Alex Curry, Leader of Doblin Western Europe states: “creating new products is only one way to innovate, and on its own, it provides the lowest return on investment and the least competitive advantage ”.
When I talk to clients about their innovation strategies, it is more often than not about the new products and services they are developing. In a recent Innovation survey we conducted with the CBI, 30% of companies surveyed said that product development was the main benefit of innovation. However, we believe that companies need a strong mix of cultural as well as product based innovation to achieve business growth. Indeed, it is those organisations who achieve a truly integrated innovation strategy that can expect to derive the most value for shareholders.
Nevertheless, the importance of product innovation should not be underestimated. Undoubtedly, if you focus on investing in innovative new products and services then you will have compelling new propositions which generate revenue and profit. Industries that regularly launch new products to market have therefore a much easier link between innovation and shareholder value. But to deliver long term value for shareholders, you need more than product innovation alone. I believe there are four other key ingredients...
Simply put, creating an innovative culture continues to attract top talent. Recruiting and retaining high calibre individuals protects and in some cases accelerates growth through ensuring best in class leadership and delivery. Our 2017 Millennial report found that organisations who offered a high degree of flexibility in working arrangements were rewarded by higher levels of productivity, engagement and loyalty. So, it shows that it is highly important that a company focuses on recruiting and retaining top talent through embracing technology and creating an innovative working culture.
Harnessing innovative trends such as Robotics Process Automation (RPA) enables organisations to unlock efficiency gains that will improve the bottom line. In our 2016 ‘The robots are here’ report, we found 74% of companies surveyed were planning to investigate RPA technology in the next year.
3. Time to market
Through leveraging the pace of change that comes with embracing innovative technologies, companies are able to speed up time to market for new ideas. For example, challenger banks that use automated digital on-boarding platforms for new customers could get a new product (in the form of an account) to a customer much faster than an established bank with antiquated processes. This enables companies to secure first mover advantage and maximise market share.
Finally, innovation can improve an organisations ‘resilience’. Having an innovative culture that embraces change increases a company’s chances of a robust bounce back from industry wide shocks. If change is celebrated then enabling new ideas or flexing existing ways of doing things can be implemented much more quickly.
It is the combination of these five elements that will help companies achieve sustainable growth and derive shareholder value.
And of course don’t forget to manage shareholder expectations around your innovation agenda effectively. Communicate a balanced portfolio, explain what you are doing and why and also how you are combining it with business as usual. Describe what you are doing in-house with how you are leveraging the capabilities of others, and articulate how you intend to conceive and scale innovations. Reminding ourselves that making an impact for shareholders, across all five of these elements, should be at the heart of any innovation programme will help us stay true to a company's wider objectives and ultimately cement an innovation function's long term value in the organisation.
 Framework for Innovation, Doblin