Decreasing average age of companies and growing impact of innovation
The success paradigm of organizations and the economy as a whole has been undergoing major changes in the last decades. Today, the rate at which new products and business models emerge is much more important than it used to be 10 or 20 years ago. Besides competing with each other, major companies are now forced to compete with young fast-growing companies too.
The average age of companies in the S&P stock market index is 15 years now compared to 60 years in the last five decades. In 2011, only three tech companies (Apple, IBM, and Microsoft) were in the top-10 largest companies in the world. Today, seven of the top-10 companies (Microsoft, Apple, Amazon, Alphabet, Facebook, Alibaba Group, Tencent) are leading innovators.
The rate of progress and the speed at which new solutions emerge have grown manifold, and so many companies who face innovation-related challenges are forced to introduce new concepts and technologies to stay competitive.
Uber and car sharing services have transformed not only the taxi market but also the structure of demand for cars. Recent developments in tight oil extraction technologies have affected the balance between demand and supply on the global oil market. New catalyst and accumulator production technologies are transforming the sectors of platinum, palladium, cobalt, and nickel extraction.
This is why the importance of innovation is growing exponentially. Adaptability and capacity for creating new markets, new products, or unique competences are coming to the fore now.
Russian companies are faced with difficulties when introducing innovations
The results of a survey of corporate executives conducted as part of this study indicate a number of barriers to innovation. Among the greatest barriers, the respondents named a lack of systemic approach to innovation, complexity of the process of transformation, too much red tape, and overlong decision-making. 65% of directors state that they dont feel confident about the innovation-related decisions that they make.
Also, large companies, the business and the scientific community suffer from a lack of new competences for product commercialization. Over the past few decades, many Russian companies havent managed to shift to new mechanisms of interaction and continue to rely on old management methods, internal resources, and corporate research infrastructure.
The speed of decision-making, the length of the process of new product launch, and the companys openness to interaction with the business community, research organizations, and other large companies are as important today as basic research and internal R&D used to be 50 years ago.
The greater a companys openness to innovations, the more powerful influence these innovations will have on its operations
Tech leaders are growing increasingly open to new business contacts and partnerships. By 2022, the global top-1000 companies by market capitalization are planning to increase their expenditure on innovative projects by 25% compared to 2017. Top-10 global innovators spend 8.3% of their revenues on innovations. More successful companies take risks regarding innovations twice more frequently than ordinary companies do. Increasingly often, companies invest in disruptive innovations.
According to the Agency for Strategic Initiatives, instead of constraining the companys operations, its innovation strategy should help maximize the number of innovative projects and increase the companys readiness to invest in innovations and to embrace the risk of possible failure.
Speed of implementation and results-oriented employees are core to innovation
According to ASI, the key paradigm to be always used when designing new processes is to accelerate and simplify wherever possible. Tech leaders single out speed as a key factor in innovation 2.5 times more frequently than less successful companies do.
The study also shows that some barriers to innovation development can stem from low employee commitment due to a lack of correlation between innovation-related activities and the remuneration, directors lack of risk perception regarding innovative projects, and possibility of sanctions for initiative or failure of innovative projects.
Without a shift to innovative corporate culture, all changes in company strategy and operating model lose their meaning
According to ASI, barriers related to corporate culture are one of the key setbacks in the process of introducing innovations. Companies that work towards changing their corporate culture perform better, while deficiencies in corporate culture correlate with poor economic indicators. Risk aversion and rigid thinking and behavior have a direct impact on the companys overall efficiency.
It is essential that the company formulates major values of its innovation transformation policy, translates them to employees through the top management, defines the required competences, hires the right staff and educates them to ensure that the innovation policy values are implemented, and introduces an appropriate set of tools.
A change in the approach to innovation strategy, operational processes, management, and motivation mechanisms, as well as an active use of innovation tools will also serve as components of an overall transformation of the companys corporate culture towards an innovative form.