Innovation Top 2004 Priority for 90% of Companies

By Allen Bernard

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According to a new Boston Consulting Group study, top management around the globe will be looking toward innovation, not just cost cutting and productivity gains, in 2004 to drive bottom line growth.

The "Innovation to Cash" study found that of the 236 executives (from 30 different countries) surveyed, 20% said innovation is the top priority going into 2004; 69% said is was part of their top three list; and 90% put innovation in the top five, said Massimo Russo, a manager in BCG's IT practice and a researcher on the study.

Perhaps more important, 64% of the companies surveyed plan to spend more in 2004 on initiatives that increase innovation within their organizations, the study found.

"I do think there's a sense now, in the industry, that cost cutting can only go so far," said Russo. "Growth through mergers and acquisitions (M&A) is fraught with risk and is only sustainable for a certain amount of time, and that true organic growth is only possible if you exceed at turning innovation into cash."

To this end, companies will be calling on IT to not only continue to do more with less but to proffer solutions that support and aid innovation efforts within the organization. Applications like product lifecycle management (PLM) will probably continue to be a popular purchase going forward as CEOs look for new ways to more closely link internal product developments efforts with the company's customer base, said Russo.

By automating and streamlining development, PLM systems make the process more efficient and productive -- exactly the type of IT solution cost-conscious CEOs looking for innovative new products will find hard to resist, said Russo.

Innovation is "essentially any new concept that leads to competitive advantage that can be monetized or turned into cash," he said. "IT is a critical enabler for innovation."

"Most people think of innovation only in terms of R&D or new product development - but taking an idea and turning it into cash is an effort that involves almost every part of a company," said Hal Sirkin, global leader of BCG's Operations Practice area. "The challenge is thinking about and managing this extremely broad set of interrelated activity as a unified process, the 'Innovation to Cash' process."

This is where IT will play its biggest roll, suggests Russo. Middleware technologies that drive infrastructure homogeneity, for example, will continue to be in high demand as managers outside of IT look to glean more and better information from the existing infrastructure faster and in new formats, he said.

"The bottom line is that companies are re-focusing on innovation because they need new sources of growth. M&A is not an option for everyone and clearly there is little left to cut in headcount, overhead or expenses," said Jim Andrew, senior vice president and Director at BCG. "Innovation has always been one of the only sources of long-term growth in profits and shareholder value - and today it is becoming a true differentiator between those companies leading the pack and the rest of the field."