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Commentary by Cass Pursell

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January 31, 2008	\|
Where's My Return on Innovation?!
(Or, Is That a Canary in Your Coal Mine?) The Boston Consulting Group (BCG), in partnership with BusinessWeek, conducted (from October 2006 through March 2007) its fourth annual survey of senior executives on innovation and the innovation-to-cash process. Its key findings, released in August of last year, include some worrisome trends: Innovation remains a top strategic focus for the majority of companies 67% of respondents said that their companies would spend more on innovation then in years past Just 46% of executives reported being satisfied with their return on innovation expenditures (down from 52% the year before) So executives are not only focusing their organization's attention on innovation programs and spending more on them, but are simultaneously less satisfied with the results of those programs. The dissatisfaction is not a one-year phenomenon, either. It's been on a downward trend visible over the entire four years of the survey, and the level of dissatisfaction is increasing. It's the kind of trend that bears watching, and taking seriously. If it continues, is it a stretch to imagine an innovation-backlash? How many executives, particularly in times of economic uncertainty, will be willing to throw good money after bad at a business approach that offers little visibility and unsatisfying returns? So how can senior executives' dissatisfaction with innovation programs be reduced? The survey identified a risk-averse culture, lengthy product-development times, and a lack of internal coordination as the three biggest stumbling blocks facing organizations seeking to improve their return on innovation, so these are obvious areas of focus. One other interesting finding was that the satisfaction with innovation payback was greatest among high-level executives whose primary organizational function is vision and strategy (CEOs, Chairmen, and company Presidents), who rated their satisfaction above 60%. Conversely, high-level executives whose primary organizational function is driving results (Chief Operating Officers, Chief Financial Officers) rated their satisfaction with innovation returns at less than 40%. This implies that the value of innovation programs may be heavily weighted by the program's ability to sway perception of the organization in the marketplace, more than by their ability to produce bottom-line results year-in and year-out.
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