Fostering Innovation CulturesIn A Time of Disruption

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Innovation is a constant battle against the status quo, with the ultimate goal of creating and capturing value by launching new products, processes, services or experiences. Innovation is also the main source of disruption —and consequently, the antidote to being

displaced. The domination of industry giants such as Netflix and Amazon illustrate the point

that companies that thrive in the age of digital disruption must be actively innovating. As

companies feel increased pressure from competition, they must embrace innovation to

boost their own competitive advantage and create disruptive new solutions.

Disruption Is The Mother of Innovation

Today, in addition to disruption from competition on improved goods and

services, organizations must address sustainability challenges such as climate

and social change, conflict, trade volatility, and, of course, contagion. For many

organizations, disruption in response to COVID-19 has been a survival tactic.

Rapid advances in digital technologies have introduced new, more efficient

processes, making pivots and opportunities for new business models possible.

However, leaders must recognize that unleashing this value presents a unique

opportunity. These companies could take hold of this moment to embrace

innovation as a means of boosting competitiveness and outmaneuvering shocks.

They could also create a new way of working by embedding innovation into their

organizational culture.

Organizational Barriers To Driving A Culture Of InnovationIf embracing innovation is critical for survival, then why do so many companies not see a return from their innovation investments? What is getting in the way of these companies realizing the value from innovation?

As part of an executive education program at the Kellogg School of Management at Northwestern University, about 140 survey respondents were asked a series of questions related to innovation culture, strategy, and barriers. Executives listed their ability to “encourage a culture that fosters risk taking” as the greatest barrier to innovation they faced. As one executive described, “It is difficult to get innovators to think about how to mitigate the consequences of a failure when they come forth with new ideas and inventions, as that tends to be a very different way of thinking.”

?WhatIf!, a company focused on driving innovation cultures which was

acquired by Accenture, conducted a similar study with nearly 900

respondents. Professionals from companies of all sizes across 8 sectors

(Financial Services, Advertising, Arts & Entertainment, Healthcare, Hospitality,

IT & Technology, Real Estate and Retail) responded to 29 questions and the

following were cited as the top five barriers to innovation (Figure 1):

• Lack of Innovation Mindset

• Lack of Innovation Vision

• Poor Innovation Execution

• Poor Alignment on Organizational Values

• Lack of Infrastructure to Support Innovation

Figure 1: Common barriers for organizations to drive innovation Source: ?WhatIf! Innovation Survey, 2017-2020

Lack of Funding

Money

Management

CostInnovation

Legacy

Budget Risk

People

Time

Biggest Barrier

Employees

Directions

Fear

Government Regulations

Constraints

Status QuoSiloed

New Technology

New Things

Fear of FailureLack of Communication

Lack of Interest

Lack of Resources

Much Red Tape Upper Management

Amount of Time Old Way

Lack of Creativity

Red Tape

Lack of Support

Lack of Innovation Mindset

Lack of Innovation Vision

Poor Innovation Execution

Poor Alignment on Organizational Values

Lack of Infrastructure to Support Innovation

Lack of Management

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At Pfizer, under the “Dare to Try”1 company-wide program, thousands of employees were trained on

innovation and experimentation. The program was

a direct effort championed by top leadership to

embrace thoughtful risk taking. In addition to the

training, a network of champions was set up to

sustain this innovation culture. The new culture

embraced an entrepreneurial spirit and a

willingness to take risks, promoted curiosity, and a

focus on problem solving.

More than ever before, leaders are beginning to

recognize the power that an innovative culture

can have on an organization, however many are

struggling to make this transformation. Creating

this type of culture needs to be the forefront of

every organization’s strategy if they have hopes of

achieving growth, market leadership, or deterring

competition.

While all these barriers slow down innovation, the biggest barrier is the lack of an innovation mindset. Without a mindset that embraces collaboration and risk taking, many teams continue to operate in silos and are held back by a fear of failure.

Companies often don’t have a clearly articulated vision of what innovation means and what it will deliver for the organization. This leads to a lack of focus and a fall back to the status quo. In the absence of a clear and inspiring ambition, there is also limited impetus for ensuring adequate resources and infrastructure are devoted to innovation. The resulting lack of funding and excessive red tape limits the ability of employees to leverage new technology and push new ideas.

Could it be that to tap value from innovation we need to pay as much attention to the innovation culture and mindset as we do to the innovation vision, funding and resources?

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1 https://www.giantinnovation.io/thinking/2018/2/16/we-are-the-innovation-champions-an-interview-with-pfizers-dan-seewald

Why Innovation Culture Matters?

As seen in Figure 2, Accenture Research analyzed 1.3 million Glassdoor reviews of 287 North American companies with revenues above $3B using Natural Language Processing (NLP) that classifies free text from the reviews into several innovation culture-related themes such as risk taking, collaboration, agility, etc. that are defined based on Accenture's deep experience in working with innovative companies. The results are used as input into computing an Innovation Culture Score in the form of an index and then mapped their Innovation Culture Scores to the S&P CapitalIQ revenue of the last 5 years.

Leading this charge, to little surprise, are Software and Platform companies like Google and Facebook, which is reflected in their past 5-year company revenue CAGR. Google2 not only embraces innovation in its core business but also across its supporting functions, even areas such as ad sales. Eric Schmidt3 has described the mindset at Google as creating “more at bats per unit of time than anyone else in the world”. Similarly, at Amazon4, there is a strong culture of experimentation with Jeff Bezos depicting their success as a function of “how many experiments we do per year, per month, per week, per day.”

Figure 2: Impact of Innovation Culture Scores on Revenue Growth Rate by Industry

Source: Innovation Culture Scores: Accenture Research NLP analysis based on 1.3 million Glassdoor reviews.S&P CapitalIQ revenue analysis based on 287 North American companies with revenues above $3bn - where data is publicly available

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The research confirms that industries with strong innovation cultures are able to drive stronger growth.

-2

2

6

10

14

18

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70

Re

ve

nu

e G

row

th

(20

15-2

0 C

AG

R)

Innovation Culture Score

Life Sciences

Consumer Goods & ServicesRetail

Natural Resources

Comms & Media

Energy

Health

High Tech

IndustrialMobility

Software & Platform

Utilities

Banking & Capital Markets

Average

Ave

rag

e

Our analysis found a strong correlation between a company’s innovation culture and growth rate. Simply put, companies that fostered a strong culture of innovation were rewarded by a higher growth rate and financial performance.

2 https://blog.google/perspectives/frederik-pferdt/innovation-just-experiment-awaygo-explore/3 https://www.fastcompany.com/3001275/experimentation-new-planning4 https://observer.com/2017/11/forget-10000-hours-edison-bezos-zuckerberg-follow-the-10000-experiment-rule/

Now, culture is not the only factor. There are several other factors as well that contribute to a company’s need and urgency to innovate, like an industry’s competitive landscape, barriers to entry and degree of disruption. In addition, a company’s percentage of R&D spend, patents and ability to scale innovation also impact its ability to innovate. However, our research confirmed that culture plays a strong role.

Leading Insurer Embedding Change with Innovation Champions and HackathonsRecognizing significant disruptive changes in data, technology, and consumer expectations, a leading global insurer set forth a clear and ambitious innovation agenda. With this agenda in mind, company leadership outlined a new mindset focused on the now and the next with the goal of ensuring that the organization delivers results today but also positions itself to remain competitively advantaged and relevant in the years ahead. A culture of innovation has become part of the company DNA with teams actively encouraged to collaborate, forge new partnerships, and accelerate new ideas to market. To foster this innovation culture, the company has also created a network of innovation champions who promote innovation within the businesses. Innovators have access to a rapid test-and-learn platform to enable experimentation at scale leveraging new digital technologies. The company also established a wide ecosystem of partners including incubators, starts up and venture capital firms to develop new capabilities and offerings. Lastly, the insurer has ensured that this innovation mindset is spread far and wide across its people. In regular Innovation hackathons, people from various businesses and functions collaborate to ideate against future challenges and opportunities. These hackathons typically attract hundreds of teams and to date have led to multiple patent applications and various in-market solutions.

In addition to software and platform firms listed above, leading banking institutions are currently on a transformation journey to build a digital-first organization that leverages innovation as a pivotal role in their success. Organizations like Barclays have embedded innovation into their core values, achieving excellence in the marketplace. Others have worked to embed a culture of innovation across their leadership teams, upskilling high-potential leaders in areas such as customer centricity and experimentation.

Healthcare firms have also ramped up their focus on innovation and experimentation as a critical lever to drive growth, well before COVID-19 struck. At a leading life sciences company, the commercial team built a culture of innovation where team members are trained to be agile and keep an open mind to all ideas. With a core cadre of innovation experts and a now 200-strong network of champions, the team has scaled these innovation mindsets across the organization.

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Evidence that Innovation Culture Delivers ValueAs seen in the examples earlier, analyzing the Innovation

Culture Scores across industries gives a comparative view of

which industries value and foster a culture and mindset of innovation more than the others. .. However, by analyzing the

culture scores and financial performances of organizations

within their respective industries as well we see a similar

trend.

Figure 3 illustrates that companies with higher innovation

culture scores within their industries significantly

outperformed their peers in terms of average industry

revenue growth from 2015-20. We refer to this group of

companies as Innovation Leaders.

Take the Communications and Media industry as an example.

Innovation Leaders within this industry have grown revenues

on average by 14.1% representing a growth rate of almost 4

times over the 3.8% growth of their industry peers since 2015

- and have achieved stronger innovation culture scores by having a common set characteristics and behaviors that fosters and nurtures innovation within their organizations. Their focus on building a culture that actively encourages collaboration, agility, experimentation, risk taking and supports creative thinking from their people with a customer centric mindset enables innovation to flow through the organization.

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Across industries we identified a group of innovation leaders that have significantly outperformed their peers in terms of growth from 2015-20

Source: Innovation Culture Scores: Accenture Research NLP analysis based on 1.3 million Glassdoor reviews. S&P CapitalIQrevenue analysis based on 287 North American companies with revenues above $3bn – where data is publicly available

Figure 3: Innovation Leadership Among Industries

Figure 4: The Innovation Leadership Growth Gap

Revenue Growth Gap: Innovation Leaders vs The RestBased to 100

2022 20232015 20212016 20182017 20202019

InnovationLeaders

Growth Gap

37%47%

+115%

If companies do not create an agile, innovative culture, the growth gap between the leaders and those being disrupted by innovation will continue to widen (Figure 4).

Consider that during the peak of the pandemic in 2020 Innovation Leaders were able to increase their growth gap by 10 percentage points over the rest of the market from 2019, and by 2023 this gap is expected to reach over 115% between leaders and those unable to keep pace, transforming their businesses with the same vigor and foresight.

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Source: Accenture Research analysis based on S&P CapitalIQ revenue data

The Rest

There is much to be learned from these Innovation Leaders – from cultivating curious thinkers

who relentlessly question the world around themselves to brave risk takers who constantly

experiment and lack a fear of failure. However, they all begin with a relentless focus on

identifying customer/ consumer/ market problems and needs, and then explore innovative

solutions that bring additional value in new ways. Imagine if companies could infuse this

innovative approach in their strategy, new product development and launch strategies.

• Companies adopted an adaptive strategy – creating a growthstrategy that is dynamic and de-risked throughexperimentation?

• Companies pursued data-driven innovation – uncovering consumerinsights through AI and data-powered assets to create innovationwith greater speed to value?

• Companies accelerated new offer incubation – unlocking rapidinvention, incubation and scaling of market changing growth offers?

Bringing the Innovation Culture Home

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Align on Innovation’s role in supporting the organizational vision, values, and goals Set ambitious yet attainable strategic and cultural goals and break them down such that every single person in the organization understands their role in achieving them.

Demonstrate leadership commitment & energize leaders for growth Ignite leaders through a cultural ambition and new ways of working to deliver on their innovation and growth strategy. As leaders begin demonstrating to employees that they are bought into their commitment to innovation, risk taking, and accepting failure, others will begin to adopt these practices as well.

Encourage behavioral experimentation Unlock human potential through everyday experimentation, driving new innovative mindsets and behaviors.

Create Rewards and Recognition Programs These programs give leaders an opportunity to showcase ideal mindsets and behaviors they hope to replicate in others and boost engagement and morale among employees.

Companies can foster this culture of innovation among employees and diffuse it throughout the organization by following these steps:

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Adopting an innovation mindset and culture is critical for achieving market leadership and

organizational success in the long term, especially during today’s world of constant market

disruption. Companies that are able to do so create a gap between themselves and the competition.

Leaders need to focus on making innovation part of the culture of the organization and mindset of

each employee to unlock the hidden value potential and see a return on their innovation investments.

Shivani VoraHead of Innovation for Accenture North America, with international experience in growth strategy & digital transformationManaging Director, Accenture

Tom Kuczmarski President and founder of innovation consulting firm, co-founder of Chicago Innovation and Academic Director at Kellogg School of Management at Northwestern UniversityPresident, Kuczmarski Innovation

Sumita BhattacharyaInnovation lead with expertise in building innovation culture and capability and driving transformational change through new operating models and mindsets ?WhatIf! Principal Director, Accenture

Yusof SeedatGlobal business research experience with a core focus on creating data-driven insights and thought leadership to inform strategy and support business developmentThought Leadership Director, Accenture

Jacob Sherman Innovation consultant with focus on new product and service development, marketing strategy, and public relationsPrincipal, Kuczmarski InnovationPublic Relations & External Affairs, Chicago Innovation

AuthorsAccenture is a global professional services company with leading capabilities in digital, cloud and security. Combining unmatched experience and specialized skills across more than 40 industries, we offer Strategy and Consulting, Interactive, Technology and Operations services—all powered by the world’s largest network of Advanced Technology and Intelligent Operations centres. Our 537,000 people deliver on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. We embrace the power of change to create value and shared success for our clients, people, shareholders, partners and communities.Visit us at www.accenture.com

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