New Report: The State of Innovation in Latin America

By: Luis Arnal

To understand the conditions around innovation in Latin America in detail, INSITUM conducted a qualitative and quantitative study with more than 300 of the biggest Latin American organizations. The study has brought to light many of the contexts, barriers, needs and outcomes around innovation in Latin American organizations. This article explores some of the results and offers a free download of the full report.

Latin America is one of the most dynamic and fastest growing regions in the world, though not all companies are poised to take advantage of this. Companies who proactively understand their context and innovate accordingly will always stay ahead of those who merely react to precarious and changing markets. We have seen some organizations embrace innovation, though many others still lag behind in this endeavor. In coming years, we believe more firms will step up their capacity and take advantage of the fruits that innovation can provide.

Innovation has become a buzzword

Its meaning is ambiguous. Through overuse it has created confusion which can defeat its very purpose as a stated goal. In Latin America, the media is using the term more than ever, consultants apply different definitions to it, it is often misunderstood and companies are not using it as an effective marketing tool. We need clarity.

We conducted 25 face to face interviews and an online survey of more than 300 people in middle and top management from leading companies (sales of $50 million annually), across five countries and 20 different sectors. We believe that this is the most comprehensive study to date of the state of innovation in Latin American organizations.

LATAM is convinced that innovation is important… now it is slowly learning to make it happen.

The report explores four key questions:

• How is innovation being implemented and utilized within the organization?
• What types of projects, resources and investments do organizations see as benefiting the most from innovation?
• What are the barriers to innovation within the organization? What are the motivations for making it work?
• What is the level of ‘expertise’ and preparedness of organizations to lead and implement innovation initiatives?

What is the state of innovation and the challenges ahead for Latin American countries?

Countries in Latin America have suffered for over 500 years from fluctuations and regional inequalities as some within the region are blessed (Venezuela’s oil and Chile’s copper deposits; Mexico’s proximity to the US), while others are in political and financial crisis, as Argentina and Venezuela are now.

While most of our countries share a common heritage, individual cultural idiosyncrasies are quite diverse. For example, in general Brazilians feel much more optimistic, have higher self-esteem and are less tolerant of corruption. Mexicans by contrast, are pessimistic, have lower self- esteem and feel cynical about corruption. The economic policies throughout Latin America also vary widely, from open to completely closed – and everything in between.

In terms of organizations there is a mix of regional conglomerates that have become multinationals (now referred to as “Multilatinas”), multinational and local partnerships and, lately, new multinational entrants exploring the region for the first time. Conditions are right for innovation to mature, but it will happen differently than in other parts of the world. Unfortunately, there is very little expertise or appreciation about innovation within large Latin American organizations, and most global innovation studies (i.e. BCG, PwC, IBM) consider only a few countries in the region, if at all. Some of these studies only consider the vision of the CEO, while in reality the CEO’s vision can vary widely from that of the management team. INSITUM is the leading innovation consulting firm in Latin America. Its mission is to help the region’s leading companies become more competitive by promoting user- centered innovation.

The study will provide detailed information on how companies are implementing innovation efforts inside their organizations. We believe these insights will help other Latin American companies become better innovators. If innovation is key to your organization, this study is key for you.

Some of the highlights of what we found include:

Companies embrace the concept of innovation widely and quite openly, but there is still a lot to do in terms of executing innovation efforts efficiently, with tangible results. The lack of an innovation culture and a lack of ‘expertise’ to enable processes to become capacities and implementation to flow smoothly are some of the main barriers hindering the innovation capacity development in the region.

Most companies are already convinced about the benefits of innovation, and are migrating from what we would call a Phase 0 (Why innovation?) to a Phase 1 (How to implement innovation?). This brings with it another set of challenges, opportunities and frustrations as companies shift their gears from ‘thinking’ to ‘doing’.

Multinational firms with subsidiaries in Latin America seem to be far ahead of the local ‘Multilatinas’ in adapting innovation processes and methods within their organizations. Both types of companies are still hesitant to invest adequate resources towards innovation efforts, resulting in the search for ‘imaginative’ ways to garner the resources they need, such as redistributing resources from other areas (from market research, advertising or training) to support, complement or initiate innovation efforts.

The main priority within organizations is the need to develop internal innovation capabilities, work processes and tools, and to develop a long-term innovation culture that is more open to trying new ideas, whether they work or not.

Working for an innovative company has a ‘Halo Effect’ on employees and prospective employees; for this reason, working for innovative organizations becomes key to attract and retain talent, often in scarce or highly competitive labor markets.

Many areas in organizations seem to embrace innovation initiatives. ‘Marketing’ seems to be the most active because: 1) its obsessive focus on ‘customer insights’ and 2) today marketing leaders often have the responsibility for the design of the product, service or customer experience where in the past they may have focused more on branding, communication and promotion efforts.

The results from this year’s innovation survey show there is a positive point of view and excitement around innovation, but Latin America still needs to create the right conditions for it to be widely supported and executed. Specifically, companies need to find ways to enable innovation cultures to coexist within the risk averse cultures of typical management, and to develop more expertise around innovation strategies, processes, and tools. We seem to be on the right road, but in order to improve the innovation capacity and competitiveness of Latin American organizations, we need to double down on growing these capacities.

By Luis Arnal

Photo : Sequence of plant growing by Shutterstock.com