New paths to innovation
New paths to innovation
Amid uncertain economic and business conditions, companies across the world are constantly seeking new sources of growth.



 

“There is no question that CEOs face a challenge today in delivering sustainable value to their stakeholders. In such an environment, innovation plays a key role; and it is fascinating to see that it’s the world’s rapidly developing economies that often seem to be at the forefront in meeting this challenge. I believe it’s vital that the world’s business and industry leaders foster a culture in their organisations that encourages and rewards the development of new products and services, as well as new and effective ways of delivering them."

Ian Powell
PwC UK senior partner and member of the Network Leadership Team		  

The solution may lie in new products, market segments or geographies – or in adopting new business models, pricing structures or channels to market. But the common thread running through all these strategies is applying innovation and insight to identify and exploit new opportunities. Helping companies to do this successfully and sustainably is what PwC does best.

With any strategy, the key question is: “Will it create sustainable value?” Crucially, value is not simply equivalent to a business’s size or market share. Instead, it’s primarily about designing and delivering new and better ways to satisfy customer needs. This underlines why innovation in products, services and business models is now the most powerful source of value creation – a fact recognised by the CEOs polled for our 14th Annual Global CEO Survey, who say innovation is as important to growing their businesses as expanding in existing markets.

So it’s little wonder that CEOs with growth agendas have accelerated their plans around innovation. But in many businesses, they find they’re hampered by corporate research and development (R&D) processes that are still too slow, incremental and disconnected from market opportunities. As a result, many businesses are exploring new paths to innovation.

Succeeding in this quest demands much more than revamping the R&D function. Innovation in any business creates tension. This is good, because such tension is the energy that drives innovation forward. However, this energy needs to be harnessed and targeted through a disciplined process, underpinned by a culture of enablement, creativity and risk-taking – because some new ideas will inevitably fail. So the onus is on the CEO and top management to lead from the front by integrating fresh thinking into their strategic goals, and creating a culture and model that encourages and celebrates it.

The price is right

For new innovation models, look no further than to the world’s rapidly developing economies. Rising living standards in these economies have fuelled consumer demand for new and improved products and services. But while people’s incomes are increasing, their spending money remains finite. So entrepreneurs across the developing world have adopted the practice of ‘frugal innovation’ – the art of developing new products and services that deliver considerable value, but at radically reduced costs. Central to successful frugal innovation are resourcefulness and ingenuity, coupled with the discipline to focus on the things that really make a difference for customers.

Frugal innovation goes hand-in-hand with the growing recognition that there is tremendous potential for growth further down the world’s ‘income pyramid’. Over the past two decades, more than a billion new consumers have entered the global economy, mostly in emerging markets. At the same time, consumer behaviours and lifestyles in all markets – developed and emerging – are changing rapidly in response to the new opportunities and experiences opened up by increasingly pervasive and mobile internet access.

The question is: “How to respond to these seismic shifts with product and service innovation that engages all these consumers with the right proposition at the right price?” A big part of the answer lies in cloud computing and SaaS (Software-as-a-Service). This was shown by the US firm’s recent collaboration with Adobe Systems – one of the world’s most consistently innovative companies – to deliver a SaaS offering for its next product release.

Innovation across boundaries

A further characteristic of new innovation models is that old boundaries no longer apply – whether between people, geographies or organisations. As our case study shows, when the Daya Bay Nuclear Operations and Management Company in China wanted to innovate across almost every aspect of how it manages its business and maintains its plants, it called in PwC China – which in turn accessed world-class nuclear expertise from PwC US.

This client experience reflects how the removal of traditional boundaries is driving the emergence of ‘open innovation’ – an approach that mixes and matches internal and/or external ideas and resources to develop new business models and technologies. A big part of this is joining forces and collaborating with others. PwC UAE helped Abu Dhabi’s Mubadala Development Company develop innovative and value-generating insights for its investment allocation strategy. And you can read how PwC US is using ‘crowd-sourcing’ to harness open innovation in its own business.

Assurance innovation

As well as helping clients innovate in their products, services and business models, we also strive to innovate in our own business, for example in our Assurance services. As the section on audit quality describes, we’re committed to driving continuous improvement in our assurance offerings, while continually scanning the horizon for future developments and innovation opportunities. And our unrivalled level of engagement with the investment community keeps us ahead of the game in aligning reporting with investor expectations, and in providing corporate management with the information it needs to drive better decisions and create higher shareholder value.

This leadership is evident in the innovation we apply in our assurance engagements for clients. When PwC Germany won the audit of Bertelsmann Group, one of the key attractions for the client was the ability to offer an innovative real-time group reporting platform, providing client teams with transparent web-based access to component team reports. And our work with Bumi plc underlines the value of our innovative thinking and insights in areas ranging from assurance and due diligence to cross-border corporate structuring, tax and sustainability.

As we highlighted at the start of this section on clients, companies in today’s world need to seek out new sources of growth – meaning innovation is not an option, but a requirement. In FY 2011 we have continued to support and accelerate our clients’ innovation journey, while also sustaining our own pipeline of future client-focused innovation. These are efforts that we will maintain and intensify in FY 2012.