Tough times require different approach to innovation

Communications and high-tech companies are jeopardizing their own innovation by not taking a more open approach, a new study from Accenture indicates. Accenture’s survey of 270 senior executives from communications, high-tech and media companies found that 70% had stopped new product development projects in the past year, most often because they ran over budget due to delays in completion. Thirty percent of those surveyed said they were unable to attract the right level of in-house expertise for new-product innovation.

The problem is not a direct result of the current financial crisis, said Angelo Morelli, senior executive of new product development and innovation in Accenture’s Communications Industry group. But tightening budgets are forcing executives to more closely examine how they fund innovation projects – which could be a good thing, Morelli said in an interview.

“In the communications sector especially, innovation has been technology-driven,” Morelli said. “Innovation should be driven by shareholder value and not by a technology agenda. The positive impact of having less money is that products will be reviewed for what will really generate in value. In our survey, executives told us they stopped innovation projects because they didn’t manage to generate enough value for each dollar invested in the innovation.”

When innovation isn’t done cost-effectively, tight times will mean less innovation, and that’s particularly troubling for communications companies that need innovative new products to be more competitive, Morelli said. “It is extremely important to manage the money they have available in the most efficient way.”

One key to innovation is taking a consistent approach, while another is using an open development environment that allows communications and high-tech companies to capitalize on innovation by outside companies and to collaborate with customers, Morelli said. “Innovation certainly means creating new products but also may also mean creating new business models and creating or addressing new markets. Companies that innovate successfully do not just take one lucky shot, they innovate in three dimensions – new products, new markets, new business models.”

By using an open development environment and an open service delivery platform, communications and high-tech companies can more directly leverage innovation from third-parties and include their customers in new product development, increasing the likelihood that innovation efforts lead to new products which generate benefits for both customers and shareholders, Morelli said.

“Smart people will always be scarce in every country, so we try to get people to open innovation up,” he said, adding that this approach has been successful in many other industries. In an all-IP, Internet-driven world, there is a way to leverage the Internet to build and test innovative models, Morelli said. “There are innovation grapevines that connect a number of people for the solution of a problem. We are already using this for a number of clients, and it has reduced the time to define the requirements and also the request for modification – the first by 70% and the second by 80%. We involved more people in the project.”

Accenture’s study showed that in countries where open development is more often used, the percentage of new product launches increases. For example, 37% of European companies said they were likely to employ open innovation, and 47% of European companies said they planned new product launches in 2009. In the US, those numbers dropped to 27% and 32%, respectively. European companies were also more than twice as likely as US companies — 2%, versus 11% — to launch more than 50 new products in the last year. The study found that 63% of executives agreed that open innovation is a more cost-effective approach to traditional development, but only 29% overall said they always used an open approach.