Article written by Alexandr Grygoryev, COO, SVP at Andersen.
Successful innovation, from a business perspective, refers to conceptualizing and building a novel solution, whether a feature, product, service, or process, that effectively meets the needs of customers. According to the recent findings from a survey by NTT DATA, intriguing statistics were reported on how businesses perceive innovation: while 96% of 1,000 organizations surveyed in Canada and the USA view innovation as a crucial catalyst for growth, only 21% feel they’ve fully met their innovation objectives. Why is it so challenging for enterprise-scale companies to innovate, and how can they resolve this situation?
Perks of being innovative
What goals do companies pursue through innovation?
The above survey lists several weighty perks:
- Growing the business heads the list and is critical for 59% of companies;
- Running processes efficiently is a determining factor for 53% of innovators;
- Sustainability is a crucial benefit to 44% of surveyed;
- Profitability is the driving force behind innovation for 40% of companies.
In addition, McKinsey & Company underscores that industries that consistently launch innovative products, such as biotechnology, IT, pharmaceuticals, etc., yield high returns and boast increased long-term revenues.
So, what are the actionable strategies for implementing innovation?
How enterprises approach innovation
There are, in essence, two strategies: incremental and disruptive. The choice depends on the ultimate goal and available resources.
The former approach refers to upgrading existing company offerings, such as changing the color palette or adding a new feature. Take Toyota’s gradual reorganization of its production that allowed it to build robust models more quickly and drastically increase sales. These tweaks allow businesses to aptly respond to dynamic market conditions and evolving user needs.
The latter strategy means a complete shift in technology and product line that ultimately creates new markets. The concept was comprehensively described in The Innovator’s Dilemma by Clayton M. Christensen. An illustrative example of this type is Amazon that made it from e-bookstore to marketplace giant thanks to its market-shifting offerings like Kindle, Amazon Cloud Drive, and more.
What’s the best approach to pursue? According to NTT DATA’s survey, 74% of decision-makers believe that gradual changes will generate the most value for them in the near term. However, we believe that blending revolutionary change with steady progress is key. Early in their enterprise maturity, companies can prioritize steady, cost-effective shifts that drive value. Later in their journey, the time will come for new revenue streams and disruptive customer experiences that will yield significant ROI.
The underlying factors that challenge the innovation process
As accomplished entrepreneurs David Kidder and Christina Wallace put it in their book, New to Big, enterprise-scale companies are proficient in driving exponential growth. In other words, they are apt operators. However, when it comes to identifying untapped potential, developing a clear roadmap, taking novel ideas to the assembly line, these giants often lag behind.
The top reasons, according to NTT DATA, are insufficient expertise of the staff (in 88% of organizations), tight budgets (87%), reliance on legacy systems (86%), stagnation of existing practices (84%), insufficient motivation of employees (84%), risk aversion (81%), unclear ROI and lack of proven use cases (81%), dependencies on third-party processes (81%), rigid organizational mindset and lack of a forward-thinking leadership (78%), and lack of initial guidance and a clear starting point (67%).
Although enterprise-scale companies demonstrate robust operational capabilities, the above challenges hamper their effectiveness in harnessing untapped potential. Taking targeted steps to address them can help organizations capitalize on emerging opportunities and develop a result-oriented approach to growth and innovation.
How to proceed: actionable steps
In the position of a technology development company that practices innovative approaches to projects, we would recommend the following working tactics that can help your organization both generate breakthrough ideas and realize them.
Revamp your technology operations
According to IDC, 40% of revenue for the top 2,000 enterprises worldwide will come from digital offerings by 2026. Moreover, leaders in innovation allocate twice as much finance to R&D as their peers and have ramped up their digital transformation budgets. The solid first step in this direction would be having your IT systems audited to identify the underlying factors that hinder performance and growth and obtain an actionable roadmap on how to proceed to revamp your IT infrastructure, transfer from legacy systems, reduce technical debt, and so on.
Devise a solid data strategy
Sadly, 78% of surveyed organizations reported they doubt their data accuracy. In the meantime, clean and well-structured data is fundamental for harnessing disruptions like gen AI. The challenging nature of data handling is confirmed by the growing need for accomplished data scientists—by 2031, the labor market for this speciality is projected to grow by 36% in the US alone, the National Bureau of Labor Statistics reports. Notably, these specialists spend nearly half of their time—45%—cleaning and preparing data, a massive survey highlights.
As per Deloitte’s findings, nearly a third of chief data officers—34%—face major resource gaps when supporting data efforts, lacking finance, data literate experts, and the needed technology. About the same amount of CDOs list aligning their data infrastructure with innovation demands among their critical objectives.
How do you tackle data-related challenges, then? Shifting to the data-orchestrated organizational structure necessitates both a solid technological base and a change in mindset toward embracing continuous learning and upskilling. Outsourcing the technology part to a dependable software developer with strong expertise in creating and managing databases can be a go-to solution. Also, promoting a data-sharing environment is recommendable, where data is a key resource on hand for everyone in the team.
Establish an innovation-friendly corporate culture
Last but not least, base your corporate culture on deliberate leadership and strategy that encourage innovativeness across all levels of your organization. COOs, CBOs, and other C-level executives must allocate funds to tech upgrades, upskilling, etc., as well as encourage risk-taking without fear of failure. Giving teams the autonomy to try their ideas is also vital, as this fosters a sense of ownership.
Relying on Agile methodologies allows teams to rapidly adapt to changing markets and customer needs. By establishing a well-substantiated vision for innovation that supports business goals, leaders can help teams grasp the “why” behind endeavors.
Partnering with startups, universities, or accomplished tech companies can spark breakthroughs. Finally, focusing on the customer with their pain points and aspirations ensures that your innovation has a real-world impact.
The takeaways
Innovation is crucial for established businesses aiming to scale up, thrive in the competition, and offer relevant products and services. In this article, we explored the stumbling blocks that jeopardize innovative endeavors in enterprise-scale organizations. These include, among other things, outdated software systems, lack of expertise, and cultural resistance. We also described actionable solutions to effectively overcome these barriers, from modernizing IT operations and developing a robust data strategy to building a corporate culture that encourages experimentation and agility. By implementing these strategies, enterprises can tap into their scale and resources to drive effectual changes.
References:
- NTT DATA. 2023. Innovation Index: Shifting from Disruption to Growth. NTT DATA.
- Banholzer, Matt, Tim Koller, and Laura LaBerge. 2024. How Innovation Can Accelerate Industry Momentum. McKinsey & Company.
- Surowiecki, James. 2008. The Open Secret of Success. The New Yorker. May 12, 2008.
- Christensen, Clayton M. 1997. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press.
- Curtis, Sophie. 2013. The Innovations That Took Amazon From Online Bookseller to Dominant Global Marketplace. Business Insider. October 15, 2013.
- Kidder, David S., and Christina Wallace. 2019. New to Big: How Companies Can Create Like Entrepreneurs, Invest Like VCs, and Install a Permanent Operating System for Growth. New York: Currency.
- Wallace, David. 2023. The Future of Customer Personalization: Powered by Experience Data and Orchestration. IDC Custom Solutions. January 2023.
- Banholzer, Matt, Laura LaBerge, Andy West, and Evan Williams. 2023. How Innovative Companies Leverage Tech to Outperform. McKinsey & Company. December 14, 2023.
- U.S. Bureau of Labor Statistics. 2024. Data Scientists: Occupational Outlook Handbook. U.S. Department of Labor.
- Anaconda. 2020. 2020 State of Data Science: Moving from Hype Toward Maturity. Anaconda.
- O’Toole, Katie. 2024. 2024 Survey of Federal Chief Data Officers: Five Years of Progress and the Road Ahead. Data Foundation and Deloitte. November 2024
