Innovation Leadership Study - Capgemini Consulting & IESE Business School

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Innovation Leadership StudyManaging Innovation: An Insider Perspective

April 2012

Copyright © 2011 Capgemini Consulting. All rights reserved.

Table of Contents

Introduction

Results

Implications

Demographics

2


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


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



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


Table of Contents

Introduction

Results

Implications

Demographics

6


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


+31%

Implications


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


8


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


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


9


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


Survey results: Innovation Strategy

10

STRATEGY GOVERNANCE

LEADERSHIP CULTURE

FORMAL MECHANISMS

INFORMAL MECHANISMS

Managing Innovation


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


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


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


12


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


It is often developed by a combination of top management and innovation experts, and communicated widely inside the organization


13


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


Survey Results: Innovation Governance

14

STRATEGY GOVERNANCE

LEADERSHIP CULTURE

FORMAL MECHANISMS

INFORMAL MECHANISMS

Managing Innovation


Only thirty percent of respondents agree they have an effective organizational structure for innovation

Results: Innovation Governance (1/4)

15


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


Thirty-nine percent do not have a formal decision-making process for managing innovation


16



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%


Implications


A stunning fifty-four percent of survey participants indicate not having a formal KPI system for promoting innovation


17



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%


Implications


Fewer than a quarter of the respondents have an effective organizational alignment of innovation efforts


18



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%


Implications


Survey Results: Innovation Leadership

19

STRATEGY GOVERNANCE

LEADERSHIP CULTURE

FORMAL MECHANISMS

INFORMAL MECHANISMS

Managing Innovation


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


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


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


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


Survey Results: Innovation Culture

22

STRATEGY GOVERNANCE

LEADERSHIP CULTURE

FORMAL MECHANISMS

INFORMAL MECHANISMS

Managing Innovation


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%


Openness, innovation as a core value, and the sharing of information are most often mentioned as the elements that constitute an innovation culture


24



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?


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


25



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?


Table of Contents

Introduction

Results

Implications

Demographics

26


What does all this mean for executives responsible for leading and managing innovation?

Implications

27


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.


Table of Contents

Introduction

Results

Implications

Demographics

28


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


Many respondents are directly responsible for leading and managing innovation

Implications


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


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


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: