fewer respondents say their companies are good at the specific processes and tactics frequently tied to successful innovation—such as generating breakthrough ideas, selecting the right ideas, prototyping, and developing business cases.
- Respondents say their companies are best at adapting once they’re in the market, with 58 percent claiming to be successful. As in the past, executives have the most difficulty stopping ideas at the right time, with only 26 percent of respondents to this survey saying they do this well.
- Fundamentally, the biggest challenge is organization: 42 percent of respondents say improvement in this area alone would make the most profound difference in innovation performance. This figure falls between the shares of respondents to a 2007 survey who selected allocating resources and aligning talent as their companies’ top challenges to successful innovation. For this year’s respondents, organization is closely followed in importance by developing a climate that fosters innovation; commercializing new businesses, products, or services; and selecting the right ideas and managing a portfolio.
- Respondents also indicate that their companies don’t make good use of many specific innovation accountability tactics. For example, only 27 percent say their companies are very or extremely effective at making business leaders formally accountable for innovation. Notably, even among respondents at early-growth companies, where innovation is likely to be a particularly high priority, only 34 percent say their business leaders are effectively held accountable.
- Nearly a third of the current survey’s respondents say their companies are effective in setting formal priorities for innovation during the strategic-planning process This result is slightly better than related findings from 2007, when roughly a quarter of respondents said their companies included innovation as a formal part of their strategic-planning process, and from 2008, when just under 20 percent said their innovation processes as a whole were very or extremely formalized.
- Respondents at companies that set formal priorities for innovation as part of the planning process are much likelier to say their companies are better at innovation than their peers (63 percent of those who prioritize versus 43 percent of others) and to say their companies are using these tactics effectively. The survey results suggest that simply ensuring innovation is tightly managed can boost performance.
All this raises questions we must answer if we want to actually innovate better: The first is if innovation is the purported Holy Grail of growth, why have we not seen marked step-change in our ability to do it better? Second, and perhaps more pressing is whether growth achieved from other pursuits has undermined or distracted us from innovating better?
I look forward to your comments.
This work appeared first in The McKinsey Quarterly [www.mckinseyquarterly.com]. As such, I am indebted to my colleagues at the Quarterly, plus Marla M. Capozzi,a senior expert in McKinsey’s Boston office; Brian Gregg, an associate principal in the San Francisco office; and Amy Howe a principal in Los Angeles, the authors of the study.