by Diann Daniel

Executives’ Frustration with Innovation Spending Grows, BCG Study Finds

Aug 02, 20072 mins

Risk-averse culture and lack of speed remain barriers to growth.

Innovation may be today’s mandate, but that doesn’t mean everyone’s good at it. So finds Boston Consulting Group’s (BCG’s) fourth annual global survey and report on innovation, which points to the executives’ frustration with the return on innovation investments. That said, respondents to the survey—2,500 executives from around the globe—recognize that performance and growth hinge on innovation.

Innovation Is More Important Than Ever

Companies deemed innovative by respondents (Apple and Google top the list) outperform their peers by nearly 400 basis points per year in terms of stock price.

Dissatisfaction with Innovation Spending Grows

Satisfaction with returns on innovation spending is down from 2006. Last year, 52 percent were satisfied. This year? Just 46 percent.

Biggest Innovation Obstacles: Risk-Averse Culture and Failure to Focus on Speed

“Risk-averse corporate culture” (38 percent) and “overly lengthy development times” (36 percent) were the most-reported factors in preventing better innovation returns.

Fifty-four percent of executives said their companies moved from idea generation to sales too slowly.

Appropriate Innovation Metrics Needed

The metrics that could be most appropriate to drive better performance, according to the study, are used the least: time to market (used by 18 percent) and return on innovation investment (used by 22 percent). What is used? Customer satisfaction (57 percent) and overall revenue growth (51 percent).

Most-Satisfied Companies: Tech, Telecommunications and Travel

Fifty-one percent of executives at technology, telecommunications and travel companies were satisfied with the results of their innovation spend. Least satisfied: execs from financial services (41 percent) and retailers (43 percent).

Global Innovation Grows

Innovation spending in China, India and other rapidly developing economies is increasing for 38 percent of executives, primarily to boost product development.

About three-quarters of Asian (76 percent) and European (74 percent) companies report they’ll be increasing innovation spend, while only 64 percent of North American execs will increase theirs.

“The most innovative organizations excel not just at idea generation, but also in the capabilities necessary to transform those ideas into profits,” says the lead study author, BCG Senior Partner James P. Andrew, in the release. “In our experience, the vast majority of companies have an abundance of ideas. But only a handful are capable of consistently generating profit from those ideas. Companies that can do that are the true innovators.”