PA Consulting asks businesses not to turn their back on breakthrough innovation
Investing in breakthrough innovation – bringing something new to the world – is critical for organisations who want to futureproof their growth and combat a rapidly evolving set of competitors. Those organisations that only focus on more incremental innovation will miss out on significant growth.
- Over two-fifths (42%) of organisations surveyed say they may not survive without being able to consistently generate breakthrough innovation
- Yet over three quarters (76%) are likelier to pursue incremental innovation over breakthrough innovation
- Nearly three-quarters (73%) prioritise efficiency and cost reduction over breakthrough innovation
- Only 23% of organisations surveyed – the Breakthrough Brigade – can get breakthrough innovations to market.
PA’s latest research, ‘The Breakthrough Brigade’, has uncovered a small group of organisations who have mastered the approach to breakthrough innovation – and made it repeatable. The global survey of 520 C-suite decision makers and innovation leaders found that while leaders recognise the need for breakthrough innovation, the majority struggle to deliver it.
The findings highlight the vast divide between those who can consistently take breakthrough innovations to market, and who achieve considerably higher return on investment rates from their efforts, versus those who find themselves locked in a cycle of smaller growth loops:
- Breakthrough innovation has been mastered by a group of leading organisations – the Breakthrough Brigade. These organisations surprisingly aren’t the small, nimble players you might expect; instead, they typically generate at least £10 billion annual revenue and have 50,000 employees. They are most likely to reside in the US and comprise mostly private healthcare, retail and transportation organisations. The brigade focuses 40% of investment in incremental innovation and 60% on breakthrough innovation and is better able to move ahead of both customer demand and competitor pace.
- More than three quarters of organisations (77%) struggle to generate ideas and/or commercialise them. This group is identified as the Incrementalists. There are several barriers to breakthrough innovation for this group, at different stages of the innovation process: 40% struggle to understand evolving customer needs, 35% have product or infrastructure technology limitations, and almost a third (32%) have slow innovation processes. Compared to the Breakthrough Brigade, the Incrementalists are twice as likely to report experiencing conflicting priorities between leadership, innovation teams and the wider business.
Hugo Raaijmakers, strategy and growth expert at PA Consulting, said:“Our findings challenge a common fallacy: that large incumbents are incapable of delivering the ideas, speed-to market, processes and culture needed to make breakthrough innovation happen. Although large corporates can achieve breakthrough innovation, some dominant sectors such as consumer goods still trail behind, missing the mark on responding to urgent societal issues such as personalisation or climate change. Achieving purposeful, profitable, long-term growth attracts customers, employees and investors – but this all demands breakthrough innovation.”
Andy Katz, strategy and growth expert at PA Consulting, said: “In the current economic environment, organisations need to be brave and break free from what they know. Manifesting what we call breakthrough innovation is vital, but our data has found that for around three quarters of organisations there’s a lot to do before they can join the Breakthrough Brigade.
“Although we are facing some tough economic times, where some leaders will want to tread carefully, if they are to face their growth challenges head on – focusing on the needs of customers and the market – now is the time for them to rethink their innovation strategy, be bold and lean into their innovation agendas.”
Leaders of the Breakthrough Brigade achieve and sustain growth from breakthrough innovation with a focus on five key actions:
- They dare to be a passionate growth leader, explore new ideas with fearlessness, and are prepared to break established rules and norms.
- They invest in agile experimentation, following up words with action to ensure teams have the psychological safety for ideas to emerge and succeed.
- They ready their rebels, and seek to recruit, retain and realise the skills of disruptive non-conformists, then coalesce these teams in creative ways.
- They build an innovation engine that provides the strategy, systems and structure needed to connect ideas to growth – and make the process repeatable.
- They nail the idea before they scale the idea, avoiding the temptation to scale until the idea has been proven, tested and iterated to the point of success.
Together, these actions make it possible for a company of any size and in any industry to generate, commercialise, and scale ideas that drive significant top-line growth.