Strategy, not size, matters in innovation spend

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More-inclusive approaches to innovation are helping companies meet the dual goals of revenue growth and cost containment. That's good news, since at the end of the day the business benefit delivered by innovation really does have to be a financial one.

It’s not about how much you spend, but the way you spend

Improving the financial return on innovation is ultimately the name of the game. But when it comes to getting results, it’s not so much about the size of your budget. It’s about how effectively you spend it—from strategy through execution.

Roughly half the companies participating in PwC's Innovation Benchmark think that their innovation efforts have had a “great” impact on driving their growth, with an equally significant impact on cost management. And nearly all companies believe there has been at least a moderately positive impact on both topline and bottom-line revenue growth. But just slightly more than a quarter profess to being innovation leaders. They also happen to expect higher revenue growth than their survey peers, as do those respondents who plan to reinvest in innovation at higher rates.

The relationship between a company’s level of innovation spending and economic success is, however, tenuous at best. Over the past dozen years, our annual Global Innovation 1000 study has found no statistical relationship between dollars spent on innovation and financial performance, suggesting that the way you spend your innovation dollars is more important than how many of those dollars you spend.

Innovation leaders

“Regardless of what anybody tells you, it's in your best interest to do financially driven investments, because if they succeed, then there will be financial and strategic returns back to the parent corporation. If that doesn't happen, it's just a waste of everybody's time.”

Nagraj Kashyap Corporate Vice President, Microsoft Ventures
Innovation's impact

Making sure innovation pays off

A majority of companies are now focusing more on inclusive operating models that bring a variety of parties into the innovation sandbox. Open innovation (61%), design thinking (59%), and co-creation with customers, partners, and suppliers (55%) are all far more prevalent models today than traditional R&D (34%).

It's good that these approaches are helping companies achieve the dual objectives of revenue growth and cost containment, since at the end of the day, the business benefit delivered by innovation really does have to be a financial one. It’s no surprise, then, that over two-thirds of firms flag sales growth as the most important innovation metric, with all other metrics lagging considerably behind.

After all, no company innovates with the goal of losing money, and none can lose indefinitely. For that reason alone, how you innovate is every bit as important as how much you invest.  

Contact us

Branton Cole

Director, PwC US

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