Breakthrough innovation and growth

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The results of our survey of 1,757 executives couldn’t be clearer: innovation today is a key driver of organic growth for all companies—regardless of sector or geography. Meanwhile, innovation leaders are breaking away from their cohorts, expecting a revenue boost of a quarter-trillion US dollars over the next five years alone. We have also analysed the differences in views between Russian senior executives and their colleagues from both developed European countries and developing countries. 

So what exactly are these innovation leaders doing differently?

Explore the practices and lessons of innovators—starting with the Road to Growth below.

Contacts

Alexander Ordinartsev

Alexander Ordinartsev

Partner, Head of Centre for Technology and Innovation (CTI) PwC
Tel: +7 (495) 287-1137

Evgeny Orlovsky

Evgeny Orlovsky

Director, Head of Practice, Innovation Strategy and Operating Model
Tel: +7 (495) 223-5070

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About the Survey

For our survey—the largest and most comprehensive study of its kind exploring innovation from a global, multi-sector perspective—we drew on insights obtained from interviews with board-level executives with responsibility for overseeing innovation from 1,757 companies, across more than 25 countries and 30 sectors.

1,750+C-suite and executive-level respondents
25+countries where respondents had headquarters
30+industrial sectors of activity

Methodology

For the purpose of our analysis, we segmented these companies based on a balanced scorecard calculated from their responses to the following six areas, which are explored in our study:

  • How important innovation is to their company
  • Their appetite for innovation (on a scale from “laggard” to “pioneer”)
  • The proportion of annual revenue derived from major products?or services launched in the previous year
  • The proportion of annual revenue spent on innovation
  • The proportion of products and services co-developed with external partners
  • Their projected revenue growth over the next five years

From this scorecard, we then identified the top 20% innovators (359 companies), and the bottom 20% innovators (395 companies), enabling us to contrast their relative characteristics and experiences—and zero in on the strategies and tactics of the most-innovative group.

Executive summary

A clear correlation between innovation and growth

Executives are looking for growth: 35.4% on average, over the next five years. Ninety three percent of executives tell us that organic growth through innovation will drive the greater proportion of their revenue growth. Only 2% of companies expect their growth to be mainly inorganic (i.e. M&A-driven). Innovations becomes a more necessary condition of business growth and competitiveness, and leading innovators receive more advantages over their competitors demonstrating faster and more high-quality growth. Over the past 3 years, growth indicators of top innovators in our study exceeded those of less innovative companies by 16%.

The leading innovators in our study forecast that their rate of growth will further increase to almost double the global average, and over three times higher than the least innovative. For the average company, this equates to $0.5bn more revenue than their less innovative peers. Companies who are less innovative need to think about the additional revenue that they are forsaking and the impact this will have on their share price and shareholder returns.

Innovation is transforming business

Leading innovators are taking a more sophisticated approach to innovation treating innovation management as one of the key business functions.

  • Seventy nine percent of the most innovative companies in our study have well-defined innovation strategies, compared with only 47% of the least innovative companies.
  • Top innovators treat innovation just like any other business process that can be efficiently structured, implemented and managed systematically. Only a fifth of the most innovative manage innovation informally, compared with a third of the least innovative companies.
  • Top innovators are targeting a higher proportion of breakthrough and radical innovations, not only around technology and products, but also services, processes and business models. In some areas the proportion is around twice that of the less innovative companies.
  • Leading companies in Russia and around the world are planning a wider range of innovation operating models. For example, innovators in our study are twice as likely to consider corporate venturing as a means to drive growth.
  • Top innovators collaborate more than their less innovative peers. When it comes to new products and services that are collaboratively developed with external partners in order to create new products and services, the most innovative companies collaborate over three times more often than the least innovative.

Russian companies are seeing more value in innovation as a source of growth and a way of boosting the attractiveness of their business. Moreover, the efforts of the Russian authorities for promoting innovation in the economy are also a way of recognising the important role that innovation should play both in public and private companies. Furthermore, Russian companies have many options for boosting their effectiveness in managing innovation efforts.

93%

Ninety three percent of executives indicate that organic growth through innovation will drive the greater proportion of their revenue growth.

  • Only 8% of Russian companies see themselves as leaders in creating and introducing innovations. For comparison, the percentage of these companies in other BRIC countries comes to 22%. This gap exists even though Russian companies are now extensively investing into innovations. This proves the real potential for boosting efficiency in managing innovations within the Russian business.
  • The development of real innovation strategies is still of the utmost importance. For example, only 17% of top-managers at Russian companies surveyed fully confirmed that effective innovation strategies were in place. For comparison, this figure comes to 30% for companies in the leading emerging markets and 21% for Europe.
  • Almost 40% top-managers at Russian companies consider the formation of efficient operating models for managing innovation to be the most daunting task in this area. Such models allow companies to actively carry out earlier agreed innovation strategies. As a result, almost 60% of companies experience difficulties in commercialising innovations quickly and effectively bringing new products to market.
  • Innovation management is now more often regarded by Russian business leaders as an important and self-contained business process. At the same time, only 27% of the respondents confirmed the development of innovative business approaches in their companies. This figure comes to 39% in the leading emerging markets.
  • Russian companies prefer to focus on improving innovations and are being careful investing in breakthrough innovations; for comparison: the world's top innovators are investing in breakthrough and radical innovations almost twice as much as their least innovative competitors.
  • More Russian companies are now taking advantage of partnerships, including those with foreign companies, in order to tackle innovative projects and obtain access to new technologies. Nonetheless, Russian companies are not actively involving consumers in the development and implementation of innovative solutions in contrast to their counterparts in BRIC and European countries.
  • Finally, a priority for many business leaders remains the cultivation of a culture of innovation within their companies, as well as attracting and retaining highly qualified specialists to take part in innovation-focussed projects. 55% of business leaders in Russia indicated this as a priority while this figure in BRIC countries was even higher, at 64%.

The competitive challenge

Business leaders need to realise that innovation pioneers already exist within their own industry and across all parts of the world and that if they are not among those pioneers, they need to be ready to step up to that competitive challenge, to avoid being marginalised. Innovation is not limited to a small number of industries or countries. There are numerous lessons that can be borrowed, tailored and made to work for any business. Our study is your guide to the world of innovation and new market opportunities.

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