Innovation capabilities need an upgrade to fend off disruption

Around two thirds of companies in the Netherlands fear the impact of disruption, according to a new study by RevelX. To fend off disruptive competitors, companies need to ramp up their innovation strategy, portfolio management and business agility and seriously invest in building an innovation competence and culture.

The study by the growth-focused consultancy surveyed managers with innovation-related responsibilities at 70 companies in the Netherlands, across startups, scale-ups and corporates. The researchers found that while the threat of breakthrough, often digital savvy, competition is lurking around the corner, only a quarter of the participants believe that their own innovation maturity is sufficiently capable of helping them maintain their competitive edge.

“Innovation is the key to sustainable growth. It is vital to develop and deploy future-proof business models, stay relevant for customers, stay ahead of competitors while defending against longer term market forces,” explained Marc Douma, a partner at the consultancy.

The main finding of the study echoes a number of other recent papers conducted in other parts of the globe. In a PA Consulting report, two thirds of organisations surveyed acknowledged that that their strategies will not survive without innovation, however, as many as 76% of those respondents said they are not fully confident that they have the skills required to innovate themselves out of trouble. In surveys by among others A.T. Kearney and McKinsey & Company, innovation was cited as a top three factor for boardroom discussions amid a fast changing business environment. In its study, RevelX assessed companies on 35 innovation best practices, across seven categories. These are: innovation strategy, customer centricity, agility, innovation portfolio management, organisation, skills & competencies and culture & leadership. Strategic pillars, such as a clearly defined innovation strategy and a roadmap, were found to be lacking by half of the respondent firms. “A worrying observation. It is therefore essential that Dutch executives focus more on crafting a holistic view of how they can advance their business model, service and product portfolios, and operations,” remarked Douma.

The leaders’ edge

Overall, firms that lead the way in RevelX’s Innovation Readiness Benchmark score 24 percentage points higher than the group of average performers, providing them with healthier innovation funnels, shorter go-to-market timelines and down the line a higher return on investment. Star performers manage to nurture higher leadership commitment for innovation portfolios, apply a more proactive and comprehensive method for innovating ‘outside-in’, and incorporate feedback loops into their innovation processes. Meanwhile, at a strategic level, they treat innovation as an integral part of their business model, instead of seeing it as a siloed part of just service/product advancement.

According to an analysis by BCG, which studied the characteristics of the world’s 50 most innovative companies, strong innovators differentiate themselves on a few factors, including a digital approach, strong execution of new product/service launches, design for innovation and an organisation along with team that provides supporting capabilities. 

Not all sectors and companies are however equally susceptible to major disruption brought by the likes of Booking.com and Airbnb (travel industry), Amazon and Alibaba (retail), and Netflix and Spotify (media & entertainment). The art lies in making the right assessment – “understanding the forces that can potentially change the fundamentals of a landscape,” said Douma, “and then acting upon that.”

Despite pressing agendas, executives are urged to take Douma’s advice seriously. One estimate found that Middle East companies alone risk losing $400 billion to disruption. With the region contributing a mere 4% to global GDP, the case for companies in the Netherlands and far beyond is clear. 

Related: Nine emerging technologies will transform innovation management.