Innovation – in the form of developing new products and services – has become as important to growth for CEOs as raising their share of existing markets. A survey by PwC of 1200 CEOs from around the world has found innovation, along with increasing their existing business, now outstrips all other means of potential expansion, including moving into new markets, mergers and acquisitions, and joint ventures and other alliances.
PwC's 14th Annual Global CEO survey found innovation is high on the executive agenda in virtually every industry. In all, 78 per cent of CEOs surveyed believe innovation will generate ‘significant’ new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations. In both the pharmaceutical and entertainment and media sectors, for example, more than 40 per cent of CEOs believe their greatest opportunities for growth come from spawning new products and services.
Additionally, the survey found CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs say they expect to co-develop new products and services.
PwC’s Chief Executive Officer, Bruce Hassall says "In today's fast-moving environment companies must constantly improve and re-invent their products, services and even brands. Innovation is a matter of survival as it gives companies a competitive advantage and creates growth.
"The next decade will be the 'most innovative time' , in mature markets companies must innovate to differentiate themselves; in emerging markets, they need innovation to lessen their dependence on lower costs," adds Mr Hassall.
According to a new PwC, study, "Demystifying Innovation: take down the barriers to new growth," the drive for innovation must arise from the CEO and other executive leadership by creating a culture that is open to new ideas and systematic in its approach to their development. The innovation process generally has four phases:
Discovery: Identifying and sourcing ideas and problems are the basis for future innovation. Sources may include employees as well as customers, suppliers, partners and other external organisations.
Incubation: Refining, developing and testing good ideas to see if they are technically feasible and make business sense.
Acceleration: Establishing pilot programs to test commercial feasibility.
Scale: Integrating the innovation into the company; commercialisation and mass marketing.
The study also identifies seven misconceptions about the innovation process: