Vision & Execution’s Weblog

McKinsey & Company released their latest Global Survey – this one focused on Innovation and Commercialization.  There were many significant highlights from their research.  Below are a few that stood out for me.

50% of businesses expect to achieve growth outside of their core business – 32% by growing beyond the boundaries of the core business and 16% by growing as a result of adjacent opportunities.  In either case half of the companies surveyed are looking outside their comfort zone for growth.  What is problematic with this goal is that most companies don’t change their process for inputs.  Or, in other words, companies don’t change how they generate innovative ideas and collect data about the likelihood for market success for new innovations.  It’s the same one day fly in – brainstorm – prioritze – fly out process that regurgitates all the projects that were previously killed. Garbage in, bad products out.

Over 60% of companies acknowledged that they are not good at commercializing new products or services.  The challenge McKinsey identified appears to be in handing off ideas to those who would convert these ideas to commercially viable products.  Companies appear to have a significant talent gap in finding folks who can translate vision into reality…that’s not surprising since most folks are good at one or the other.  But it may also be a factor of garbage in, bad products out.

Another issue associated with the successful handoff of new ideas to market reality is picking the winners; 43% said their top challenge was choosing which ideas to move forward.  Not surprisingly 40% use an ad hoc process to make these commercialization decisions and 77% do not address these decisions at corporate leadership meetings as a regular agenda item.  New ideas don’t just surface during the annual strategic planning process – this needs to be well-funded ongoing initiative.

Vision & Execution has experience helping companies improve their inputs.  We run innovation workshops that help shake up corporate mythology about what business a company is really in.  When you rethink the way you define the business you’re in, you increase your clarity about where to expand your business.  We also help companies use the plethora of web-based solutions designed to actively engage customers and innovators outside the organization to vet or enhance new ideas.  And lastly, we help companies implement expedient ways of sizing and categorizing market opportunities to help senior management prioritize which products or pieces of a product to bring to market first.

In Silicon Valley we have a plethora of international trade organizations ensconced to help facilitate business among US companies and investors with foreign companies wishing to enter the US market. I’ve noted that the longer the trade organization has a had presence in Silicon Valley the greater success they’ve had in transferring knowledge back to the home country for the benefit of their local entrepreneurs. Yet, no one has been able to replicate the success of Silicon Valley and the relative ease with which successful new companies are created in the US. There are many cultural reasons why Silicon Valley exists and remains the largest entrepreneurial ecosystem in the world. Risk-taking is a major factor…the US is more tolerant of failure than most other countries and more importantly there is significantly more upside to taking risks through better exit opportunities in the US. But what are the advantages for US companies to go outside their home country? What can these trade organizations offer to US entrepreneurs that can facilitate knowledge transfer…teaching entrepreneurialism to the home country while transferring technology knowledge to the US companies? Many of these countries function as venture capitalists but are they proactively drawing the best US entrepreneurs to partner with local companies or research institutes to fund rapid commercialization of new technologies? How do we facilitate two way traffic to enrich entrepreneurs in every country? And if they were to succeed how long would Silicon Valley sustain its competitive advantage?

Two reports on innovation and competitiveness were released by the European Commission in recent weeks. These two reports come on the heels of the 2009 Global Competitive Index (GCI) being released last fall. They provide a fascinating look at the changing dynamics of our global economy as well as the impacts of our lingering economic crisis.

Why is this important? Just look at some of the recent shifts in the GCI Index as a result of the recent economic downturn. The U.S., which has historically held the #1 position, slipped to 2nd place allowing Switzerland to take 1st place. Singapore jumped from 5th place to 3rd place. Japan moved up from #9 to #8 in 2009 while Denmark dropped from 3rd to 5th place. Are these the countries you think of when conducting your competitive analysis?

Expanding your analysis of potential competitors creates advantages for you in a couple of ways. According to the EIS report, firms that are more innovative are less likely to cut back on innovation expenditures. The report found companies that maintained their innovation strategies and spending, including the use of open innovation and user innovation, were more resilient to economic downturns. Shifts in rankings as reported by the EIS suggest that other countries are being far more effective in remaining innovative and potentially producing a competitive threat to your business.

One of the most interesting findings in the 2009 EIS report is the causality between internationalization and innovation. “The extent to which a country’s businesses, institutions and industries are linked with resources and capabilities located outside the country is likely to positively impact the innovation performance of that country. Conversely, innovation intensive firms and countries are more likely to be able to compete successfully in international locations.” Movement across borders of capital, employees and students are key drivers to a company’s success. It’s not enough for your company to monitor competitive threats in other countries; it’s critical to be in the right countries to leverage your innovation efforts.

The U.S., despite falling to 2nd place this past year behind Switzerland, has a long standing tradition of highly efficient markets, sophisticated business culture and an impressive capacity for technological innovation supported by high levels of collaboration with research universities. Yet these very factors that drive US productivity and competitiveness are the areas where other countries are making impressive gains.

The EU27 outpace the US in all areas except those related to R&D expenditures and patents. While the US leads in 11 of the 19 indicators measured, the rate of growth is slowing (1.63%) while the EU27 is growing (3.17%). Similarly, compared to Japan, the EU27 have shown greater improvements in education, research and other collaborations and exports while Japan improved its lead in R&D expenditures and PCT patents.

The BRIC countries have been lumped together for some years, however the disparities reported in the EIS study suggest a new grouping will emerge. China is surging ahead with high tech exports, while Russia has fallen behind. Russia’s key strength is its higher education but it has not been effective in converting that to innovation growth. China surprisingly is outpacing the EU27 with their improvements in patents, trademarks and knowledge intensive services.

These findings are a not so gentle reminder that we must look past our borders when evaluating the competition but also when searching for partners and R&D opportunities. Depending on your business – manufacturing based or services based – you will find different countries offer different strengths as competitive threats or prospective resources.

Vision & Execution specializes in taking a global perspective to developing strategic growth plans for your business. If you’re struggling with how to ramp your growth internationally, contact us for a 60 minute complimentary review of your current strategy.