Companies that move innovation from the sidelines and into their strategic business mainstream stand to substantially boost revenue. In fact, the top 20% of innovators worldwide say their growth rate over the next five years will be double the global average.
A study by the consulting leader PwC, titled Breakthrough Innovation and Growth, pegged innovation as your $500 million opportunity. The researchers found that innovative companies expect to grow by more than 60% over the next five years, adding a total of more than US $250 billion in new revenues as a result of sophisticated approaches to innovation in all areas of their operations.
Their conclusion: companies that move innovation from the sidelines and into the strategic business mainstream stand to substantially boost revenue. In fact, the top 20% of innovators worldwide say their growth rate over the next five years will be double the global average and will triple that of the least innovative companies.
Five years ago, expansion into China was seen as the most powerful source of growth for just about every business. Now, companies see that innovation presents them with greatest potential for growth, according to David Percival, PwC's Global Client Innovation Leader.
And innovation is not just for technology companies or consumer products companies. Innovation can come from any size company, take varied forms, and focus on any industry or cross numerous industries. At startup operations innovation is their lifeblood and reason to exist. Among players in mature markets that have evolved into low price/low margin slugfests, innovation may be the only remaining route to sustainable growth. You can innovate around product, business process, or service.
Innovation today often revolves around GPS or mobile apps. In the near future innovation may likely involve biometrics in various forms. One of Apple’s newest iPhone uses the customer’s fingerprint as a security authentication device. That’s not exactly new in the computer security world but it’s considered a first for mass market smartphones.
Even the way companies innovate is changing. PwC found that innovation has moved beyond products and services and now regularly encompasses business models, operating systems, and customer experience. You can also add data to the innovation mix. Do you regularly encounter or generate data that, if collected and presented right, would be something your customers would like to have?
Additionally, PwC found collaboration with both internal and external partners has become vital to innovation efforts. Social media and crowdsourcing also may prove fertile grounds for seeding innovation. Already, companies are streamlining and expediting global collaboration using social business tools.
Not everyone does innovation equally well, which is why it can be a source of sustainable revenue gains and competitive advantage if you get good at it. PwC found major differences between the most and least innovative companies:
- The most innovative companies anticipate 62.2% revenue growth over the next five years compared with 20.7% for the least innovative.
- The combined revenue growth of the most innovative companies is forecast to be US $252 billion over next five years compared with US $93 billion among the least innovative.
- Two-thirds of the most innovative companies say innovation is a competitive necessity compared with 19% among the least innovative.
- Nearly 80% of the most innovative say they have a well-defined innovation strategy compared with 47% of the least innovative.
- The most innovative companies are almost twice as likely to be targeting breakthrough and radical innovations.
- The most innovative companies are more likely to use corporate venturing to drive growth: 13% vs. 7%.
- Similarly, the most innovative companies use social media more often to collaborate externally: 67% vs. 39%.
Finally, the most innovative are less likely to manage innovation efforts informally: 21% vs. 32%.
Sustained innovation success doesn’t rely on serendipity. Companies have to strive for it, work deliberately at it, and manage and reward it.