Electronics and high-tech companies underperforming in innovation
by Wouter Koetzier and Adi Alon,
2013-06-06 12:40:45.0
THERE is widespread commitment to innovation throughout the electronics and high-tech industry. But this commitment is not reaping commensurate rewards. This needs to change. Innovation is too critical to the future of the industry to continue along this path of unrealised potential.
These are key findings from a new Accenture survey of executives from 519 companies across 12 industries, including 68 from the electronics and high-tech industry. The full report can be found here: "Why ‘Low Risk’ Innovation Is Costly."
The research, led by Accenture’s innovation and product development group, revealed that only 13% of executives within the electronics and high-tech industry believe their respective companies’ innovation initiatives deliver a competitive advantage. Electronics and high-tech executives also revealed a high degree of commitment and focus on innovation compared to executives from the 11 other industries.
In addition, an analysis of the electronics and high-tech industry responses found:
• Nearly two-thirds (63%) of respondents indicated opportunities to exploit underdeveloped areas and markets often die. Nearly the same percentage (60%) revealed their organisations tend to pursue product line extensions rather than develop completely new products and services. In addition, 59% noted their organisations have become more risk averse regarding new ideas.
• Consistent with these findings, only slightly more than one third (34%) said they were "very satisfied" with their initial idea generation; 30% said they were very satisfied with their company’s conversion of ideas into market-ready products, services or business models; and just one-fourth (26%) 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% of respondents indicated they rank innovation among the top five strategic priorities of their corporations.
Renovation and invention traps
The research revealed two dominant obstacles that respondents said inhibit them from driving higher returns from innovation. The first challenge can be found in the conservative approach itself. This approach focuses on individual line extension "renovation" rather than developing a broader portfolio that also includes bold, big ideas. Renovation can limit innovation to small, incremental improvements and fail to result in significant step changes and revenue opportunities.
The second challenge is the "invention" trap. By this Accenture means over-reliance on the invention process itself to produce success and relative lack of systematic, enterprise-wide processes capable of commercialising inventions into products or services at scale, bringing them to market in a sufficiently timely fashion and reaping expected returns.
To overcome renovation and innovation challenges, electronics and high-tech companies need to introduce something new on a scale where it has sufficient impact to redefine a market while still not "betting the farm"? This can be achieved by pursuing a prudent and disciplined investment approach that specifically addresses innovation risk management.
High commitment to innovation
Despite pervasive dissatisfaction, 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 among all industries in two categories, cloud (74%) and scientific applications (43%).
These same respondents also showed deep commitments to innovative initiatives versus the other industries. Nearly three-fourths (72%) have a formal system in place to achieve innovation, placing the sector second among all surveyed industries. Virtually the same percentage (71%) reported employment of a chief innovation executive or another officer designated to oversee innovation — the second highest among all industries.
Final thoughts
Innovation can be more effective when a formal system exists to streamline processes, manage risks and mine the data needed to generate new products, services and business models to foster growth. Approached correctly, innovation can be executed at scale, with speed and balance between renovation and game changing initiatives; driving higher strategic and commercial value.
Five elements needed to create a formal innovation system
Through its research, Accenture identified five key elements involved in creating a formal innovation system. Those include end-to-end processes that contribute to speed and flexibility; unique, personalised customer experiences that can foster loyalty and enhance revenues; the application of risk management to help drive innovation with analytics, processes and tools; integration of the customer voice 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.
• Wouter Koetzier is managing director for innovation and product development at Accenture. He can be reached at [email protected].
• Adi Alon is a managing director for innovation and product development at Accenture. He can be reached at [email protected].
Picture: THINKSTOCK
THERE is widespread commitment to innovation throughout the electronics and high-tech industry. But this commitment is not reaping commensurate rewards. This needs to change. Innovation is too critical to the future of the industry to continue along this path of unrealised potential.
These are key findings from a new Accenture survey of executives from 519 companies across 12 industries, including 68 from the electronics and high-tech industry. The full report can be found here: "Why ‘Low Risk’ Innovation Is Costly."
The research, led by Accenture’s innovation and product development group, revealed that only 13% of executives within the electronics and high-tech industry believe their respective companies’ innovation initiatives deliver a competitive advantage. Electronics and high-tech executives also revealed a high degree of commitment and focus on innovation compared to executives from the 11 other industries.
In addition, an analysis of the electronics and high-tech industry responses found:
• Nearly two-thirds (63%) of respondents indicated opportunities to exploit underdeveloped areas and markets often die. Nearly the same percentage (60%) revealed their organisations tend to pursue product line extensions rather than develop completely new products and services. In addition, 59% noted their organisations have become more risk averse regarding new ideas.
• Consistent with these findings, only slightly more than one third (34%) said they were "very satisfied" with their initial idea generation; 30% said they were very satisfied with their company’s conversion of ideas into market-ready products, services or business models; and just one-fourth (26%) 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% of respondents indicated they rank innovation among the top five strategic priorities of their corporations.
Renovation and invention traps
The research revealed two dominant obstacles that respondents said inhibit them from driving higher returns from innovation. The first challenge can be found in the conservative approach itself. This approach focuses on individual line extension "renovation" rather than developing a broader portfolio that also includes bold, big ideas. Renovation can limit innovation to small, incremental improvements and fail to result in significant step changes and revenue opportunities.
The second challenge is the "invention" trap. By this Accenture means over-reliance on the invention process itself to produce success and relative lack of systematic, enterprise-wide processes capable of commercialising inventions into products or services at scale, bringing them to market in a sufficiently timely fashion and reaping expected returns.
To overcome renovation and innovation challenges, electronics and high-tech companies need to introduce something new on a scale where it has sufficient impact to redefine a market while still not "betting the farm"? This can be achieved by pursuing a prudent and disciplined investment approach that specifically addresses innovation risk management.
High commitment to innovation
Despite pervasive dissatisfaction, 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 among all industries in two categories, cloud (74%) and scientific applications (43%).
These same respondents also showed deep commitments to innovative initiatives versus the other industries. Nearly three-fourths (72%) have a formal system in place to achieve innovation, placing the sector second among all surveyed industries. Virtually the same percentage (71%) reported employment of a chief innovation executive or another officer designated to oversee innovation — the second highest among all industries.
Final thoughts
Innovation can be more effective when a formal system exists to streamline processes, manage risks and mine the data needed to generate new products, services and business models to foster growth. Approached correctly, innovation can be executed at scale, with speed and balance between renovation and game changing initiatives; driving higher strategic and commercial value.
Five elements needed to create a formal innovation system
Through its research, Accenture identified five key elements involved in creating a formal innovation system. Those include end-to-end processes that contribute to speed and flexibility; unique, personalised customer experiences that can foster loyalty and enhance revenues; the application of risk management to help drive innovation with analytics, processes and tools; integration of the customer voice 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.
• Wouter Koetzier is managing director for innovation and product development at Accenture. He can be reached at [email protected].
• Adi Alon is a managing director for innovation and product development at Accenture. He can be reached at [email protected].
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