Companies that govern innovation extensively achieve twice the revenue growth compared to those that don’t, according to a report released by information technology services and consulting major Accenture on Monday.
The Dublin-based technology company found that only 12% of companies govern innovation extensively and these achieved a CAGR (compound annual growth rate) of 5.9% on an average from 2013 to 2018. The rest, which governed innovation more haphazardly, achieved a CAGR of 2.9%, the report titled Governing Innovation: The Recipe for Portfolio Growth, showed.
The results are based on a global survey of executives at nearly 1,100 companies, a financial analysis of those companies and in-depth interviews with innovation experts in business and academia.
“Strategic commitment, brought to life by the right governance through rituals, can unlock tremendous value trapped within innovation investments,” Anindya Basu, geographic unit and country senior managing director, Accenture (India), said.
The aim of the research was to determine how organisations apply different types of innovation across their business portfolios, identify how they allocate innovation investments and help executives understand how to govern more strategically across their business portfolios to get greater value from their innovation investments, the company said in a statement.
A majority of the executives surveyed (84%) said they direct innovation centrally -- through a chief innovation officer or an innovation committee.
“The growing hunger for innovation is putting it at the core of every new business decision, but many companies lack the discipline needed to turn their innovation investments into growth. While many see innovation as a creative force that can’t be controlled, our research reveals that a systematic approach to managing innovation and governing it extensively can provide tangible financial impact,” Paul Daugherty, Accenture’s chief technology and innovation officer, said.
The report shared the example of energy management and industrial automation company Schneider Electric. The report said: “The company takes a pervasive approach to innovation, applying incremental and non-incremental innovation across its entire portfolio of businesses. Doing this has enabled Schneider to generate balanced growth — increasing revenue in both its core and newer businesses in 2018 by 7 and 9%, respectively".