Why Corporate Innovation Is Broken And What Insights Teams Can Do About It

By Market Logic Software

• article

• Innovation Research
• Innovation Testing
• Insight Transformation
• AI Personas
• Knowledge Management
• AI Agents

This article is based on a panel discussion hosted by Insight Platforms featuring Adam Brown (Ipsos), Richard Davies (AlchemyRx) and Olaf Lenzmann (Market Logic Software). Watch the full webinar on demand here:

Innovation is widely recognised as essential to business growth. Most senior leaders know this. And yet, across many of the world’s largest organisations, innovation is declining: not in ambition, but in execution, investment and results. We know this not from instinct, but from data.

Earlier this year, our three organisations, Ipsos, AlchemyRx and Market Logic Software, collaborated on a survey of 250 C-suite leaders in large consumer businesses. We spoke with chief executive officers, chief marketing officers and chief growth officers at organisations with annual revenues of $100 billion or more. These are industry leaders who have a clear picture of what is happening inside their businesses. What they told us is worth paying attention to.

Innovation is a stated priority, but not a real one

Innovation ranked as the number one driver for growth in our survey. Eighty-two per cent of respondents expect its importance to increase over the next three years. But when we looked at what is actually happening, the picture was very different.

The C-suite respondents did not feel they were effective at generating new innovations. More significantly, innovation was not driving the revenue it should be. Companies recognise the potential, but they are not realising it.

Part of the reason is straightforward: what most companies are calling innovation is not innovation at all. Of all the new products and services being launched, 74% are close-in line extensions. They are modifications to messaging, changes to packaging, variations on existing products. Only 26% of new launches represent genuine innovation. When you are trying to drive growth through innovation, but only a quarter of what you launch is actually new, you are not going to see the revenue growth you need.

The source of innovation ideas is part of the problem

When we asked where organisations were getting their innovation ideas, the most common answer was: from competitors. That creates an obvious problem. It is very difficult to differentiate your offer from competitors if competitors are the source of inspiration for what you are developing. You end up following, not leading.

Less than half of the innovations being developed are actually rooted in consumer research. Companies are not investing the time and effort needed to understand what consumers want and to build their innovation pipelines around that understanding. And yet, at the same time, those same C-suite respondents acknowledge they do not have the consumer insights they need. The solution seems obvious: do more research, develop a better understanding of your consumers, and use that to drive innovation. It is a straightforward picture, even if the execution is difficult.

Richard has seen this pattern repeatedly. Over the past ten to twenty years, there has been a significant shift towards driving the bottom line at the expense of the top line. When organisations look to cut costs, investment in strategic consumer research is often one of the first areas to be reduced. And because long-term R&D programmes require sustained commitment over several years, the pressure to deliver results in the next twelve months makes it harder to justify that kind of investment. A third factor, which Richard considers a genuine concern, is what he describes as a growing lack of curiosity about consumers: a reluctance to ask why consumers think and behave the way they do, and what could be done differently.

The innovation funnel has become a tunnel

One of the clearest findings from our survey is that organisations are not managing their innovation funnels effectively. Companies are not tracking how many ideas they are generating, not measuring success rates for the concepts they test, and have no clear view of whether their funnel is working. Without that visibility, it is very difficult to improve.

Richard describes what happens in practice as turning a funnel into a tunnel. Organisations do not generate enough ideas at the top. Because they do not have enough to choose from, they do not kill enough ideas along the way. Strong ideas cannot be identified and resourced properly because everything is moving forward together. The result is a higher failure rate, which in turn reinforces the belief that innovation does not work in particular categories, and so investment is cut further, creating a cycle that becomes self-fulfilling.

Consumers, of course, want innovation. They want new things. Even in mature categories, the appetite for something genuinely new is there. The problem is not consumer demand. It is the internal processes and investment decisions that are preventing organisations from meeting it.

True innovation starts with consumer insight, not consumer data

One of the points Adam is direct about is the distinction between data and insight. Having more data is not the goal. The goal is better insights: understanding not just what consumers are doing, but why, and what they actually need that is not being met. Innovation that does not start from a genuine understanding of consumer needs is unlikely to produce anything truly differentiated.

This is a distinction that matters. When organisations focus on accumulating consumer data rather than extracting meaningful understanding from it, the research process becomes less effective even as it becomes more active. Speed matters too. The speed at which research can now be conducted has increased significantly. But if that speed comes at the expense of insight quality, if results are delivered faster but with less meaning, then the acceleration is counterproductive.

Innovation needs to be managed like a growth engine

Perhaps the clearest conclusion from our research is that innovation requires discipline. It needs to be managed like a growth engine, with clear metrics, structured funnel management and an ongoing commitment to reviewing and refining the process. Adam draws a comparison to the Mythbusters principle: the only difference between science and screwing around is writing it down. If you are not tracking your process, you cannot learn from it or improve it.

For insights leaders specifically, Richard’s view is that the most important thing is to lead the consumer within the organisation. If there is one person who should be representing what consumers want and do not want when it comes to innovation, it should be the insights leader. That means being willing to occupy that role, and working within, or helping to build, organisations that genuinely value consumer understanding as a driver of decision-making.

That is not a small ask. But given the gap between where innovation is now and where it needs to be, it is a necessary one.

Author

Learn more about Market Logic Software