KPMG: New Research Shows Need for Transformational Innovation and Transformed Business Models

Originally Published by KPMG.

Innovation and R&D teams inside the Fortune 1000 are spending about 50 percent of their efforts on incremental innovation, 30 percent on adjacent innovation and 20 percent on transformational innovation, according to a new Innovation Leader report sponsored by KPMG LLP.

The 50-30-20 ratio is a change from the 70-20-10 ratio that has been considered conventional wisdom for several years. This shift in focus emerged in a benchmarking survey of 270 executives responsible for innovation, R&D and strategy.

“Given advances in technology, companies see the need for new, digitally transformed business models and are taking on new risks and beginning to drive a far more ambitious innovation mix,” said Kevin Bolen, principal, Innovation & Enterprise Solutions, KPMG LLP. “To stay competitive and survive in today’s landscape, executives need to have the appropriate capital, resources and leadership to enable the possibility of timely innovation success.”

While the scope and scale of innovation is expanding, the report found many companies still face obstacles to innovation, citing politics and turf wars, cultural issues, inability to act on market signals and lack of strategy among the biggest challenges.

“To address Wall Street pressures and the threat of disruption, corporations need to overcome the obstacles that stand in the way of becoming more innovative,” said Scott Kirsner, CEO and editor-in-chief of Innovation Leader. “That’s why we conducted this research — to find out what’s working and what isn’t. Our mission is to equip innovation teams with the answers and data they need to take their innovation programs from the ‘just talking about innovation’ stage to fully formed programs that deliver results for the business.”

According to the report, companies pursuing innovation focus on three foundational elements: aligning strategically, funding deliberately and delivering impact. Respondents cited executive leadership support as the top enabler of innovation success, followed by the ability to test, learn and iterate, align the correct team and have the correct strategy.

While revenue was the most commonly cited metric for measuring success, a surprising 25 percent of respondents said they do not track financial impact. The top three non-financial metrics that companies track: progress or stage-gate metrics, learnings or insights generated, and number of ideas generated.

“Innovation is complex, and organizations can get a lot right but still get innovation wrong,” said John Farrell, national managing partner of Innovation & Enterprise Solutions, KPMG LLP. “To have an impact, it’s vital to get strategic and create the time, focus, and accountability for innovation. While methods and approaches will vary, finding the right combination is what’s critical to success.”

The full findings of the survey are detailed in the report,Benchmarking Innovation Impact 2018.

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