The Accenture Innovation Index

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1 The Accenture Innovation Index 2013: Key Findings

2 Innovation enables businesses to be more productive, efficient and grow faster, resulting in competitive economies. These economies respond better to change, see higher returns on investment, and increased living standards. The success of a country is linked to the abilities of its companies and public sector to innovate. The Survey results that follow highlight the need for South African organisations to drive innovation as an executive agenda. Companies that scored well foster an innovative culture from the boardroom throughout their organisations. The questionnaire process promoted the thinking of entrants with one entrant citing that their board had to rethink their approach based on the five aspects that were reviewed: Technological Process Innovation, Social and People Innovation, Service Delivery Innovation, Product Development Innovation, and Market/Brand Development Innovation. Social and People Innovation, Technological Process Innovation and Market/Brand Development Innovation received high scores in driving employment and competitive differentiation. What has been seen in the survey results is the need to be able to report to shareholders on innovation investments and achieve the necessary organisational balance to drive sustainable economic growth. Accenture defines innovation as the translation of a good idea into a tangible outcome (financial, social or environmental) which supports the creation of stakeholder value. The electric light did not come from the continuous improvement of candles. Oren Harari Against the backdrop of increasing volatility and growing competition fuelled by globalisation, only organisations that seamlessly integrate innovation into everything they do will secure sustainable growth and create a competitive advantage. South Africa (SA) already has strong pockets of innovation and achievements, with several examples that can be cited. However, the results of the Accenture Innovation Survey indicate that there is significant room for improvement. To gauge the level of innovation excellence across South Africa s private and public sectors, Accenture s Innovation Survey surveyed 190 organisations, both large and small, across various industries. The findings provide unique insights into innovative behaviours displayed by these organisations and we highlight selected key themes that came through strongly. 3

3 Did You Know, Stronger Innovators 1 manage innovation through senior leadership (75% vs. 63% for the rest of the market) and foster an innovative culture through employees by encouraging innovation and offering financial rewards for great ideas (90% vs. 48%). 6 leverage innovation to decrease costs without reducing headcount. Innovation laggards reduce cost through retrenchments and in some cases these companies have experienced a rise in costs release innovations that are totally new to the market (75% of leaders), while the rest of the market are improving on previously released products. make use of innovative platforms like social media to gather competitor intelligence (85% vs. 58% for the rest of the market), utilise S-curves 1 for decision-making (90% vs. 21% for rest of the market) and Road Mapping Techniques 2 to achieve technology goals (70% vs. 57% for the rest of the market). increase their market share through innovation (cited by 75% of respondents), and are generating revenue from innovations that are only three years old. have readily available budget dedicated to the development of new or improved products or services ( vs. 22% for the rest of the market) to drive innovation dedicate programmes to drive brand identity (63% vs. 34% for the rest of the market) and have committed communications strategies to promote identification of the company and their products with innovation. increase their bottom-line and market share by more than 10% through marketing and brand innovation initiatives. implement environmental management programmes with 75% of strong innovators having a committed policy for reducing energy consumption and minimising their environmental impact. view cross-border collaboration, talent management and competitors as important reasons to drive innovation in their organisation. 1. S-curves: Provide a tool for organisations to gain a perspective of where they are in terms of their business cycle. It provides an early warning when the product or process life cycle is reaching maturity. Organisations attempt to have a spread of offerings which are in various phases of development. 2. Road Mapping: A technology roadmap is a document that describes how evolving customer requirements can be connected with new means of satisfying them, into the future. The best technology roadmaps define performance benchmarks that describe successive advancements in performance, from the customer perspective, and identify where gaps in capability (or challenges that need to be addressed) exist in reaching defined future requirements. 4 5

4 Fostering an Innovative Culture What types of incentives do you offer employees to encourage an innovative culture? Professional development/ advancement opportunities Opportunities for more varied work experience and assignments 80% 100% 67% 83% 65% 55% 83% Average 74 % 63 % Financial rewards 40% 83% 73% 17% 60 % Organisations that demonstrate innovation excellence drive the process through total integration, where all practices are aligned to foster an innovative culture. Just under half (48 percent) of South African organisations surveyed have achieved this alignment. Companies within the Financial Services (FS) industry lead with 11 percentage points above the national average. Communications, Media and Technology (CMT) companies are two points above, while those in Manufacturing and Fast-Moving Consumer Goods (FMCG) fall two points below the national average. professional development and advancement opportunities, as reported by 74 percent of respondents. Promoting an internal culture of employee innovation enables organisations to bring new products to market rapidly: 67 percent report that it takes under 12 months to release new products from prototype to full commercialisation. Employee s name being associated with the innovation Opportunities to work with broader teams Opportunities for rotation in different business units More global work assignment opportunities Cross industry collaboration Communications, Media and Technology 65% 83% 42% 83% 65% 67% 33% 67% 25% 30% 17% 15% 33% 33% 17% 25% 33% 12% Financial Services FMCG and Manufacturing 50 % 46 % 29 % 26 % 24 % Non-governmental organisation (NGO) To encourage an innovative culture, most South African organisations incentivise employees by offering The most successful innovative companies have a leader who drives innovation actively throughout all levels of the organisation. Creative thoughts are encouraged, incentives given for ideas that can be commercialised and processes are in place to support that commercialisation. It is a culture that drives competitive differentiation. Fostering an Innovative Culture CMT 11 Financial Services National Average for Fostering an Innovative Culture: All the scores derived from questions that had sentiments related to the innovation culture were averaged to arrive at the national average. For relevancy from a statistical size perspective only industries that had a substantial representation by number of companies were included for industry reporting as well as for the national average. FMCG & Manufacturing National Average 6 7

5 Achieving Stronger How much has your organisation s annual revenue grown through product and/or service innovation over the last three years? Growth and ROI 7% 16% 11% 14% 22% 12% 19% 17% Evidence from the Survey supports the link of innovation to outcomes, such as strong growth and return on investments (ROI). 65% 56% 23% 38% Most organisations surveyed have released at least one new or improved innovation within each of the five innovation categories (product development, social and people, service delivery, technological process and market/brand development innovations). In 2012, 31 percent of respondents indicated ROI from innovation of more than 20 percent which was 9 percent higher than the ROI response rate in FS companies progressed the most by achieving less than 10 percent ROI in 2010 to just over a third of companies in 2012 experiencing ROIs of more than 20 percent. From a customer viewpoint, 72 percent of respondents mentioned that product development innovations resulted in customers purchasing demands increasing and 68% cited a growth in market share. 75 percent Of organisations reported that over the last three years innovations in product development were mostly comprised of improved or repackaged products. With regards to marketing and brand development innovation, South African organisations have indicated at least a 10 percent increase in their bottom-line (48 percent of respondents) and/or increase in market share (51percent of respondents). How much ROI has your Product Innovation patent generated for your organisation over the last three years? 9% 16% 16% More than Between 21% and Between 11% Less than 10% and 20% Most encouragingly, 62 percent of companies cited that they have achieved at least a 10 percent growth in revenue through product and/or service innovation over the last three years. This relates to a 27 percent increase in response rates from Please indicate in which of the following categories your organisation introduced any new or significantly improved innovations: (% of Yes ) Close to 60 percent of organisations stated that their product innovation patents had generated less than 10 percent ROI over the last three years only 9 percent state that patents generated more than 50 percent ROI in this time. 59% 77% 76% 75% 75% 64% Overall Product Development Innovation Social and People Innovation Service Delivery Innovation Technological Process Innovation Market / Brand Development in Innovation More than Between 21% and Between 11% Less than 10% and 20% 8 9

6 Improving Efficiency Through Technology Technology is now recognised as the key driver of competitive advantage, and innovation is a critical success factor for achieving efficiencies. 97% of organisations indicated that innovation in technology has increased efficiency significantly. Innovation in technology has increased efficiency significantly, reported by 97 percent of organisations. Over half of these organisations (54 percent) indicated that the results of technology innovation has even led to an increase in headcount, especially companies in the FMCG and Manufacturing industries. In addition, 30% of organisations have managed to cut back on staff costs through innovation. From a customer viewpoint 41 percent of respondents mentioned that technology process innovations have resulted in customers buying more, while 9 percent have reported an increase in costs to customers. How has your organisation s innovation in Technological Processes increased productivity and efficiency? Overall: 54% How has your organisation s innovation in Technological Processes increased productivity and efficiency? Industry: 20% 12% by more than 11% by more than 6-10% 22% by more than 1-5% 46% No increase in headcount 22% 17% 11% Communications, Media and Technology Financial Services 20% 13% 30% 37% Products 25% 75% NGO by more than 11% by more than 6-10% by more than 1-5% No increase in headcount 54% of companies specified that innovation led to an increase in employment

7 Leveraging Key Sources and Tools to Compete What are your sources for competitor intelligence? 79% 32% 15% Innovative organisations utilise many different sources to drive their ideation and competitive advantage. The results of the Survey indicate that companies are making use of various sources and tools to drive their innovation agenda. 79 percent of SA companies have actively used innovations like social media to harvest competitor intelligence and just over a third of organisations use S-curves as a decision making tool (with 85 percent using the tool to determine the start of new offerings development). FS and CMT companies are the largest users of S-curves, cited by 50 percent and 45 percent of respondents respectively. Not surprisingly, the results reveal that large organisations favour S-curves to aid decision-making across business strategies. The use of crowdsourcing 3 or open innovation to gather information offers up-to-date and unprecedented levels of insights on end consumers needs, behaviours and preferences, as well as emerging trends which would give companies a competitive edge. Only 11 percent of companies use crowd sourcing (open innovation) for innovation idea gathering. Internet and social media platforms How do you use S-curves? Focus groups Specialised web crawling software systems To decide on when to start the development of new offerings To release new offerings into the market 85% 70% 56% 37% To freeze a development process until a more appropriate time To take existing products out of the market 3. Crowdsourcing: Is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, and especially from an online community, rather than from traditional employees or suppliers

8 Displaying a Does your organisation have a committed policy for reducing energy consumption and minimising environmental impact? What types of techniques do you deploy to reduce energy consumption and minimise environmental impact? Commitment to Yes 64% Moving towards a paperless environment 81 % Sustainability No 36% Use of CFL lighting systems 52 % Organisations that integrate social, environmental and community responsibility into their business practices demonstrate higher levels of innovation. The Survey results reveal that only 45 percent of organisations have achieved this in totality. Almost two-thirds of organisations surveyed are committed to reducing energy consumption and minimising their environmental impact, mainly through moving towards a paperless environment within the organisation (cited by 81 percent of respondents). Encouragingly, through social and people innovation strategies, 80 percent of organisations have indicated improved education levels. Waste and water recycling Waste minimisation through production and design Use of energy management and control systems in buildings Use of lean manufacturing processes Deploying eco-design processes 52 % 46 % 42 % 31 % 31 % Use of green IT systems 25 % Use of solar voltaic cells for electricity production 23 % Use of product life cycle approach to R&D processes 23 % 73% have seen improvements in quality of life among their communities. Reduction of effluents Use of solar water heating systems 17 % 15 % Use of wind generators for electricity production 8 % 14 15

9 Organic vs. Inorganic What are the challenges you face from inorganic innovation? Complexities around managing the relationship Innovation Growth 78 % Sustainability of the relationship Strategies 56 % Innovation growth strategies that rely on partnering through joint ventures and alliances result in improved efficiencies and enhanced offerings. Overall, 62 percent of organisations prefer an organic innovation growth strategy and 37 percent favour a combination of both organic and inorganic options (1 percent of respondents selected the inorganic avenue only). Those in the CMT industries were the only companies to cite an inorganic innovation growth strategy as an option to pursue. The key challenges faced by organisations from inorganic innovation include complexities around managing relationships and the sustainability of those relationships. Cultural differences Potential for creating a new competitor Concerns around confidentiality 30 % 30 % 26 % What are the key drivers of your innovation growth strategy? 62% 1% 37% Organically: mainly internal Inorganically: mainly through external collaboration and mergers/acquisitions with other innovative companies Combination of organic and inorganic 16 17

10 Measuring Innovation Accenture believes that innovation is a differentiator, as it fuels both top- and bottom-line growth. The Survey has highlighted the need for corporate agendas to change and increase C-suite focus on driving innovation-based development. The model used for scoring innovation excellence is based on the acronym PERFECTION and provides an indication of the level of innovation maturity amongst respondents. Below we illustrate a snapshot of the top 20 respondents with the highest average scores as well as covering the rest of the participants surveyed. 18 While the top 20 have scored stronger on foresight, customer value and integration (59 percent, 50 percent and 58 percent respectively), the results indicate that innovation in South Africa is a challenge, evidenced by an overall average score for the top 20 of 37 percent and 19 percent for the rest of the market. Based on the selected key themes that were highlighted in this brochure together with the actual scores derived from the PERFECTION model of innovation excellence, there is clear indication that innovation in South Africa lags despite strong pockets of attainments. NO SCORE QUALITATIVE % % % % % % % % NO SCORE QUALITATIVE % % % % % % % % P E R F E C T I O N Top 20 NO SCORE QUALITATIVE 29% 43% 10% 59% 9% 58% 9% P E R F E C T I O N P E R F E C T I O N Top 20 29% 43% 10% 59% 9% 58% 9% P E R F E C T I O N South African Market Average Infographic Process of Innovation 14% Processes deployed to maximise competitive advantage or excel in service delivery. Engagement 32% Practices in place to manage people for the enablement of an innovation mindset. Resources 5% Investment, funds and other resources committed to driving the innovation. Foresight 26% Tools and techniques mobilised to understand market forces in relation to customer needs and competition. Exceptional Attributes Unique features and processes developed in the delivery of exceptional offerings. Customer Value 38% Gauging real customer value that is attributed to the organisation s innovation drive. NO SCORE QUALITATIVE Tangible Benefits 7% Innovation excellence, which enables organisations to quantify the benefits derived from the process. Integration 43% Not executing innovation programmes in isolation and integrating the outcomes from innovation into a wider business context. Organisational Ecology 4% Ethos underpinning the organisation. Innovation excellence is not only about internal impact, but also within the broader stakeholder grouping. Niche Evaluation of organisation s innovativeness in a number of specific areas or domains. 19

11 About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, Its home page is How do you measure up? Contact Accenture to understand how your organisation may move from discovery of innovation through to execution and commercialisation. Contact For further information, please contact: Hayley Walters Managing Director: Operations and Innovation, Management Consulting +27(11) Methodology and research Accenture Research The Da Vinci Institute Isometrix Survey Methodology An online survey of 190 companies was administered. The process included a vetting through TransUnion, completion of the main questionnaire and adjudication of high scoring companies. Further vetting through TransUnion and a second adjudication was undertaken to verify organisations. The survey was quantitative in nature with very limited open-ended questions/items for the purpose of creating an index score for innovation. Copyright 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

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