Half of companies say they are unhappy with the return they see on their innovation spending. But despite this, almost three-quarters plan to increase this spending over the next few years.
The importance of innovation spending to the bottom line has been highlighted in a new survey by Archstone Consulting which found that half of the companies questioned said that between 10 per cent and 25 per cent of their revenues over the next three years would be driven by products and services that will be developed over the next 12 months.
The survey quizzed 70 large consumer durable, consumer non-durable, life science and services corporations, half of whom are Fortune 1000 or Global 500 companies and a third of whom have revenues in excess of $10 billion.
Yet less than five per cent of these companies believe they have a highly effective innovation process and only a small number are using state of the art approaches to innovation like open networks and innovation-based metrics.
To bridge this gap, the vast majority of companies are investing significantly in consumer research as well as tapping into external resources such as formal and informal inventor networks to help them uncover new ideas, concepts, improvements and enablers.
They are also calling on the services of a range of consumer research firms, brand strategy and innovation firms, management consultants, advertising agencies and brand and identity design firms.
"In today's fast paced business environment, companies are increasingly relying on new products to drive the top line growth," said Archstone Consulting's Carrie L. Shea.
"Yet many of the companies we surveyed were very dissatisfied with the overall innovation process and a lack of confidence in their innovation investments."
Looking more closely at how the innovation process operates, several reasons emerge for this dissatisfaction.
Around half (55 per cent) of the companies surveyed admitted they do not have a formal innovation strategy in place and fewer than three out of 10 (28 per cent) measure their innovation effectiveness.
Confused project sponsorship and a failure to commit senior level attention and cross-functional owners to projects was another reason for return on innovation failing to meet expectations.
More than eight out of 10 respondents also said that many projects were kicked off without a proper discovery phase, resulting in fewer quality opportunities.
"The survey also found that having a culture that does not foster risk taking was the biggest impediment to innovation," said George Davie, a Managing Director of The Hazelton Group, an Archstone Consulting company.
"Companies also cited dedicated resources, internal communication, as well as consistent investment as major challenges to innovation."