The Corporate Innovation Problem™: Nailing it down

frankmattes Advisory, Thought Leadership

This is the fifth post in our series about what we call the “Corporate Innovation problem” and how to solve it. The series started HERE.

With this post, we show how the Corporate Innovation Problem™ manifests. We have coined this term (Note: For easier readability we skip the ™-sign in the rest of the text) for the fact that despite the investments made to build the infrastructure for the early phase of innovation, innovation results remain disappointing.

Disproportionate investments

As we have shown in the last post, companies are investing heavily into building the infrastructure for the early phase of innovation, the so-called ‘Fuzzy front-end’ (FFE). Compared to these investments, relatively little money has been spent on the processes of late phase of innovation, the so-called ‘Efficient back-end (EBE), i.e. into the ‘innovation execution infrastructure’:

The Corporate Innovation Problem_4

Chart 1: Investments into the FFE are much larger than investments into the EBE

Idea generation + idea conversion = Financial results

Booz showed in its 2012 Global Innovation Study, that superior financial results from innovation are clearly linked to excellence in idea generation (FFE) and idea conversion (EBE).

Booz was able to show that excellence in the FFE drives EBITDA, whereas excellence in the EBE drives revenue growth.

The Corporate Innovation Problem

Chart 2: Financial implications of superior idea generation and idea conversion

The issue however is that only 25% of the companies see themselves being excellent in both areas:

The Corporate Innovation Problem_3

Chart 3: How 1,000 companies assess themselves in idea generation and idea conversion

The Corporate Innovation Problem can manifest in 3 main types:

  • Type A companies (46%) do not have enough good ideas and concepts and they also struggle in executing
  • Type B companies (18%) come up with many ideas and strong concepts, but then fail to execute
  • Type C companies (11% of the sample in the Booz study) struggle with creating enough high-quality ideas and concepts, but then execute well

In other words, three out of four companies they are not superior in idea creation and/or idea execution. Two out of three companies do not see themselves ahead of their peers in idea execution. If one adds to this the financial implications shown in chart 2, we have a good explanation why there is a Corporate Innovation Problem.  

C-suites sense the Corporate Innovation Problem

This is perceived by C-suites, which is a good sign for Chief Innovation Offices and Organizational Development Managers since it opens up the door for solving the Corporate Innovation Problem of their firms.

The factual evidence is contained in a study on the managerial aspects of innovation which was cited by a recent Forbes article: More than 75% of US Top Managers say that new ideas are poorly reviewed and analyzed. 80% say their companies do not have the resources needed to fully pursue promising new ideas. And only 5% report that their staff feels highly motivated to innovate.

Where is the Corporate Innovation Problem located?

The 2014 and 2015 studies of the Boston Consulting Group (BCG) on the world’s most innovative companies provide insights about why this is so. Based on BCG figures we see that the symptoms of the corporate innovation problem can be found in three places: In the FFE, in the interface between the FFE and the EBE and in the EBE itself:

The Corporate Innovation Problem_2

Chart 4: Where the Corporate Innovation Problem is located

Implications

In order to maximize results from innovation, companies who want dramatic improvement need to be both efficient and effective in idea generation as well as in idea conversion.

The symptoms of the Corporate Innovation Problem can be found all along the innovation value chain. Solving the Corporate Innovation Problem requires an approach that drives the whole innovation capabilities, or the innovation system – It will not be solved by only increasing investments into the FFE infrastructure and hoping for the best.

In the next posts we will outline how this can be achieved.

About innovation.support

innovation.support is an international agency focused on solving the ‘Corporate Innovation Problem™’. To achieve this, we provide consulting services based on proven, best-in-class methodology which in many cases is proprietary. The services are delivered by experienced innovation management specialists and by subject-matter experts.

Please get in touch with us if you want to improve the outcomes of innovation investments.