83% of Companies Rank Innovation as a Top-Three Priority, Yet Just 3% Are Ready to Deliver on Those Innovation Goals

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Jun 04, 2024, 00:01 ET

BCG's 18th Annual Innovation Study Reveals That "Innovation Readiness" Across Companies Has Declined 17 Percentage Points Since 2022
More Than Half of Executives Cite an Unclear Strategy as a Top-Three Challenge for Their Organization
Although 86% of Organizations Are Experimenting with GenAI for Innovation, Only 8% Are Applying GenAI at Scale

BOSTON, June 4, 2024 /PRNewswire/ -- Companies are prioritizing innovation more than ever before—yet they've never been less prepared to deliver on those aspirations. This year, a record 83% of senior executives rank innovation among their organizations' top three priorities. However, according to a new report released today from Boston Consulting Group (BCG), just 3% of companies in 2024 qualify as "innovation ready"—a steep drop from 20% as recently as 2022.

Innovation Systems Need a Reboot, Boston Consulting Group (BCG)

For its 18th annual innovation study, titled Innovation Systems Need a Reboot, BCG assessed companies' innovation maturity on a 100-point scale and surveyed over 1,000 senior innovation executives around the world.

Among the executives BCG surveyed, less than half (48%) felt that their organization made some effort to link its business and innovation strategies, and only 12% reported strong links between the two that were delivering real impact. However, innovation activity (i.e., the number of active projects) has remained steady.

"We're observing a troubling picture of zombie organizations just going through the motions of innovation without a clear strategy to focus their efforts," said Justin Manly, a BCG managing director and partner and a coauthor of the report. "To get back on track, strengthening the link between innovation strategy and business strategy is the most critical place to start."

The Great Disconnect

When business leaders were asked to rank the challenges facing their innovation teams, strategy concerns topped the list, with 52% of respondents citing an unclear or overly broad strategy as one of their top three challenges. Rising interest rates and talent constraints were cited among the top three concerns of 47% and 44% of innovation executives, respectively.

Unfortunately, not all companies are acting on their concerns. Just 30% of respondents said they're planning to refresh their innovation strategy. Instead, 70% plan to focus on process optimization moves, such as boosting the efficiency and speed of their operating models, and 65% seek to increase the number of projects in their portfolio. Of those respondents increasing their project load, roughly one-third are prioritizing more short-term projects—suggesting a lack of clarity or conviction on medium- to long-term opportunities.

Nearly All Innovators Are Exploring GenAI

While most organizations were already experimenting with classical predictive AI, the rise of GenAI seems to have shaken many innovators' assessments of the quality of their AI achievements to date. Between 2022 and 2024, the proportion of executives reporting their companies had implemented AI with impact has declined from 37% to 10%.

Nearly all executives (86%) said their organizations were experimenting with GenAI for innovation, R&D, or product development; however, most remain in the early stages. Just 8% said their organization is currently applying GenAI at scale.

In the GenAI race, "ready" innovators are already moving out ahead. They're applying GenAI more frequently in a single use case and are 5x more likely to have applied it at scale.

"GenAI can boost efficiency and bring fresh perspective to an organization, empowering its innovation function to invent faster and better," said Michael Ringel, a BCG managing director and senior partner and a coauthor of the report. "But without a strategic North Star to guide the organization, even the most efficient innovation function is likely to underperform its potential."

Download the publication here:
https://www.bcg.com/publications/2024/innovation-systems-need-a-reboot

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About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

SOURCE Boston Consulting Group (BCG)