83% of companies rank innovation among the top three priorities, but only 3% of them are ready to achieve these innovation goals.

• BCG’s 18th Annual Innovation Study Finds ‘Innovation Readiness’ in Businesses Has Decreased 17 Percentage Points Since 2022
• More than half of executives cite unclear strategy as one of their organization’s top three challenges
• Although 86% of organizations are experimenting with GenAI for innovation, only 8% are applying GenAI at scale.

BOSTON, June 4, 2024 /PRNewswire/ — Businesses are prioritizing innovation more than ever, yet they have never been less prepared to meet these aspirations. This year, a record 83% of senior executives rank innovation among their organization’s top three priorities. However, according to a new report released today by the Boston Consulting Group (BCG), only 3% of companies in 2024 are considered “innovation ready,” a sharp drop from 20% in 2022.

For its 18th annual study on innovation, entitled Innovation systems need a rebootBCG assessed the innovation maturity of companies on a 100-point scale and surveyed more than 1,000 senior innovation executives around the world.

Among executives surveyed by BCG, less than half (48%) felt their organization was making efforts to link its business strategies and innovation strategies, and only 12% reported strong connections between the two that produced a real impact. However, innovation activity (i.e. the number of active projects) has remained stable.

“We see a troubling picture of zombie organizations embarking on innovation without a clear strategy to focus their efforts,” said Justin Manly, managing director and partner at BCG and co-author of the report. “To get back on track, it is essential to start by strengthening the link between innovation strategy and business strategy.”

The great disconnect

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

Unfortunately, not all companies address their concerns. Only 30% of respondents said they were considering refreshing their innovation strategy. Instead, 70% plan to focus on process optimization measures, such as improving the efficiency and speed of their operating models, and 65% are looking to increase the number of projects in their wallet. Of those surveyed who are increasing their project load, around a third are prioritizing shorter-term projects, suggesting a lack of clarity or conviction about medium- and long-term opportunities.

Almost all innovators are exploring GenAI

While most organizations were already experimenting with classic predictive AI, the rise of GenAI appears to have shaken many innovators’ assessment of the quality of their AI achievements thus far. Between 2022 and 2024, the proportion of executives reporting that their company had implemented AI with impact fell from 37% to 10%.

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

In the race to GenAI, “ready” innovators are already getting ahead. They apply GenAI more frequently in a single use case and are 5x more likely to have applied it at scale.

“GenAI can increase efficiency and bring a new perspective to an organization, enabling its innovation function to invent faster and better,” said Michael Ringel, managing director and senior associate at BCG and co-author of the report. “But without a strategic North Star to guide the organization, even the most effective innovation function risks underperforming 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 address their biggest challenges and seize their greatest opportunities. BCG pioneered business strategy when it was founded in 1963. Today, we work closely with our clients to take a transformational approach aimed at benefiting all stakeholders, enabling organizations to develop, create a sustainable competitive advantage and generate a positive societal impact.

Our diverse global teams bring deep industry and functional expertise and a range of perspectives that challenge the status quo and drive change. BCG delivers solutions through management consulting, cutting-edge technology and design services, as well as corporate and digital projects. We work in a unique collaborative model within the firm and at all levels of the client organization, fueled by the purpose of helping our clients thrive and enabling them to make the world a better place.

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SOURCE Boston Consulting Group (BCG)