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Transform to the power of digital
Innovation Leadership StudyManaging Innovation: An Insider Perspective
April 2012
Copyright © 2011 Capgemini Consulting. All rights reserved.
Table of Contents
Introduction
Results
Implications
Demographics
2
Copyright © 2011 Capgemini Consulting. All rights reserved.
This Innovation Leadership Study provides insight into the formal and informal mechanisms for managing innovation
Introduction (1/3)
3
Innovation Leadership Study
Koen KlokgietersVice PresidentBusiness Innovation
Dear Participant,
This joint research by IESE Business School and Capgemini Consulting provides insight into both the formal and informal mechanisms for managing innovation.
With respect to the formal part of managing innovation, we see that even though innovation is considered a highly strategic topic it is not organized in such a way. Innovation leaders understand the need to have an explicit innovation strategy and to support it with formal innovation governance mechanisms. However, only a minority of respondents agree they have an innovation strategy or an effective governance for innovation. I hope you will find these survey results useful for leading and managing innovation.
Best regards,Koen Klokgieters
Dear Participant,
This Innovation Leadership Study aims to understand how those leading and managing innovation in their organizations think about the innovation function.
When looking at the informal mechanisms for managing innovation we notice that the accountability for realizing growth is the main motivational driver for senior executives to be involved in innovation. Many of the innovation leaders and managers we surveyed have been tasked with creating a culture of innovation but interestingly enough it is the CEO and peers that are considered the main drivers of an innovation culture within companies. I would like to thank you for your contribution to this research.
Best regards,Paddy Miller
Paddy MillerProfessor of Managing People in Organizations
Introduction Results Implications Demographics
Copyright © 2011 Capgemini Consulting. All rights reserved.
The study aims to understand how those leading and managing innovation in their organizations think about the innovation function
Introduction (2/3)
4
Study Overview
Objectives
The Innovation Leadership Study aims to understand how those leading and managing innovation in their organizations think about the innovation function.
Content
It looks at both formal (strategy, governance) and informal (leadership, culture) mechanisms for managing innovation.
Approach
It is based on both qualitative (interviews) and quantitative research (survey).
We have conducted in-depth interviews with innovation leaders from various industries on how they lead and manage innovation.
Subsequently a broad-scale survey targeting innovation leaders has been carried out to validate our hypotheses and generate additional insights.
Process
25 interviews have been conducted, most between July and September 2011.
The online survey, in the field from September 12 to October 12 2011, generated responses from 260 executives around the world, representing the full range of industries, regions, functional specialties, and seniority.
The final report – integrating all findings – is to be expected in early 2012.
STRATEGY GOVERNANCE
LEADERSHIP CULTURE
FORMAL MECHANISMS
INFORMAL MECHANISMS
Managing Innovation
Introduction Results Implications Demographics
Copyright © 2011 Capgemini Consulting. All rights reserved.
Our leader versus laggard methodology allows us to uncover good practices in managing innovation
Introduction (3/3)
5
Survey Methodology
The methodology differentiates between innovation leaders and laggards based on a self-assessment by survey respondents of their innovation success rate.
The innovation success rate is determined by the percentage of innovation efforts that have a positive material impact on the company’s business results.
We distinguish between 4 categories of innovation success based on this rate, namely: ‘Less than 25%’, ‘25-49%’, ‘50-74%’ and ‘Over 75%’ of innovation efforts having a positive material impact on the company’s business results.
The ‘Less than 25%’ category represents the innovation laggard group and the ‘Over 75%’ category the innovation leader group of analysis.
Survey Population
The exhibit to the left shows how respondents are distributed over these four categories. Thirty-eight percent of respondents fit the innovation laggard profile, whereas seven percent belong to the innovation leaders group.
Introduction Results Demographics
Innovation Success Rate Leader versus Laggard Perspective% of respondents, n = 260
Could you please estimate your organization’s innovation success rate?
Less than 25% 25-50% 50-75% Over 75%
38% 37%
18%
7%
LAGGARDS LEADERS
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Table of Contents
Introduction
Results
Implications
Demographics
6
Copyright © 2011 Capgemini Consulting. All rights reserved.
Yes No
28%
72%
49% 51%55%
45%
59%
41%
Less than 25% 25-50% 50-75% Over 75%
Forty-three percent of respondents have a formally accountable innovation executive
Results: Innovation Function (1/3)
7
Formal Accountability for Innovation Leader versus Laggard Perspective% of respondents, n = 260
Does your organization have someone at the executive level who is formally accountable for innovation?
43% of respondents have someone at the executive level who is formally accountable for innovation
Yes No
43%
57%
59% of innovation leaders have an accountable executive versus only 28% in the laggard peer group
Introduction Results Demographics
+31%
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
The innovation function’s main role is considered to be the development of an innovation ecosystem and strategy
Formulating and communicating the innovation strategy
Monitoring and analysis of the external environment
Optimizing the innovation processes and governance
Building and nurturing an innovation ecosystem
‘Selling’ of innovation within the organization
Motivating employees to innovate
Running innovation workshops/events
Developing employees’ innovation skills
31%
7%
14%
32%
5%
6%
2%
5%
15%
11%
16%
19%
12%
9%
4%
14%
11%
9%
18%
13%
12%
13%
7%
17%
Developing an innovation ecosystem and strategy are considered to be the innovation function’s main role
Results: Innovation Function (2/3)
8
Introduction Results Demographics
Innovation Function’s Role% of respondents, n = 260
What do you consider to be the innovation function’s main role?
Top-1 Top-2 Top-3
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
13%
11%
7%
12%
10%
11%
9%
11%
16%
The absence of a well-articulated innovation strategy
Lack of understanding of the external environment
No formal innovation governance structure
Lack of formal innovation processes
Inadequate innovation budget allocation
Lack of top management commitment to innovation
No innovation-friendly culture
Lack of clarity on what innovation behaviors actually are
Inadequate innovation skills within the organization
24%
13%
7%
7%
11%
11%
11%
9%
6%
The absence of a well-articulated innovation strategy is the biggest constraint to reaching innovation targets
Results: Innovation Function (3/3)
9
Introduction Results Demographics
Innovation Constraints% of respondents, n = 260
What most constrains your organization’s ability to achieve its innovation targets?
Top-1 Top-2 Top-3
9%
15%
12%
9%
10%
9%
12%
12%
12%
The absence of a well-articulated and/or communicated innovation strategy is the top-1 innovation constraint
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Survey results: Innovation Strategy
10
STRATEGY GOVERNANCE
LEADERSHIP CULTURE
FORMAL MECHANISMS
INFORMAL MECHANISMS
Managing Innovation
Copyright © 2011 Capgemini Consulting. All rights reserved.
Yes No
29%
71%
45%
55%53%
47%
65%
35%
Less than 25% 25-50% 50-75% Over 75%
The majority of respondents do not have an explicit innovation strategy
Results: Innovation Strategy (1/3)
11
Introduction Results Demographics
Innovation Strategy Leader versus Laggard Perspective% of respondents, n = 241
Does your organization have an explicit innovation strategy?
42% of respondents have an explicit innovation strategy 65% of innovation leaders have an explicit innovation strategy versus only 29% of the laggards
Yes No
42%
58%
+36%
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Targets
Partners
38%
46%
37%
18%
57%
61%
55%
55%
Over 75% 50-75% 25-50% Less than 25%
The innovation strategy most frequently includes statements on alignment with corporate strategy, technology and markets
Results: Innovation Strategy (2/3)
12
Introduction Results Demographics
Innovation Strategy Elements Leader versus Laggard Perspective% of respondents,¹ n = 98
Does it include statements on any of the following?
Targets and partners are the least frequently included elements of an innovation strategy
Leaders are more keen to include statements on targets and partners in their innovation strategies than laggards
¹Multiple answers possible; Respondents who answered ‘Other’ are not shown.
Alignment with corporate strategy
Technology
Markets
Innovation culture
Innovation processes
Internal capabilities
Targets
Partners
80%
64%
62%
58%
55%
47%
44%
40%
+17%
+9%
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
It is often developed by a combination of top management and innovation experts, and communicated widely inside the organization
Results: Innovation Strategy (3/3)
13
Introduction Results Demographics
Innovation Strategy Development Innovation Strategy Communication% of respondents,¹ n = 98
How is your innovation strategy developed?
The development of an innovation strategy is predominantly a top-down exercise
19% of respondents communicate their innovation strategy also outside the organization
% of respondents,¹ n = 98
How is your innovation strategy communicated in your organization?
¹Respondents who answered ‘Other’ are not shown. ¹Respondents who answered ‘Other’ are not shown.
Not communicated at all
Communicated to top management layers only
Communicated widely inside the organization
Communicated widely inside the organization and used as a daily guideline for innovation
Communicated widely inside and outside the organization
2%
18%
44%
15%
19%
Developed by top management
Developed by top management and BU heads
Developed by top management, BU heads, and internal innovation experts
Developed by top management, BU heads, internal and external innovation experts
Developed by employees, approved by top management
Developed by employees, validated by BU heads, approved by top management
Developed by BU heads, approved by top management
Developed by innovation experts (internal and external), approved by top management
13%
6%
30%
11%
2%
9%
2%
20%
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Survey Results: Innovation Governance
14
STRATEGY GOVERNANCE
LEADERSHIP CULTURE
FORMAL MECHANISMS
INFORMAL MECHANISMS
Managing Innovation
Copyright © 2011 Capgemini Consulting. All rights reserved.
Only thirty percent of respondents agree they have an effective organizational structure for innovation
Results: Innovation Governance (1/4)
15
Introduction Results Demographics
¹Respondents who answered ‘Not Applicable’ are not shown.
Organizational Structure% of respondents,¹ n = 227
How strongly do you agree or disagree with the following statements regarding your organizational structure for innovation?
We have an effective organizational structure for innovation 9% 36% 21% 23% 7%
We have a formal organizational structure for innovation
We have a well defined governance structure to manage innovation in our organization
We have clearly defined roles and responsibilities with regard to innovation
15%
12%
9%
30%
33%
31%
15%
19%
24%
25%
24%
25%
12%
11%
9%
Strongly disagree Disagree Neither disagree, nor agreeAgree Strongly agree
45% of respondents do not have a formal organizational structure for innovation
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Thirty-nine percent do not have a formal decision-making process for managing innovation
Results: Innovation Governance (2/4)
16
Introduction Results Demographics
¹Respondents who answered ‘Not Applicable’ are not shown.
Respondents disagree most with having a well defined process for prioritization and funding of innovation projects
Decision-making Process% of respondents,¹ n = 227
How strongly do you agree or disagree with the following statements regarding your decision-making process for innovation?
We have an effective decision-making process to manage in-novation 8% 31% 26% 25% 8%
We have a formal decision-making process for managing innova-tion
We have a well defined process to prioritize, and allocate time and funding to, innovation projects
We have a clearly defined process for stage gating, and making go/no go decisions
10%
8%
9%
29%
33%
26%
15%
20%
18%
30%
26%
30%
14%
11%
15%
Strongly disagree Disagree Neither disagree, nor agreeAgree Strongly agree
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
A stunning fifty-four percent of survey participants indicate not having a formal KPI system for promoting innovation
Results: Innovation Governance (3/4)
17
Introduction Results Demographics
¹Respondents who answered ‘Not Applicable’ are not shown.
Only 26% percent agree they have clearly defined performance measurement and rewarding of innovation success
KPI System% of respondents,¹ n = 227
How strongly do you agree or disagree with the following statements regarding your KPI system for innovation?
We have an effective KPI system to promote innovation 15% 41% 21% 17% 4%
We have a formal KPI system for promoting innovation
We have well defined targets and scope for innovation
We have a clearly defined performance measurement and rewarding of innovation success
15%
11%
13%
39%
34%
39%
14%
17%
20%
24%
29%
19%
6%
7%
7%
Strongly disagree Disagree Neither disagree, nor agreeAgree Strongly agree
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Fewer than a quarter of the respondents have an effective organizational alignment of innovation efforts
Results: Innovation Governance (4/4)
18
Introduction Results Demographics
¹Respondents who answered ‘Not Applicable’ are not shown.
Respondents are most positive about the alignment of innovation efforts with corporate strategy
Organizational Alignment% of respondents,¹ n = 227
How strongly do you agree or disagree with the following statements regarding your organizational alignment of innovation?
We have an effective organizational alignment of innovation ef-forts 9% 36% 27% 19% 5%
We have a formal organizational alignment mechanism for our innovation efforts
We have a well defined process for alignment of our innovation efforts with corporate strategy
We have clearly defined how to align innovation efforts across the organization and utilize internal capabilities
9%
8%
8%
35%
32%
37%
21%
19%
22%
24%
30%
25%
7%
7%
4%
Strongly disagree Disagree Neither disagree, nor agreeAgree Strongly agree
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Survey Results: Innovation Leadership
19
STRATEGY GOVERNANCE
LEADERSHIP CULTURE
FORMAL MECHANISMS
INFORMAL MECHANISMS
Managing Innovation
Copyright © 2011 Capgemini Consulting. All rights reserved.
Accountability for realizing growth
Intrinsic creative motivation
Feel responsible for advancing innovation in the organization
Innovation is considered a high status area
46%
14%
22%
14%
Accountability for realizing growth is the main driver for senior executives to be involved in innovation
Results: Innovation Leadership (1/2)
20
Introduction Results Demographics
Executive Motivation for Innovation Leader versus Laggard Perspective% of respondents,¹ n = 241
What do you think motivates senior executives to be involved in innovation leadership?
¹Respondents who answered ‘Other’ are not shown.
46%
15%
17%
15%
40%
11%
28%
17%
51%
19%
23%
7%
65%
18%
12%
6%
Over 75% 50-75% 25-50% Less than 25%
Accountability for growth is the main driver for senior executives to be involved in innovation
Our leader group stresses accountability for growth as the driver for senior executives to be involved in innovation
+19%
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
4%
5%
5%
7%
17%
35%
The exciting nature of innovation work, the desire to improve things, and teamwork aspects motivate employees most to be involved in innovation
Results: Innovation Leadership (2/2)
21
Introduction Results Demographics
Employee Motivation for Innovation% of respondents,¹ n = 241
How strongly do you agree or disagree with the following statements with respect to what motivates employees to be involved in innovation?
Strongly Agree / Agree Disagree / Strongly Disagree
¹Respondents who answered ‘Neither disagree, nor agree’ or ‘Not Applicable’ are not shown.
Innovation is considered to be exciting work
Desire to improve things
Like being part of a team or task force for something new
An opportunity for self-realization
Like being pulled out of everyday
Interesting travel and conferences
91%
89%
87%
75%
53%
26%
Employees are particularly involved in innovation work because of its exciting nature, the desire to improve things and its teamwork aspects
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
Survey Results: Innovation Culture
22
STRATEGY GOVERNANCE
LEADERSHIP CULTURE
FORMAL MECHANISMS
INFORMAL MECHANISMS
Managing Innovation
Copyright © 2011 Capgemini Consulting. All rights reserved.
Yes No
57%
43%
65%
35%
86%
14%
65%
35%
Less than 25% 25-50% 50-75% Over 75%
Two-thirds of our respondents have been tasked with creating an innovation culture
Results: Innovation Culture (1/3)
23
Introduction Results Way Forward Demographics
Innovation Culture Leader versus Laggard Perspective% of respondents, n = 236
Have you been tasked with creating a culture of innovation in your organization?
66% of respondents have been tasked with creating a culture of innovation
Innovators with a success rate of 50% or higher are more often tasked with creating an innovation culture than less
successful innovators
Yes No
66%
34%
Copyright © 2011 Capgemini Consulting. All rights reserved.
Openness, innovation as a core value, and the sharing of information are most often mentioned as the elements that constitute an innovation culture
Results: Innovation Culture (2/3)
24
Introduction Results Way Forward Demographics
¹Multiple answers possible; Respondents who answered ‘Other’ are not shown.
Openness (to others’ ideas, to change, to exchange)
Innovation considered a core value of the company
Sharing information, ideas and results
Listening to ideas, pushing them forward, making sure they’re followed
Acting quickly even outside plan to capture opportunities
People throwing out ideas, discussing them, excited about them
Facilitating and guiding ideas
Code of trust
People are aware they have to have new ideas and bring them up
Going in directions you believe in
84%
74%
69%
59%
56%
54%
54%
41%
33%
28%
Our leader versus laggard comparison revealed that innovation leaders are more concerned with facilitating and guiding ideas than others
Innovation Culture Elements% of respondents,¹ n = 236
Which elements do you think constitute a culture of innovation?
Copyright © 2011 Capgemini Consulting. All rights reserved.
CEO
Peers, people you work with
Managers in general
Learning and development, training
Innovation managers
Chief Innovation Officer and innovation office
Executive sponsor
Internal social media collaboration
69%
59%
51%
36%
33%
32%
30%
24%
The CEO is considered the main driver of an innovation culture within companies
Results: Innovation Culture (3/3)
25
Introduction Results Way Forward Demographics
¹Multiple answers possible; Respondents who answered ‘Other’ are not shown.
In addition to the CEO, peers and managers in general are most often mentioned as the source of an innovation culture
Innovation Culture Source% of respondents,¹ n = 236
Where does an innovation culture come from?
Copyright © 2011 Capgemini Consulting. All rights reserved.
Table of Contents
Introduction
Results
Implications
Demographics
26
Copyright © 2011 Capgemini Consulting. All rights reserved.
What does all this mean for executives responsible for leading and managing innovation?
Implications
27
Introduction Results Implications Demographics
Drivers for Innovation
• The innovation function is in the spotlight to improve the organization’s ability to achieve its innovation targets by formulating a well-articulated innovation strategy and improving its understanding of the external environment.
INNOVATION FUNCTION
STRATEGY
• Traditional strategy development no longer suffices in the pursuit of sustainable growth under high uncertainty – there is a need to move strategy development to the outer peripheries of the company.
INNOVATION LEADERSHIP
• Real innovation leadership requires executives to reduce the level of disconnect between themselves and employees.
• Our leader versus laggard perspective shows the relation between company size and reported innovation success rate, suggesting that it is easier to drive innovation in small organizations.
Innovation should be in the DNA of the company as well as in its leaders and employees
ORGANIZATIONAL DESIGN
• Limited organizational design for innovation is impairing growth at large organizations.
• There is no one size fits all when it comes to org design for innovation but the correlation between having a formalized innovation governance and the reported innovation success rate suggests that there is much to gain by improving the formal mechanisms for managing innovation
INNOVATION CULTURE
• Innovation culture is a highly important mechanism to enable agility and be able to survive in a continuous change environment.
• Our research on innovation culture shows that – among other things – openness to others’ ideas, to change, to exchange, and acting quickly even outside the plan to capture opportunities, are considered important elements of a culture.
Copyright © 2011 Capgemini Consulting. All rights reserved.
Table of Contents
Introduction
Results
Implications
Demographics
28
Copyright © 2011 Capgemini Consulting. All rights reserved.
Two hundred and sixty respondents contributed to this survey
Demographics (1/3)
29
Chief Executive Officer 24
Chief Innovation Officer 23
Chief Operating Officer 3
Vice President of Innovation 11
Vice President of Strategy 8
Vice President of R&D 4
Director of Innovation 36
Director of Strategy 4
Director of R&D 4
Manager of Innovation 41
Manager of Business Development 9
Manager of Marketing 8
Other 85
Position Role% of respondents, n = 260 # of respondents, n = 260
What is your role in the organization?
20%
13%
27%
22%
10%
9%
C-Level
VP
Director
Manager
Analyst
Other
Respondents’ position within their organizations
60% of respondents are at the director level or higher
Introduction Results Demographics
Many respondents are directly responsible for leading and managing innovation
Implications
Copyright © 2011 Capgemini Consulting. All rights reserved.
43%
15%
24%
18%
Less than €500m€500m - €1b€1b - €10 billionMore than €10 billion
37%
23%
18%16%
15%
8%
8%
7%
4%1%
18%
InnovationCorporate StrategyR&DMarketingOperationsITHRSalesFinanceSupply ChainOther (please specify)
Innovation and corporate strategy functional areas represent 60% of the respondents
Demographics (2/3)
30
Functional Area Company Size% of respondents, n = 201 % of respondents, n = 201
What is your functional area? What are your company’s annual revenues?
60% of respondents work within innovation or corporate strategy
There is a 50/50 split between big and small companies represented
Introduction Results DemographicsImplications
Copyright © 2011 Capgemini Consulting. All rights reserved.
40%
3%
46%
2%6% 3%
North America
South America
Europe
Africa
Asia
Australia
Other
Utilities
Retail
Transportation and Logistics
Healthcare Providers
Automotive
Energy, Oil & Gas
Telecommunications and Media
Public Sector
Financial Services
Consumer Products
Life Sciences
High Tech
Professional Services
19%
3%
4%
5%
6%
7%
7%
9%
9%
12%
13%
13%
13%
19%
The survey results represent the full range of industries and geographical regions
Demographics (3/3)
31
Geography Industry% of respondents, n = 201 % of respondents, n = 201
Respondents per geographical region In which industry segment does your company operate?
37 countries are represented in this study with most respondents based in Europe and North America
Introduction Results Demographics
The majority of respondents work in professional services, high tech, life sciences or consumer products
Implications
32
Paddy MillerProfessor – IESE Business School
Mob: +34 93 253 [email protected]
Koen KlokgietersVice President – Capgemini Consulting
Mob: +316 5112 [email protected]
For more information regarding this study, please contact: