How innovation teams are navigating turbulence
Innovation teams are on a journey to an uncertain destination. Here’s how to write a new flight plan.
A plane without a destination. That’s the state of innovation today, according to our latest “Benchmarking Innovation Impact” report, which draws on data from survey responses and in-depth interviews with senior leaders across a range of industries.
Many companies still find themselves stuck in the “fire alarm” mode that consumed many organizations over the past three years as they responded to times of unprecedented change: pandemic, supply chain, labor, inflation, and more. In other words, they’re prioritizing efficiency, reliability, safety, and profitability over finding new destinations, customers, and amenities.
So, how can you unlock innovation again and set up your teams for success? What capabilities do you need to focus on? And how do you identify your biggest challenges and enablers? Our comprehensive new report, developed in collaboration with research group InnoLead, answers those key questions and much more.
Journey to success—and impact
For this report, we surveyed 216 professionals working in innovation, research and development, and strategy roles. The high-level goal was to answer two key questions:
- How do you set up innovation teams for success?
- How can those teams create quantifiable impact for their organization?
As we detail in the report, we found that innovation thrives when there’s a clear vision, quantifiable metrics and outcomes, a culture that can make decisions and allot resources without getting embroiled in politics and turf wars, and strong relationships throughout the organization.
But (and it’s a big one): We also found that innovation looks a little different now than it did just three turbulent years ago. The changes aren’t inherently good or bad, but they do make flying the innovation plane more challenging. Here’s a look at the top three.
Key Change #1: Focus on transformational change
Teams are spending less time on transformational innovation—only 18 percent say they’re doing it versus 26 percent in 2019. Instead, they’re focusing on incremental advances (such as improvements to existing products) and adjacent work, such as creating new products and services that are built on the foundations of existing offerings.
Why the shift? It’s that fire alarm mentality again. Economic headwinds, staffing challenges, and lingering supply chain disruptions have created uncertainty—and what can start to feel like a permanently risk-averse environment.
The opportunity: It’s important that innovation teams understand the mix of activities that enables them to meet overall growth objectives—both iterative and transformational. That means ensuring the innovation pipeline is robust and placing smart bets on the future in areas like mapping emerging customer preferences, identifying new technologies that could be important in the years ahead, and understanding market changes.
37.1%
The percentage of respondents who say their dedicated innovation space is used once per month or less.
Key Change #2: Reimagine deep collaboration
The pandemic forever changed how innovation teams work together. Just 6 percent of teams work out of a physical space full-time, even though 57 percent say their company has a dedicated innovation center. Most teams, 81 percent, are using a hybrid model, while 13 percent are innovating in a fully virtual environment.
How’s it working? Eh. Fifteen percent of respondents say productivity has decreased compared to prepandemic levels. And while 41 percent say it’s about the same and 43 percent say their teams are more productive, it’s important to consider the opportunity costs.
It’s easier to innovate incrementally in a virtual environment, and with more than a third of physical spaces being used less than once a month, might this be another reason why less transformational change is happening?
At the very least, it’s likely a contributing factor. Survey respondents noted a “loss of creativity” from too many structured meetings, fewer opportunities for spontaneous interactions, and—not a small issue—less access to senior leadership.
The opportunity: Similar to physical office space and in-person interactions, setting up a cadence of activities and gatherings that can cross functional silos is key, as is bringing in executive leadership and even outside experts. This can create interactions, innovative “sparks,” and even prototypes that likely would not emerge from virtual meetings.
The two activities we found innovation and R&D groups to be most commonly offering to their colleagues were innovation training, and internal idea challenges.
Excerpt from the KPMG and InnoLead report, "Benchmarking Innovation Impact 2023."
Key Change #3: Get help from above
When we asked what has been enabling innovation success, the top answer—from 53 percent of survey respondents—was leadership support. That’s down significantly from 2020, when 75 percent of respondents said support from above was contributing to their successes.
What’s more, when we asked survey respondents to pinpoint their top challenges, more than 24 percent of them cited a full-on lack of executive support—up from 19 percent in 2020.
Let’s look at some other top challenges:
35.8%
Internal politics and alignment
32.9%
Cultural issues
32.9%
Inability to act on business signals and moments
32.4%
Lack of budget
25.4%
Lack of strategy and vision
Survey respondents also said getting senior leadership excited about the innovation vision is the number one key to unlocking more resources, both human and financial, beating traditional levers like incremental revenue generation, competitive pressures, and demonstrated cost savings.
The message is clear: Innovation teams are increasingly working in silos, and they recognize the critical need to have more organizational support. It’s been a domino effect, not unlike how flight cancellations ripple across the country: The pandemic and the subsequent global and economic challenges have changed how we work, which has reduced visibility with leadership. This has made deep collaboration more challenging and transformational change less of a priority.
The opportunity: For innovation teams, this is a critical moment. As always, they must continuously evaluate innovation, R&D, and new product pipelines with a clear eye. But equally important, they need to understand what’s delivering value, what’s sucking up time and money, and what opportunities they’re missing. They must then be deliberate about garnering support up, down, and across the organization. Planes don’t take off without air traffic control and a ground crew too.
But here’s the beauty of both airplanes and innovation teams: Neither can fly backward. The innovation team’s work does, inevitably, move the organization forward. It’s really a matter of ensuring they’re going in the right direction.
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