While innovation centres receive solid investments, 90% of them fail: Study

With tech startups rapidly eating into traditional sectors, large organisations face an increased pressure to innovate. The challenge is that traditional innovation approaches are broken, revealed a global report “The Innovation Game: Why and How Businesses are Investing in Innovation Centers” by Altimeter Group’s Brian Solis and Capgemini Consulting.

According to the report, only 5 percent of R&D staff feel highly motivated to innovate. In certain sectors, more than 85 percent of new products fail and an overwhelming 90 percent of companies consider they are too slow in launching new products and services.

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“For the world’s largest organisations, innovation has never been more important – or more difficult. We find ourselves in a world where disruption is imminent and can come from anywhere and these digital-savvy competitors are threatening the very fabric of many established industries. Without constant innovation, once dominant players are finding their tried and trusted paths to innovation are now dead ends. It’s time to innovate or die!,” said Brian Solis, Principal Analyst at Altimeter Group.

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The report brings out some startling facts: – While many organisations are struggling to activate their research and innovation efforts, only 38 percent of the leading 200 companies have set up innovation centres – 33 percent of organisations have single innovation centre, while 67 percent have a network of innovation centres – Penetration varies significantly between sectors; Manufacturing is a clear leader at 58 percent as many of these companies are tackling developments, such as 3D Printing (for prototyping) and the Internet of Things (to constantly monitor supply chain or operations). Similarly, telecoms companies (43 percent), which have felt the full disruptive brunt of the digital revolution, have also invested significantly in innovation centres. But despite facing increasing pressures from digital disruptions, Financial Services lags at only 28 percent. – The US and Europe have the largest share with 29 percent of total innovation centres respectively followed by Asia at 25% – Silicon Valley is the most attractive area to locate an innovation centre for leading organisations – 61 percent of companies have established one or more centres in the Valley. But many more hubs are emerging – the top 10 cities in the report analysis represent only 35 percent of total innovation centres – The most popular areas of research for innovation centres remain well-established technologies such as mobility (63 percent), big data/analytics (51 percent), Internet of Things (39 percent), Robotics (13 percent), Virtual Reality (13 percent), and 3D Printing (5 percent). – Innovation centres help to accelerate the generation and implementation of new ideas, attract talent, drive employee engagement, and establish partnerships with startups The report identified four main types of innovation centres, including In-house Innovation Labs - the innovation engine for their companies, these centres perform all innovation activities from inception to prototyping using an in-house approach_;_ University Residence - in this model, companies invest to set up a centre at a university campus to drive innovation through university researchers; Community Anchor – these innovation centres actively identify mentors and provide opportunity to startups to work actively with the company; and Innovation Outposts – these are essentially small teams that are based in technology hubs, typically Silicon Valley. However, while innovation centres are receiving substantial investments from many global organisations and some are seeing significant benefits, establishing a successful centre is proving a challenge - the report quotes a seasoned innovation expert as saying that 80-90 percent of these centres fail.

“It is extremely challenging to make a success of innovation centres. Success factors include clarity on the role of the innovation centre, governance for innovation implementation, and a strong connection with the rest of the business,” the report stated.

To deploy successful innovation centres, the report recommends the following strategies be employed: Define a clear purpose; create a strong governance model, with senior leadership support, to implement innovations across the enterprise; Have an optimal focus – neither too futuristic,  nor too close to current business operations; Closely involve business units to avoid isolation; Create a truly cross-functional team that thrives in both structured and unstructured environments; Operate with a degree of budgetary freedom, but know when to abandon projects; and Work with a diverse group of partners in the innovation ecosystem, but use sound judgment when selecting them.