A colleague Jared recently sent me this revealing Businessweek article; CEOs Say Investing in Innovation Is Not Paying Off. It stemmed from an Accenture survey of 519 companies in more than 12 industries.
What did it find? First of all, everyone loves innovation. 93% of the companies felt innovation was key to their long-term success and 51% had recently increased their spending on innovation overall. Cool, right? Well... yes and no.
Despite realizing how important innovation is and being willing to spend more on it, 82% weren’t seeing these investments pay off. Making matters worse, a lot of innovators are favoring more incremental (i.e. little and boring) and less transformational (big and exciting) opportunities. Around half (46%) said their companies were shying away from risk with a third (33%) focused on expanding existing offerings rather than braving new frontiers.
Why is this happening? Our research has found the failure rate of internal corporate ventures to be 78% (to date) if you look at raw mortality within 7-10 years of initial funding. This failure rate wanders from around 70% – 90%, depending on what company or industry you’re looking at. Accenture’s findings were right in the ballpark. Any way you cut it, the odds are bleak.
The sheer violence of this mortality makes it hard for companies to stay the course. Even the most committed innovators start to sweat 7 years into things when around 80% of their investments have died and the remaining 20% are (typically) little incremental wins rather than the big home runs they were supposed to be. Not exactly the best environment when you’re trying to increase your innovation budget for next year.
There are a lot of theories about how to improve innovation, and that’s a good thing. Whatever your favorite approach is, we should all be able to agree that companies need to profoundly change the way they innovate. It will take more than a tweak or two. Otherwise, if companies keep innovating the same way, they’ll continue to suffer the same mortality rates and predominant lackluster results. This increases the risk that the baby (innovation) will be thrown out with the bathwater (failure), just when – ironically – companies need innovation most.
Innovation is necessary. Innovation is important. Innovation is a good thing… but once in a while it sure can suck.