Innovation Matters Because It Leads to Higher Financial Performance and Creates Competitive Advantage

Research shows that an organization’s ability to innovate is highly correlated with both its market positioning and financial performance. Innovation is tangible. Organizations that possess strong innovative cultures with high levels of ideation gain sustainable, competitive advantage in their respective industries.

Our own empirical research on innovation revealed that companies that scored high in the top quartile of our InnovationOne Health Index© reported higher financial performance than bottom quartile performers by as much as 22%. We also learned that the 2012 top innovators earned a 6.3% total shareholder return premium (stock price appreciation and dividends) over 3 years. Companies that have been on the top innovators list since 2004 delivered a 4% premium over 10 years.

Other empirical researches have found strong statistical evidence for the relationship between innovation and higher financial results. Consider the chart below.

growth100 Firms with innovative and adaptive cultures achieve extraordinary financial  results, including nearly three times the review growth, 900% higher stock price growth and 755% higher net income growth. (John P. Kotter and James L. Heskett, Corporate Culture and Performance, 1992)
bcg-logo100 A Boston Consulting Group survey revealed [2009] that 64% of senior executives agreed that innovation is a top strategic focus for their firms. They believed that innovation provides strategic value and is a key differentiator because it increases revenue, employee engagement and customer satisfaction. It also decreases costs, financial risk and competition.
boozlogo100 Organizations that focus on innovation capabilities report higher profit margins by up to 22%. (Booz and Company Global Innovation Study, 2010)
EBIT100 Companies with a passion for innovation experience an increase in EBIT of 4% and more than 10 times higher returns from their innovation investments. (Arthur D. Little Innovation Survey, 2005)

You can improve your innovation

Innovation is quite doable. It is tangible, measurable, manageable, and will drive results. You can transform your organization with the right information, direction, and culture. You can improve your innovation while still maintaining a focus on excellence with your current operations and financial obligations.  If you don’t, you’ll fall behind your competition.

Organizations become innovative through their employees and external ecosystems!

The key to innovation resides in leadership’s ability to define, instill and reinforce a culture of innovation and ideation in their organization.

A culture of innovation flourishes under the right circumstances, when leaders:

  • Inspire or organization’s purpose

  • Relentlessly communicate your innovation vision and strategic focus

  • Broadly disseminate knowledge of customer needs and the latest technology, market and socio-economic trends

  • Facilitate the free exchange of ideas among employees and the external ecosystem

  • Create a well understood process to propose, build upon, track, and measure innovative ideas

  • Empower project managers and teams

  • Decide quickly on which ideas to advance, using analytics, and fund them

  • Align the organization to deliver solutions to customers

Contact us to learn more.