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Innovation

CEOs Say Investing in Innovation Is Not Paying Off


If CEOs are not seeing their more risky R&D investments produce needle-moving results fast enough, they may turn to incremental improvements rather than big, out-there killer ideas

Photograph by John Churchman

If CEOs are not seeing their more risky R&D investments produce needle-moving results fast enough, they may turn to incremental improvements rather than big, out-there killer ideas

By now it is almost gospel that investing in innovative new products and services helps a company’s long-term success. That doesn’t mean it’s easy. A new study from Accenture, “Why ‘Low Risk’ Innovation Is Costly,” found that fewer than one in five chief executives believes his strategic investments in innovation are paying off, and that this poor track record is starting to discourage companies from taking risks.

For the study, Accenture (ACN) surveyed 519 companies across more than 12 industry sectors in France, Britain, and the U.S. Half (51 percent) of survey respondents reported they had recently increased funding for innovation at their companies. Almost all (93 percent) said the long-term success of their organization’s business strategy depends on their ability to innovate.

Despite the importance they assign to this innovate-or-die business rationale, just 18 percent of CEOs say they’re seeing their investments in innovation pay off. At the same time, 46 percent of the executives surveyed said their company had become more risk averse when considering new breakthrough ideas, the study found.

There may be a classic negative feedback loop at work here. If frustrated CEOs are not seeing their more risky R&D investments produce needle-moving results fast enough, they may turn to incremental improvements rather than big killer ideas. To wit, nearly two out of three of respondents said they were investing in product-line extensions. And 33 percent said that when it comes to innovation, “their primary goal was the expansion of the product suites that support their basic offerings.” That’s fine, but it’s the kind of innovation that begets the donut burger, not the risk-taking that can really change a company’s future.

Warner writes about innovation for Bloomberg Businessweek. Follow him on Twitter @bernhardwarner.

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