By: Karin Wall
Today’s business leaders view innovation as a means to fight the financial crisis, however a new European study by INSEAD and Logica warns that the link between the money spent and the final result is broken. Their findings show that the majority of business leaders commit substantial resources to innovation, but only nine percent use ROI as a measure of innovation. What’s more, the Nordic countries achieved the lowest rating when it comes to measuring and implementing innovation.
Europe’s competitive potential will depend on the capacity to be truly innovative and creative in launching new successful products and services.
– This challenge has been acknowledged on several occasions, especially by the European Commission and it is the core of EU’s innovation policy.The lack of structural knowledge and competence in innovation is one of the most important challenges that Europe faces when it comes to reassuring future sustainable growth and prosperity, said Mr. Lars Percy Andersson, founder and managing director of InnovationManagement.se. Mr. Andersson was the moderator of the round table discussion in conjunction with the presentation of the results for the Nordic countries in Stockholm last week.
The INSEAD/Logica report reveals a dichotomy between businesses committing resources on innovation, but not allowing their staff to get on with the jobs of innovating or measuring value and outcomes. Key findings from the study include:
- Despite the recession, 80% of organizations have increased or maintained innovation spending – however, 41% see short-term financial performance clashing with long-term innovation priorities.
- Only 16% have good metrics in place to evaluate the success of innovation projects and only 9% use ROI as a measure of innovation.
- 64% of organizations do not have a Chief Innovation Officer.
– Companies claim a commitment to innovation, but few of them have processes for innovation management, thus risk wasting a lot of money. Swedish companies, for example, are often very good in R&D, but when it comes to efficient innovation work there is a great need for improvement, says Mr. Markus Närenbäck, Innovation Director, Logica, Sweden.
Results from the study show that despite alleged commitments to innovation, there is a high potential for improvement. On a scale between 1 and 4, where 4 is the top score in innovation, the average grade for the Nordics is 1.80. Other results from the study show that:
- 32% of Nordic organizations think that innovation is deeply embedded in the culture. Total average is 40 percent.
- 21% of the Nordic companies claim to have processes to manage and mobilize everyone to come up with innovative ideas.
- Nordic countries show a lower score for significant involvement of external partners – only 32%. The Netherlands is on top with 50 %.
- A mere 6% of Nordic organizations emphasize creative problem solving as a key criterion when recruiting staff. Average in the survey was 27%. The Netherlands is on top with 45%.
Soumitra Dutta, faculty director of the research centre eLab@INSEAD and the Roland Berger Chaired Professor of Business and Technology at INSEAD, commented:
– If leaders do not improve their innovation readiness, their organizations will not rank among the future winners of the global economy. This is particularly true given the increasing competition from new competitors from emerging markets, such as China and India.
The study includes two hundred CxO level business leaders from blue-chip organizations from public and private sectors across Europe, and their views on innovation. Based on the findings, INSEAD developed an Innovation Readiness Model (IRM) as a way to rank organizations’ ability to innovate successfully. The ‘readiness’ ranking is the measurement of an organization’s ability to put into practice cutting-edge thinking on innovation. The IRM showed that despite leaders prioritizing innovation at board level, organizations scored on average a disappointing two out of four on the IRM.
The study found that organizations’ ‘innovation readiness’ is weakest in the organization & collaboration category. This is especially worrying given that collaboration is such a crucial part of solving global problems as well as driving innovative thinking. Not surprising, the organizations with the most developed innovation process management and measurement obtained the best return on their innovation spending. Of all the countries, the Netherlands stood out as being the most forward thinking in their embrace of collaborative innovation, driven by strong beliefs in the power and applicability of innovation.
Logica is an IT and business services company, employing 40,000 people. It provides business consulting, systems integration, and IT and business process outsourcing services. Logica works closely with its customers to release their potential – enabling change that increases their efficiency, accelerates growth and manages risk. It applies its deep industry knowledge, technical excellence and global delivery expertise to help its customers build leadership positions in their markets. Logica is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE: LOG; Euronext: LOG). More information is available at www.logica.com.
INSEAD is one of the world’s leading and largest graduate business schools. With campuses in Asia (Singapore), in Europe (France) in the Middle East (Abu Dhabi), and an office in New York, INSEAD extends the reach of its business education and research across three continents. INSEAD offers MBA, Executive MBA and PhD programmes. In addition, more than 9,500 executives participate in INSEAD’s executive education programmes. More information about INSEAD can be found at www.insead.edu