New Survey Data Indicates Increased Confidence And Investment In Innovation Among Fortune 1000
Friday, September 20th, 2019
Fortune 1000 companies are showing increased confidence in their innovation strategies and investments according to Benchmarking Innovation Impact 2020, a new report from Innovation Leader, sponsored by KPMG LLP. Despite ongoing economic uncertainty, 41 percent of respondents say that their confidence in their company's innovation strategy and investment for competitive advantage has grown in the last year. Companies with more mature innovation processes, those defined as "role models" in the report, were even more confident, with nearly 50 percent saying that their confidence has increased over last year.
"Today's unprecedented pace of change makes it even more critical for companies to be able to answer a key question: are we investing in the right things—at the right time—to drive growth for the future?" said Fiona Grandi, KPMG national managing partner, Innovation & Enterprise Solutions. "For all businesses, the cost of underinvesting in enterprise-scale innovation is high. It can mean the difference between continued growth and obsolescence."
According to the findings, which encompass feedback from over 200 executives responsible for innovation, R&D and strategy, organizations that are underinvesting in innovation may be putting themselves at a strategic disadvantage. The positive news is that more than half (56 percent) of respondents expect that their company's overall investment in innovation will increase from 2019 to 2020.
Companies are increasingly integrating innovation efforts with strategy and transformation initiatives. Companies with more mature innovation processes were significantly more likely to have innovation activities integrated or collaborating with their strategy (81 percent vs. 56 percent), corporate development/M&A (48 percent vs. 29 percent), and corporate venture capital (62 percent vs. 30 percent) teams, versus the overall respondent pool. This signifies that companies have an opportunity to develop the right strategies and approaches to successfully scale innovation and align imperatives with other groups across the business.
"One key to longevity and impact for innovation teams in any industry is that they find ways to collaborate with other parts of the organization," says Scott Kirsner, CEO and Co-Founder of Innovation Leader. "Creating allies and supporters is key, because there are always internal conflicts and resource debates you'll need to work through."
Investment Continues to Focus On Adjacent and Transformational Innovation
This year's report also confirmed a trend identified last year: companies are shifting away from the commonly-accepted ratio of a 70-20-10 focus on incremental, adjacent, and transformational innovation. Today, 52 percent of innovation initiatives are focused on adjacent and transformational activities. And, that shift increases to nearly 60 percent for adjacent and transformational innovation among the companies defined as role models. This signals that companies are allocating resources towards more ambitious new business models and services.
The Role of the CFO in Innovation Continues to Evolve
Several results from the survey point to the increasingly vital role of the Chief Financial Officer (CFO) in innovation. Fifty-eight percent of respondents said that they are tracking revenue to evaluate the success of their innovation programs. Seventy-one percent of respondents say that innovation efforts are funded as part of the annual budget process. And, 40 percent cite lack of budget as an obstacle to the success of their innovation programs. CFOs are being increasingly relied on to help create strategies that move beyond traditional finance measures, including building an agile portfolio that balances the needs of the business today with long-term growth investments.
Obstacles to Success Include Politics, Talent
Among the full respondent set, 52 percent cited politics, turf-wars or lack of alignment as the biggest obstacle to success. However, among the role model companies, the fight for talent is increasingly becoming a hurdle. Of those companies, 41 percent responded that difficulty recruiting talent with the types of skillsets that are in high-demand today is the biggest obstacle they face.
Successfully scaling innovation, and gaining widespread adoption, may require navigating additional areas. According to the report, 61 percent of respondents stated that competing priorities is the challenge that they most frequently encounter when trying to scale innovation initiatives.
In an environment where market conditions are constantly changing, having the right innovation strategy, establishing the right funding and resourcing models to support innovation, being able to identify and overcome obstacles, and balancing short- and long-term goals are critical to long-term growth supported by innovation.