BARRIERS TO INNOVATION

A recent IBM Consulting survey of 765 CEOs that found that "Without a supportive corporate culture, proper funding for investment, and a cooperative workforce, even the best plans for innovation will falter" . The study quantifies much of what we have been discussing in our blog as well as our Exec Ed class -- Driving Organic Growth.

The first chart highlights the major barriers we found repeatedly:

The inability of companies to resource their critical growth initiatives to win is perhaps the most important reason for lackluster results. The underpinning cause is usually an ineffectual portfolio process. All businesses must meet their short term financial goals; they only have so much budgetary headroom. The inability or lack of desire to kill projects that we call "the walking dead" takes valuable resources away from the growth initiatives. More often than not, these "walking dead" projects are favorites of those in power. What is needed is a transparent and rigorous decision process.

The second issue highlighted in the IBM study is Corporate Climate. Our experience suggests that managing business risk is critical to driving organic growth -- how do you execute in highly uncertain business/technology environments? We talked about this earlier (8/22/056 post) in relation to the need to "manage the cost, not the rate of failure" (MacMillan and McGrath). This is more than changing a process; it is about culture and it starts with the top!

Managing business risk is growing in importance as IBM found that more and more of innovation is occurring around business models which, by definition, requires fundamental change and an inherent increase in uncertainty and exposure to business risk -- ~40% of innovation efforts are on product or services but a full 30% is on new business models which must be lead from the top (see 8/27/06 blog); the remaining innovation is on operations.