CEOs, turn your innovation ambition into advantage

Most business leaders understand the need to innovate, but only a small number take the necessary steps. In PwC’s 29th Global CEO Survey, we asked respondents to name their biggest concern. The second most-cited concern (after technology and AI) was whether a company’s innovation capability was good enough to face an uncertain future.

Half of CEOs say innovation is central to their company’s business strategy. Yet when asked about specific practices that support innovation, the results show a gap between aspiration and reality. Only one in four CEOs agree to a large or very large extent that their company tolerates high-risk innovation projects or has a defined innovation centre, incubator, or corporate venturing division. Fewer than one in ten CEOs (8%) say their company has made significant moves to implement at least five of the six practices we asked them about.

The innovation advantage
There’s a clear prize for embedding innovation into a company’s DNA. Analysis of this year’s survey data shows that companies employing a critical mass of innovation practices are achieving not only a higher percentage of sales from new products and services (as you might expect) but also faster overall revenue growth and higher profit margins.

Your next move: Build innovation capabilities. The practices we asked about in this year’s survey aren’t a foolproof recipe for innovation success. But they’re a good starting point for frank discussions among CEOs, their top team, and their board about whether innovation is more than a rhetorical priority. Beyond that, CEOs should consider taking the following steps:

• Audit your innovation capability across the organisation to identify deficits you can address, or successful practices to replicate.
• Create innovation hubs or venturing divisions that can rapidly develop and test new products and services without impacting the core business.
• Identify potential external partners, alliances, vendors, and even acquisitions that can help close capability gaps.
• Codify processes to terminate underperforming R&D projects and reallocate their resources to more promising initiatives.