Deloitte Survey: the future of Innovation

Deloitte Survey: the future of Innovation
Deloitte’s penetrating and authoritative Annual Survey of Innovation (‘Global 1000’) tells us how big business will do its innovation and what kinds of things they will do – and thus what kinds of things they will seek from early-stage businesses.
Next week: Part 2 explores the kinds of innovations that big business is seeking to fund.
The study reveals that first and foremost companies are seeking to align their innovation strategies with their business strategies, that where the business is going will increasingly determine the innovations they are looking for; and secondly they are seeking to gain better insights into customers’ stated and unstated needs. And it reveals that over the next decade many companies plan to shift their R&D spending mix—from incremental innovation to new and breakthrough innovation, and from product R&D to service R&D.

If you are an early-stage business looking to create rapid value for your business, there is no better indicator of your best strategy than to be working in those areas in which big businesses is working. If you can do what they want, and you can do it better than they can, you have a winning formula – alone or together!
Part 1
Where big business is heading with Innovation
“There has been a strong push over the last 10 years to align what you do in R&D with what you do in the business, and it has gotten better,” says Oliver Nussli, head of project and portfolio management at food and beverage manufacturer Nestlé. “Many companies have streamlined their R&D portfolios because there were too many things going on that were leading nowhere or had little chance of success.”

And over a three-year period, companies that directly captured customer insights had three times the growth in operating income and twice the return on assets of industry peers that captured customer insights indirectly, as well as 65 percent higher total shareholder returns.
The Need Seeker Advantage

In 2007, the Global Innovation 1000 study identified three fundamental kinds of companies, each with its own distinct way of managing the R&D process and its relationship to customers and markets. Every company tends to follow one of these three innovation models; it thus categorized companies as being Need Seekers, Market Readers, or Technology Drivers. Need Seekers, such as Apple, Procter & Gamble, and Tesla, make a point of using superior insights about customers to generate new ideas. They gain this insight through direct engagement with customers (for instance, Apple routinely learns from interactions at its retail stores) and through other means, including analysis of big data. Most important, they develop new products and services based on this superior end-user understanding. Their goal: to find the unstated customer needs of the future, and to be the first to address them. Their cultures encourage openness to new ideas from customers, suppliers, competitors, and other industries, and they prioritize directly generated consumer/customer insights and enterprise-wide launch capabilities. It is estimated that 25 percent of the Global Innovation 1000 companies are Need Seekers.

Market Readers, such as Samsung, Caterpillar, and Visteon, make up some 40 percent of the Global Innovation 1000 companies. They focus largely on creating value through incremental innovations to products already proven in the market. They use a variety of means to generate ideas; most involve closely monitoring their markets, customers, and competitors. This implies a more cautious approach, one that depends on being a second mover or “fast follower” in the marketplace. One of their specific innovation goals is customizing products and services for local markets, and they seek a culture of collaboration across functions and geographies. They prioritize capabilities for managing resource requirements and engaging suppliers and partners.

Technology Drivers, such as Google, Bosch, and Siemens, depend heavily on their internal technological capabilities to develop new products and services. They leverage their R&D investments to drive both breakthrough innovation and incremental change. They hope and expect that by following the imperatives implied by their discoveries, they will naturally meet the known and unknown needs of their customers. Their distinct innovation goal is to develop products of superior technological value, and their cultures reflect reverence and respect for technical knowledge and talent. Approximately 35 percent of the Global Innovation 1000 companies are Technology Drivers.

In general, the most important success factor is how well companies execute on their chosen strategy — whether they align their innovation strategy with their business strategy, whether they have prioritized the right capabilities, whether they have the right culture to enable their strategy, and whether they are using the tools that will help them develop new ideas and processes that are consistent with their innovation model. The quality of the alignment of all these elements is the key, and it trumps the amount of R&D spending.

Increasingly, the Deloitte Survey has come to believe that the Need Seeker strategy is inherently advantaged. Need Seekers, for example, report being better at innovation today than they were 10 years ago at a significantly higher rate than companies following the other two strategies, and they also more often indicate that they are financially outperforming their competitors.

In the 2011 study, Deloitte found that what sets Need Seekers apart is their ability to execute on their strategy—to combine all the elements of innovation into a coherent whole, with a culture that supports innovation. In a study in 2012 in conjunction with the Bay Area Council Economic Institute, Deloitte found that significantly more of the technical leads at companies classified as Need Seekers report directly to the CEO, and that their innovation agendas are much more likely to be developed and clearly communicated from the top down to the rank and file of the organization. They were also much more likely to point to product development as the function with the most influence on their company’s power structure. (That same study also revealed that Silicon Valley firms are almost twice as likely to follow a Need Seekers model than the general population of companies—46 percent versus 28 percent, a consequence of the startup/venture capital mind-set of tightly aligned business and technology strategies.)

While aligning business and innovation strategies will be the most important driver for innovation success, interestingly, this and other key areas are the same ones that Need Seekers are already focused on today.

Part 2 next week is on Big business and the future of Innovation
Open Innovation’s innovations

Corporates are articulating their needs and opportunities for innovation; and using intermediaries to search for innovators with ideas, and to provide candidates with a period of intensive development. Jan 2015. (

Unilever and Canary Wharf’s ‘Cognicity’ both invite you to come and help them crack a world-wide problem, but… Corporates are seducing startups into giving them their good ideas, but the odds and the risks against getting your rewards are less evident than they should be. April 2015. (

Cambridge Service Alliance
A global alliance between leading businesses and universities that brings them together to work on the complex service solutions of tomorrow. (

The full version of the Deloitte Report can be found at‎

John Whatmore April 2015 (


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