As shareholders continue to demand year-over-year percentage-point growth, our largest public companies are facing diminishing returns on cost-saving and margin-enhancement initiatives. In this continuous struggle to satisfy shareholder demand, many companies are committing to consistently deliver meaningful growth from innovation— a promise few are prepared to deliver. Without a clear innovation strategy and roadmap, these companies, and those held accountable for their results, are doomed to fail.
Enter the Chief Innovation Officer, the fastest growing executive role in recent memory. While there are many new CIOs, there remains a great deal of ambiguity to the responsibilities of this position. This presentation introduces a four phase transformation journey that arms CIOs and CEOs with a scalable toolkit of structures, strategies, capabilities, and processes.
2. 39%
64%
8%
Source:Apple, IBM & Royal Dutch Sell 2012 Annual Reports
Growth
Expectation
Assets + Free
Cash Flows
Growth
expectations as
percent of total
market value
NYSE Valuation
[2012]
3.
4. Source: Leslie Known, Wall Street Journal 2012; Samsung & Siemens 2012 Annual Report
‘’Our latest figures confirm our
power of innovation”
33,528
“Technology innovation… accounts
for our growth & stellar performance”
“Our constant innovation and
desire for positive change…”
5. 8.3%
4.8%
4-YearAverage
R&D Spend as a
Percent of Revenue
[2008-2011]
Cross-Industry
Average
73%M o r e
HIGH-TECH
SPENT
Source: Booz&co.TheGlobal Innovation 1000: Comparison of R&D Spending by Regions and Industries
I D E A S I N
P R A C T I C E
High-Tech Industry
Average
7. Source: Booz&co.TheGlobal Innovation 1000: Comparison of R&D Spending by Regions and Industries
WHAT’SYOUR R&D EFFECTIVENESS RATIO?
8.3%
3.9%
R&D Spend as
% of Revenue0.47
HIGH-TECH INDUSTRY
R&D EFFECTIVENESS RATIO
YoY Average
Revenue Growth
=
I D E A S I N
P R A C T I C E
Poor R&D Effectiveness
8. US Industrial R&D Spend by Size of Enterprise
[1981-2011]
Sources: National Science Foundation, Science Resource Studies, Survey of Industrial Research Development, 1991, 1999, 2001, 2013.
71% 68%
41% 35%
13%
10%
14%
17%
6%
6%
9%
8%
6%
8%
14% 17%
4% 9%
23% 23%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1981 1989 1999 2011
Less than 1,000
1,000–4,999
5,000–9,999
10,000–24,999
25,000 or more
9. Lack of a strategy
Lack of alignment
Overloaded pipeline
Rampant incrementalism
1
3
Seven Chronic Problems
4
5
Short-term orientation 6
Accountability for results
Lack of skills 7
Seven Chronic Problems
13. Innovation Strategy
Fuzzy Front End
Business Strategy
Innovation Leadership
Consumer
& Customer
Insights
Brand
Technology
NPD Portfolio Management In-market
Portfolio Management
Idea Concept
Portfolio Management
Launch
Management
Product Lifecycle Management
New Product Development &
Commercialization
Results
Analysis
Are your
innovation
capabilities
sufficient to
transform your
organization?
Shareholders continue to demand year-over-year growth, but it’s getting harder to move the top and bottom line.
Five years ago , globalization would have been the most power lever for growth and every business would have been talking about China-- and rightly so. However, these markets are no longer the gold rush they once were. Since 2010, as these markets were tapped, declining growth rates in these regions no longer makes them a reliable source of growth.http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/ZJ?display=graph
As the traditional means form driving bottom-line growth face diminishing returns, many organizations are turning to “innovation” to meet shareholder demands.But innovation is more than a term, and in large corporations delivering on the promise of “innovation” is not easy.In 2012, a review of quarterly and annual reports submitted to the Securities and Exchange Commission sited the word “innovation” used over 33,528 times (Kwoh, 2013). Yet, when pairing this number to a 2012 Capgemini study, only 42% of companies claim to have an innovation strategy in place (Paddy Miller, 2012).
Notes:Go back to original data point….if we are going to spend more than other industries on R&D than we should be getting growth rates that reflect that investment Metric name…R&D spending as % of sales compared to aggregate revenue growth R&D effectiveness/efficiency ratio
In large organizations achieving this growth from innovation is even harder… for some the organizational barriers make innovation nearly impossible. Since 1980 we have seen a continual shift in innovation funding to smaller and smaller firms.
iStock#17618502 Short-term orientation of business results. Protective of the core business. Siloed by geographies, functions, and brands.
The CIO has four primary areas of responsibility Formulate and communicate the innovation strategy Shape and manage the corporate innovation portfolio and accelerate breakthrough innovations stuck in the development pipelineEvolve innovation business disciplines, competencies, and cultureSustain the transformation by creating a learning organization that actively measures and monitors innovation engine performance Could restructure so that we can use the following 4 S’s: [strategize, sponsor, shape and sustain]Understanding that” innovation” is a holistic, results-oriented journey is essential for companies who wish to drive meaningful growth from innovation.
![39%
64%
8%
Source:Apple, IBM & Royal Dutch Sell 2012 Annual Reports
Growth
Expectation
Assets + Free
Cash Flows
Growth
expectations as
percent of total
market value
NYSE Valuation
[2012]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)