Innovation Leadership Study: Managing Innovation: An Insider Perspective

Innovation Leadership Study
Managing Innovation: An Insider Perspective April 2012
Transform to the power of digital
Table of Contents
Introduction Results Implications Demographics
Copyright 2011 Capgemini Consulting. All rights reserved.
This Innovation Leadership Study provides insight into the formal and informal mechanisms for managing innovation
Introduction
Results Implications Demographics
Introduction (1/3) Innovation Leadership Study

Paddy Miller
Professor of Managing People in Organizations
Koen Klokgieters
Vice President Business Innovation
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
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
The study aims to understand how those leading and managing innovation in their organizations think about the innovation function
Introduction
Introduction (2/3) Study Overview

Objectives
FORMAL MECHANISMS STRATEGY GOVERNANCE
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
Managing Innovation
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
LEADERSHIP
CULTURE
INFORMAL MECHANISMS
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.

Our leader versus laggard methodology allows us to uncover good practices in managing innovation
Introduction
Introduction (3/3) Innovation Success Rate

% of respondents, n = 260
Leader versus Laggard Perspective

Survey Methodology
Could you please estimate your organizations innovation success rate?
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 companys business results.
38% 37%
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 companys business results.
18%
The Less than 25% category represents the innovation laggard

group and the Over 75% category the innovation leader group of analysis.
7%
Survey Population
Less than 25% 25-50% 50-75% Over 75%
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.
LAGGARDS
LEADERS
Table of Contents
Forty-three percent of respondents have a formally accountable innovation executive

Introduction
Results
Implications
Demographics
Results: Innovation Function (1/3) Formal Accountability for Innovation


Less than 25% 25-50% 50-75% Over 75%
Does your organization have someone at the executive level who is formally accountable for innovation?
+31%
57%
49% 59%
72%
55%
51% 45% 41%
43%
28%
Yes
No
Yes
No
43% of respondents have someone at the executive level who is formally accountable for innovation
59% of innovation leaders have an accountable executive versus only 28% in the laggard peer group
Developing an innovation ecosystem and strategy are considered to be the innovation functions main role
Introduction
Results
Implications
Demographics
Results: Innovation Function (2/3) Innovation Functions Role

What do you consider to be the innovation functions main role?
Top-1
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 5% 6% 7% 14% 32% 31%
Top-2
15% 11% 16% 19% 12% 9%
Top-3
11% 9% 18% 13% 12% 13%
2%
5%
4%
14%
7%
17%
The innovation functions main role is considered to be the development of an innovation ecosystem and strategy
The absence of a well-articulated innovation strategy is the biggest constraint to reaching innovation targets
Introduction
Results
Implications
Demographics
Results: Innovation Function (3/3) Innovation Constraints

What most constrains your organizations ability to achieve its innovation targets?
Top-1
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 7% 7% 11% 11% 11% 9% 6% 13% 24%
Top-2
9% 15% 12% 9% 10% 9% 12% 12% 12%
Top-3
13% 11% 7% 12% 10% 11% 9% 11% 16%
The absence of a well-articulated and/or communicated innovation strategy is the top-1 innovation constraint
Survey results: Innovation Strategy
Managing Innovation
LEADERSHIP
CULTURE
INFORMAL MECHANISMS
10
The majority of respondents do not have an explicit innovation strategy

Introduction
Results
Implications
Demographics
Results: Innovation Strategy (1/3) Innovation Strategy


Less than 25% 25-50% 50-75% Over 75%
Does your organization have an explicit innovation strategy?
+36%
71% 65% 58% 53% 42% 29% 45% 55% 47% 35%
Yes
No
Yes
No
42% of respondents have an explicit innovation strategy
65% of innovation leaders have an explicit innovation strategy versus only 29% of the laggards
11
The innovation strategy most frequently includes statements on alignment with corporate strategy, technology and markets
Introduction
Results
Implications
Demographics
Results: Innovation Strategy (2/3) Innovation Strategy Elements


Less than 25% 25-50% 50-75% Over 75%
Does it include statements on any of the following?
Alignment with corporate strategy Technology Markets Innovation culture Innovation processes Internal capabilities Targets Partners 64% 62% 58% 55% 47%
80%
38% 37% Targets 57% 55% 46% 18% Partners 61% 55%
+17%
44% 40%
+9%
Multiple answers possible; Respondents who answered Other are not shown.
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
12
It is often developed by a combination of top management and innovation experts, and communicated widely inside the organization
Introduction
Results
Implications
Demographics
Results: Innovation Strategy (3/3) Innovation Strategy Development

Innovation Strategy Communication

How is your innovation strategy developed?
How is your innovation strategy communicated in your organization?

13% 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
Respondents who answered Other are not shown.
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
2%
6% 30% 11% 2% 9% 2% 20% 19% 18%
44%
15%
The development of an innovation strategy is predominantly a top-down exercise
19% of respondents communicate their innovation strategy also outside the organization
13
Survey Results: Innovation Governance
Managing Innovation
LEADERSHIP
CULTURE
INFORMAL MECHANISMS
14
Only thirty percent of respondents agree they have an effective organizational structure for innovation
Introduction
Results
Implications
Demographics
Results: Innovation Governance (1/4) Organizational Structure

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 Strongly disagree
Respondents who answered Not Applicable are not shown.
15% 12% 9%
30% 33% 31% Agree
15% 19% 24%
25% 24% 25%
12% 11% 9%
Disagree
Neither disagree, nor agree
Strongly agree
45% of respondents do not have a formal organizational structure for innovation

15
Thirty-nine percent do not have a formal decision-making process for managing innovation
Introduction
Results
Implications
Demographics
Results: Innovation Governance (2/4) Decision-making Process

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 innovation
8%
31%
26%
25%
8%
We have a formal decision-making process for managing innovation 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 Strongly disagree
10% 8% 9%
29% 33% 26%
15% 20% 18% Agree
30% 26% 30% Strongly agree
14% 11% 15%
Disagree
Respondents disagree most with having a well defined process for prioritization and funding of innovation projects
16
A stunning fifty-four percent of survey participants indicate not having a formal KPI system for promoting innovation
Introduction
Results
Implications
Demographics
Results: Innovation Governance (3/4) KPI System

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 Strongly disagree
15% 11% 13% 34%
39% 17%
14%
24% 29%
6% 7% 7%
39% Agree
20% Strongly agree
19%
Disagree
Only 26% percent agree they have clearly defined performance measurement and rewarding of innovation success
17
Fewer than a quarter of the respondents have an effective organizational alignment of innovation efforts
Introduction
Results
Implications
Demographics
Results: Innovation Governance (4/4) Organizational Alignment

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 efforts
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 Strongly disagree
9% 8% 8%
35% 32% 37% Agree
21% 19% 22%
24% 30% 25%
7% 7% 4%
Disagree
Strongly agree
Respondents are most positive about the alignment of innovation efforts with corporate strategy
18
Survey Results: Innovation Leadership
Managing Innovation
LEADERSHIP
CULTURE
INFORMAL MECHANISMS
19
Accountability for realizing growth is the main driver for senior executives to be involved in innovation
Introduction
Results
Implications
Demographics
Results: Innovation Leadership (1/2) Executive Motivation for Innovation


Less than 25% 25-50% 50-75% Over 75%
What do you think motivates senior executives to be involved in innovation leadership?
Accountability for realizing growth
46% 15% 11% 19% 18% 17% 28% 23% 12% 15% 17% 7% 6%
46% 40% 51% 65%
+19%
Intrinsic creative motivation
15%
Feel responsible for advancing innovation in the organization
22%
Innovation is considered a high status area
14%
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
20
The exciting nature of innovation work, the desire to improve things, and teamwork aspects motivate employees most to be involved in innovation
Introduction
Results
Implications
Demographics
Results: Innovation Leadership (2/2) Employee Motivation for Innovation

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
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 26% 53% 91% 89% 87%
Disagree / Strongly Disagree

4% 5% 5%
75%
7%
17% 35%
Respondents who answered Neither disagree, nor agree or Not Applicable are not shown.
Employees are particularly involved in innovation work because of its exciting nature, the desire to improve things and its teamwork aspects
21
Survey Results: Innovation Culture
Managing Innovation
LEADERSHIP
CULTURE
INFORMAL MECHANISMS
22
Two-thirds of our respondents have been tasked with creating an innovation culture
Introduction
Results
Way Forward
Demographics
Results: Innovation Culture (1/3) Innovation Culture


Less than 25% 25-50% 50-75% Over 75%
Have you been tasked with creating a culture of innovation in your organization?
86% 66% 65% 57% 34% 43% 35% 35%
65%
14%
Yes
No
Yes
No
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
23
Openness, innovation as a core value, and the sharing of information are most often mentioned as the elements that constitute an innovation culture
Introduction
Results
Way Forward
Demographics
Results: Innovation Culture (2/3) Innovation Culture Elements

Which elements do you think constitute a culture of innovation?
Openness (to others ideas, to change, to exchange)
84% 74% 69% 59% 56% 54% 54% 41% 33% 28%
Innovation considered a core value of the company

Sharing information, ideas and results Listening to ideas, pushing them forward, making sure theyre 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
Our leader versus laggard comparison revealed that innovation leaders are more concerned with facilitating and guiding ideas than others
24
The CEO is considered the main driver of an innovation culture within companies
Introduction
Results
Way Forward
Demographics
Results: Innovation Culture (3/3) Innovation Culture Source

Where does an innovation culture come from?
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%
In addition to the CEO, peers and managers in general are most often mentioned as the source of an innovation culture
25
Table of Contents
26
What does all this mean for executives responsible for leading and managing innovation?
Introduction Results
Implications
Demographics
Implications Drivers for Innovation

INNOVATION FUNCTION
The innovation function is in the spotlight to improve the organizations ability to achieve its innovation targets by formulating a well-articulated innovation strategy and improving its understanding of the external environment.
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.
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 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 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.
Innovation should be in the DNA of the company as well as in its leaders and employees
27
Table of Contents
28
Two hundred and sixty respondents contributed to this survey

Introduction Results Implications
Demographics
Demographics (1/3) Position

% of respondents, n = 260 # of respondents, n = 260
Role
What is your role in the organization?
Chief Executive Officer 24 23 3 11 8
Respondents position within their organizations

9% 20% 10% C-Level VP Director 13% 22% Manager Analyst Other
Chief Innovation Officer Chief Operating Officer Vice President of Innovation Vice President of Strategy
Vice President of R&D

Director of Innovation Director of Strategy Director of R&D Manager of Innovation Manager of Business Development
4
36 4 4 41 9 8 85
27%
Manager of Marketing Other
60% of respondents are at the director level or higher
Many respondents are directly responsible for leading and managing innovation
29
Innovation and corporate strategy functional areas represent 60% of the respondents
Demographics
Demographics (2/3) Functional Area

% of respondents, n = 201 % of respondents, n = 201
Company Size
What are your companys annual revenues?
What is your functional area?

18% 1% 4% 7% 8% 8% 23% 15% 37%
Innovation Corporate Strategy R&D Marketing Operations IT HR Sales Finance Supply Chain 24%
18%
43%
Less than 500m 500m - 1b 1b - 10 billion More than 10 billion
16%
18%
Other (please specify) 15%
60% of respondents work within innovation or corporate strategy
There is a 50/50 split between big and small companies represented

30
The survey results represent the full range of industries and geographical regions
Demographics
Demographics (3/3) Geography

% of respondents, n = 201 % of respondents, n = 201
Industry
In which industry segment does your company operate?
Professional Services High Tech Life Sciences North America 40% South America Europe Africa Asia Consumer Products Financial Services Public Sector Telecommunications and Media Energy, Oil & Gas Automotive 7% 6% 5% 4% 3% 19% 7% 9% 9% 13% 19%
Respondents per geographical region

6% 3%
2%
13%
13% 12%
46%
Australia
Healthcare Providers
Transportation and Logistics Retail Utilities Other
3%
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
31
For more information regarding this study, please contact:
Koen Klokgieters
Vice President Capgemini Consulting Mob: +316 5112 3259 koen.klokgieters@capgemini.com
Paddy Miller
Professor IESE Business School
Mob: +34 93 253 4200 pmiller@iese.edu
32

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Innovation Leadership Study

Managing Innovation: An Insider Perspective April 2012

Transform to the power of digital

Introduction Results Implications Demographics

Copyright 2011 Capgemini Consulting. All rights reserved.

Introduction (1/3) Innovation Leadership Study

Copyright 2011 Capgemini Consulting. All rights reserved.

Introduction (2/3) Study Overview

FORMAL MECHANISMS STRATEGY GOVERNANCE

It looks at both formal (strategy, governance) and informal (leadership, culture)

Subsequently a broad-scale survey targeting innovation leaders has been

The final report integrating all findings is to be expected in early 2012.

Introduction (3/3) Innovation Success Rate

Leader versus Laggard Perspective

Could you please estimate your organizations innovation success rate?

The methodology differentiates between innovation leaders and

The innovation success rate is determined by the percentage of

We distinguish between 4 categories of innovation success

The Less than 25% category represents the innovation laggard

The exhibit to the left shows how respondents are distributed

Copyright 2011 Capgemini Consulting. All rights reserved.

Introduction Results Implications Demographics

Copyright 2011 Capgemini Consulting. All rights reserved.

Forty-three percent of respondents have a formally accountable innovation executive

Results: Innovation Function (1/3) Formal Accountability for Innovation

Leader versus Laggard Perspective

51% 45% 41%

Results: Innovation Function (2/3) Innovation Functions Role

What do you consider to be the innovation functions main role?

Results: Innovation Function (3/3) Innovation Constraints

Survey results: Innovation Strategy

FORMAL MECHANISMS STRATEGY GOVERNANCE

Copyright 2011 Capgemini Consulting. All rights reserved.

The majority of respondents do not have an explicit innovation strategy

Results: Innovation Strategy (1/3) Innovation Strategy

Leader versus Laggard Perspective

Does your organization have an explicit innovation strategy?

42% of respondents have an explicit innovation strategy

Results: Innovation Strategy (2/3) Innovation Strategy Elements

Leader versus Laggard Perspective

Does it include statements on any of the following?

Results: Innovation Strategy (3/3) Innovation Strategy Development

Innovation Strategy Communication

How is your innovation strategy developed?

How is your innovation strategy communicated in your organization?

6% 30% 11% 2% 9% 2% 20% 19% 18%

The development of an innovation strategy is predominantly a top-down exercise

Survey Results: Innovation Governance

FORMAL MECHANISMS STRATEGY GOVERNANCE

Copyright 2011 Capgemini Consulting. All rights reserved.

Results: Innovation Governance (1/4) Organizational Structure

We have an effective organizational structure for innovation

30% 33% 31% Agree

15% 19% 24%

25% 24% 25%

Neither disagree, nor agree

45% of respondents do not have a formal organizational structure for innovation

Results: Innovation Governance (2/4) Decision-making Process

We have an effective decision-making process to manage innovation

29% 33% 26%

15% 20% 18% Agree

30% 26% 30% Strongly agree

14% 11% 15%