RESEARCH | November 2, 2022 | 4 min read
New research shows that innovation drives revenue, improves products and services, and lowers costs
By Evan Ramzipoor, Workflow contributor
In these uncertain times, it’s clearer than ever that companies must embrace innovation to survive – let alone thrive. But adopting new technologies and business models isn’t enough. It takes a cultural transformation that pairs the human and the digital to come out ahead.
To better understand how companies are responding faster to change and fostering a culture of innovation, ServiceNow and ThoughtLab surveyed 1,000 global C-level executives across manufacturing, telecom, healthcare, financial services, and the public sector.Survey respondents were evaluated on whether they provide a unified vision for innovation, create and meet benchmarks tied to concrete objectives, prioritize lateral over hierarchical decision-making, use agile development based on speed and iteration, and put customers at the center of their strategies.
These same respondents were then categorized as beginners, intermediates, and leaders along an innovation maturity curve.
The full report is available to download. Here are some highlights:
Many C-level executives agree that innovation has myriad benefits: it fuels growth, reduces costs, supports new business models, improves products and services, and bolsters customer satisfaction.
There’s no question that innovation is on business leaders’ agendas. The vast majority of respondents, 88%, say their senior management and boards are involved in decisions around innovation, especially in financial services (92%) and manufacturing (90%).
However, few companies solicit input from a wide range of internal and external stakeholders. Indeed, most respondents say their companies don’t involve customers or employees in their innovation decision-making, with only 11% and 5% respectively, saying they involve these stakeholders in such decisions.
Surprisingly, leaders are even less likely to include customers or employees in these decisions. While 96% of leaders across industries say their senior management and boards are involved in innovation decision-making, only 8% of leaders consult customers and a paltry 1% talk to their own employees, even though both customers and employees would probably be the most affected by changes in products, services, or processes.
The C-level consensus is that modernizing IT platforms is the most important first step to promote innovation—but it isn’t enough. Change management activities and training are also high priorities for top executives. However, CFOs were the only ones not to put change management in the top three for effectiveness; instead they prioritized adequate staffing and resources. This makes sense in the current economic environment, where inflation is rising and finding talent to fill positions is difficult.
Organizations are seeing definite financial boons from innovation. Over half expect it to help boost revenue and sales and cut costs now and over the next two years. When asked to explain the advantages, one COO of a U.S. healthcare provider replied that they are “delivering a significantly enhanced client experience, aided by new technology, while cutting our cost base structurally.” Other benefits include improved customer satisfaction and products, new business models, and more.
However, innovation doesn’t come cheap. Just under half of respondents say they’re struggling with high implementation costs and, at the same time, insufficient technology investments related to innovation, which prevent them from making as much progress as they’d like.
Companies also say inadequate talent, skills, and training are holding them back from realizing their innovation goals, and almost a third report that their employees are slow to adopt new technologies or processes associated with innovation. Finally, slightly more than 20% of respondents admit that their companies have neither a person or team responsible for innovation nor a guiding innovation vision.
Leaders understand that innovation depends on people, not just on the latest technology. While more than 20% of non-leaders report making significant progress building an innovation culture and a vision around innovation in their organizations, more than 40% of leaders are making significant progress providing vision and objectives around innovation and 30% are making significant progress creating an innovation-embracing culture. Their efforts are paying off in the form of greater profits and lower costs versus non-leaders.
While innovation drives growth across the board, the challenges vary by industry. The financial services industry, manufacturing, and telecoms are struggling with the high cost of implementing new technologies, while healthcare and the public sector are grappling with a lack of data management systems and tools.
Financial services and manufacturing are slightly ahead of the pack in terms of innovation, thanks largely to their progress modernizing IT platforms and providing staff with technology, data, and tools to get work done. After fighting the Covid pandemic, healthcare is most advanced when it comes to embracing change management and training.
The public sector is the furthest behind, but is working to improve innovation coordination across departments to reduce rigid governmental bureaucracies and silos. It is ahead of others when it comes to providing tools to employees for distributed work, which has allowed many government agencies to continue their vital functions throughout the pandemic.