The Accenture Innovation Index shows that majority of businesses in South Africa are not innovating at the pace needed to compete in the 21st century. The index was released yesterday at the Accenture Innovation Conference in Johannesburg.
The index shows that innovation has increased by four points in 2016, a pace not required to for a stable economic growth.
Analysis of the results puts the majority – 57 percent of companies surveyed that scored less than 52 points out of a possible 100 – into the innovation laggard category. Only 29 percent can be categorised as innovation leaders. However, there is one further category that is truly setting the pace – innovation value champions.
“Digging deeper into the research we found that eight percent of companies are successfully managing to convert innovation into substantial bottom line growth,” said William Mzimba Chief Executive of Accenture South Africa and Chairman of Accenture Sub-Saharan Africa. “These innovation value champions are seeing returns on their innovations in excess of 40 percent and generate three times more value on their innovation investments than market average.”
“The innovation excellence of innovation leaders and value champions sets a benchmark for corporate South Africa. So, how can laggards close the gap to become leaders? And what is it that innovation champions are doing differently to achieve such impressive returns on their innovations? The first, most significant finding is that innovation value champions invest more in innovation,” said Mzimba.
“On average, South African companies invest 13.7 percent of their annual revenues in innovation and realising a 14.5 percent return. Innovation value champions invest 17.8 percent of revenues and their average return is 42.6 percent – almost three times higher than the market average.”
Mzimba further emphasised that investment is not the only factor that underpins their success. “A strong innovation culture is central to their innovation strategy, they use digital as a business enabler and as a revenue generator, and they leverage the power of ecosystems to gather intelligence and insights that help them differentiate their offerings in the market.”
In this year’s Accenture Innovation Index results, there are three stand-out dimensions of innovation maturity in which innovation leaders are gaining momentum: Engagement, Resources and Digital.
Engagement: innovation embedded
To achieve a truly sustainable innovation ecosystem, engagement needs to be encouraged and facilitated on all business and employee levels. Among South African companies surveyed, levels of engagement have increased by seven percent to 50 percent in 2016. This is driven primarily by innovation leaders who are acutely aware that for innovation to be embedded within their organisation it needs to be a persistent mindset among all employees.
Engagement is an important recurring theme in the 2016 Innovation Index with companies continuing to drive innovation from within their organisations. Notably, almost 70 percent of companies reported that their employees see innovation as an important part of their day jobs and believe it has the ability to enhance the life span of a company, its products and services. innovation value champions see embedding innovation in their organisations as a cornerstone to their innovation strategy. Their talent development is directed at acquiring new skills to support innovation and they have a high success rate in terms of retaining top talent to support innovation, and attracting and acquiring new talent to drive innovation.
The Accenture Innovation Index results show that innovative businesses encourage their employees to be innovative and openly promote the use of interactive tools and digital platforms for employees to pursue innovation. This is in line with Accenture’s 2016 Tech Vision report, an annual report that identifies technology trends essential to business success in the digital economy, which shows that 76 percent of South African businesses believe a more fluid workforce will improve innovation.
The index indicates that 95 percent of innovation leaders are giving more control to their employees to ideate and innovate, and are offering strong incentives and opportunities to encourage and cultivate innovation. Incentives include professional development, varied work assignment opportunities, financial rewards and annual rewards programmes recognising innovation.
The value of internal collaboration is also receiving strong attention – 85 percent of Innovation Leaders are making use of dedicated multi-functional innovation teams to generate new ideas, and have dedicated innovation teams set up to manage innovation.
Resources: the power of the ecosystem
Along the innovation value chain, resources in the form of financial capital, human capital and partner relationships are needed to generate ideas, facilitate innovation and bring it to fruition. In 2016, the Resources dimension of innovation maturity measured by the Innovation Index witnessed an impressive general increase of 20 basis points from 2014 to reach 55 points. This score was primarily driven by innovation leaders who increased their score in the Resources dimension by 32 percent to reach 77 points.
In an increasingly competitive world, companies need to take advantage of a wide range of resources to innovate; they cannot rely on ideas to come only from within their organisation. Encouragingly, the use of Open Innovation, which is characterised by partnerships among a range of players in a global ecosystem, is a strong theme emerging under the Resources dimension in this year’s Innovation Index as a means to drive innovation agendas.
“Our results show that 66 percent of innovation leaders are proactively embracing innovative ideas that come from sources inside the organisation as well as platforms and channels located externally. Innovation value champions clearly see opportunities in leveraging a broader ecosystem: 71 percent look to academia, clients, customers and suppliers to crowdsource information to innovate rather than relying on traditional sources,” said Mzimba.
Digital: leading in the new
Innovation Leaders are using analytics to drive innovation – a successful strategy that laggards are not taking full advantage of. Big Data analytics enables companies to harness data and use it to identify new opportunities and more efficient ways of doing business, as well as speed up decision-making and attend to customer needs with precision.
Digital technologies are also being adopted by innovation leaders internally to support business process innovation and streamline operations. This translates into significant cost efficiencies within the business. Digital technologies are also being used for process automation, with over half of South African organisations currently automating their core business processes, and eight in 10 innovation leaders moving to automate core business processes as part of their digital progress.
The digital environment makes a strong customer focus a competitive advantage. By leveraging digital, South African organisations can improve their cost-to-serve throughout each layer of the value chain. Innovation Leaders are also strongly invested in reducing the time to respond to customer needs. They are using digital technologies to improve their service delivery and, ultimately, customer satisfaction; social media for product and service promotion; and technology apps to improve route-to-market processes, ensuring market strategies are optimised for their business.
The journey from laggard to leader
Overall, South African companies understand the importance of open, collaborative innovation and the positive impact it can have on employee engagement and company performance. Accenture believes that South Africa needs to catalyse change to drive next steps. The Innovation Index provides some insight into how the country’s innovation value champions and leaders are building successful systems of innovation. If South African companies can better mobilise their resources, engage their talent and leverage digital technologies, they can increase their innovation success.
However, the journey from innovation laggard to leader requires a new mindset and adequate investment in innovation and development. To become an innovation value champion, companies must take the next step, creating an innovation ecosystem designed to capture value and promote and reward risk-taking and performance.