The Boston Consulting Group’s (BCG’s) sixth annual global survey and report on innovation, “Innovation 2009: Making Hard Decisions in the Downturn,” confirmed that innovation remains a key focus for the majority of companies. Sixty-four percent of the more than 2,700 executives who responded said they consider innovation a top-three strategic priority, one critical to their company’s long-term competitiveness. Consistent with that, more than half of the respondents said their company would increase innovation spending in 2009. The reason? In 2008, for the fourth consecutive year, innovative companies handily outperformed their industry peers in terms of stock market performance.
But the survey revealed that executives are growing increasingly anxious. The percentage of respondents who said their company would raise innovation spending in the year ahead was 58, down from 63 in 2008. And a significant number of respondents — 14 percent — said their company would reduce innovation spending in 2009. North American executives were particularly bearish: a sizable 21 percent said their company would lower spending.
Key findings of the report include the following:
1. The majority of companies (58 percent of survey respondents) will boost innovation spending in 2009. Asia-Pacific companies have the most aggressive plans.
2. Utilization of Rapidly Developing Economies: The percentage of companies that plan to make greater use of rapidly developing economies in their innovation activities in the year ahead jumped to 45 in 2009 from 37 in 2008, consistent with a growing sensitivity to costs.
3. Perceived Strengths and Weaknesses: Executives consider ensuring executive-level sponsorship of projects (66 percent of respondents) and developing a deep understanding of customers (65 percent) to be their companies’ greatest strengths in advancing their innovation efforts.
Companies’ biggest hurdle is speed, or the time it takes to move from idea generation to initial sales.
4. Measuring Innovation: Customer satisfaction (tracked by 44 percent of companies, according to survey respondents) and overall revenue growth (tracked by 41 percent) are the two main gauges that companies use to determine the success of their innovation efforts
5. Innovation Success and Stock Market Performance: Innovative companies generate vastly superior total returns for shareholders. Globally, on an annualized basis, innovators outperformed their industry peers by 430 basis points over three years; over ten years, they outperformed them by 260 basis points.
6. Differences in Perception Regarding Innovation Efforts Within Companies: C-level executives are more satisfied with the return on innovation spending than the rest of the company. Sixty-three percent of C-level respondents said they were satisfied, versus 50 percent of vice presidents and managers and 47 percent of other employees.
7. The Role of M&A Activity in Innovation Strategies: M&A activity plays a significant part in many companies’ innovation strategies.
8. The Most Innovative Companies: For the third straight year, respondents ranked the “evergreens” — Apple, Google, and Toyota — the most innovative companies, with Apple once again the hands-down winner.