The business value of innovation is not being understood by as many Irish CEOs as their international counterparts. A new study reveals only 68pc see innovation leading to new revenues compared with 78pc on average internationally.
Innovation – in the form of developing new products and services – has become as important to growth for CEOs as raising their share of existing markets.
A survey by PwC of 1,200 CEOs from around the world found that innovation, along with increasing their existing business, now outstrips all other means of potential expansion, including moving into new markets, mergers and acquisitions, and joint ventures and other alliances.
In Ireland, the trend is similar according to PwC’s Irish CEO Pulse survey. Irish CEOs clearly see innovation as critical to growth.
Irish CEOs are anticipating that their investment in innovation, whether product, process or new ways of working, will succeed. For example, nearly two-thirds (65pc) said their innovation will lead to new revenue streams.
Three-quarters of Irish CEOs reported that their innovation programs will lead to operational efficiencies and competitive advantage. The Irish survey suggests that companies are revamping their organisations for innovation with a clear focus on new product and service development.
According to the survey, most of this innovation is generated and funded internally. For example, only a fifth said they needed Government assistance and only 15pc felt that innovation would be sourced through M&As.
Similarly, PwC’s 14th Annual Global CEO survey found innovation is high on the executive agenda in virtually every industry. In all, 78pc of CEOs surveyed believe innovation will generate ‘significant’ new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations.
In both the pharmaceutical and entertainment and media sectors, for example, more than 40pc of CEOs believe their greatest opportunities for growth come from spawning new products and services.
Next decade will be ‘most innovative time’ since industrial age
Additionally, the survey found that global CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs said they expect to co-develop new products and services.
“Innovation is a matter of survival for companies in sectors facing rapid changes in technology and high customer expectations,” said Ciaran Kelly, Consulting Partner, PwC Ireland.
“Forward-looking companies strive for innovations that will give them competitive advantage and create growth. In today’s fast-moving and challenging environment, companies must constantly improve and re-invent their products, services and even brands.
“The next decade will be the ‘most innovative time’ since the industrial revolution due to the dynamics of over a billion new customers, global connectivity, and radical new technologies and science,” added Kelly.
“In mature markets, companies must innovate to differentiate themselves; in emerging markets, they need innovation to lessen their dependence on lower costs,” Kelly added.
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