The business of innovation is booming like never before. Sort of.
Report after report, study after study all say the same thing: manufacturers are investing more in innovation every year, and they are dedicating more talent and more capital to R&D than ever.
Accenture's latest contribution to that pile of evidence suggests that an incomprehensible majority of companies – about 93% – are maintaining or increasing their already massive R&D budgets to help guarantee their long-term success.
And that's no surprise. What is surprising is that only 18% of those companies believe their innovation strategies will deliver any kind of competitive advantage.
That is a wide – and widening – gap that has Adi Alon worried.
"I'm concerned," Alon, managing director of Operations, Innovation and Product Development at Accenture, said. "I'm concerned that, despite all of the commitment to innovation, there is some element of disappointment that the companies feel from the returns they are getting."
That disappointment is creating what he considers to be a kind of impending disaster looming over the industry. As he explained it, "The big risk is that we'll see retrenchment by the market from companies in their commitment to innovation, which would be very, very dangerous for the whole market."
The danger, he explains in a report he co-authored for Accenture, is that companies will shy away from big investments in big breakthroughs to focus more on improving current offerings – falling into what he calls "the renovation trap" (which you can read all about here).
To avoid that fate, he identified five steps that highly effective companies follow to keep their innovations alive and their products disruptive.
Low-Risk Escape Plan
Step One: Don't be Late
As Blackberry taught the world this year, missed opportunities in a changing market can destroy your company. To survive today, above all companies must be fast and flexible.
"As product lifecycles shrink and consumer preferences become more volatile, speed becomes absolutely critical to successful innovations," Accenture's report reads.
Successful companies, Alon added, are those that treat innovation as an end-to-end value chain that is driven by speed and flexibility.
Step Two: Get Personal
The newest thing with the newest features is no longer enough to win the market. Successful companies design their innovations around customer experience.
According to the report, "[A new innovation] needs to be accompanied by a business model that builds up the product to provide a unique, personalized consumer experience and a service element that maintains connection with the customer and supports an ongoing revenue stream."
Step Three: Apply your Risk Management Skills
Risk management tools are no longer just for risk management. They can now be applied to design and manage your innovation portfolio while also helping to identify the direction you should take with your innovation strategy.
As Alon writes, "Innovation-centric risk management identifies future opportunities and evaluates the value of entire portfolios informed by the different categories of initiatives. By applying these mature refinements of risk, companies can be better able to avoid the renovation trap and to enhance the future value of their portfolios."
Step Four: Leverage Big Data and Social Media
This one is easy – the more you know about your customers, the better you can drive your innovations toward building the personalized experiences that will keep them relevant. Online retailers have been perfecting this craft for years, Alon noted, but now it's a must for all industries.
Step Five: Be Frugal
Pursuing fugal innovations that drastically reduce the complexity and/or cost of your products can help capture both middle-class consumers in emerging economies and also disrupt markets in developed countries, the report claims.
"Frugality is a matter of necessity in emerging countries," Alon said. "But here, it's an opportunity for disruption."