Half of C-level executives say their organizations are spending more than 5 percent of their annual budget on innovative initiatives, yet 42 percent cite a limited budget as their biggest barrier to activation, according to a newly released report from consulting firm Ernst & Young LLP (EY).
The firm commissioned Wakefield Research to survey 500 senior executives in the US as part of the research, and found that beyond internal budget constraints, the external factors cited as most concerning included market volatility that can distract from an innovation agenda.
In EY's work with clients, the firm often sees a disconnect between an organization's investments in innovative technology and its ability to integrate the results of those new technologies and capabilities into the business to create value, said Roger Park, EY Americas Advisory and Financial Services Organization Innovation Leader.
In many cases, organizational fragmentation creates the risk of "trapped assets," where investments aren't being used effectively across silos to realize their full potential, Park said.
Business leaders might feel they need to increase budgets to drive more innovation in their organizations, Park said. But unless they are also prepared to transform their businesses to fully reap the benefits of those new ideas, "it will be like pouring more water into a leaky bucket."
A majority of the organizations (81 percent) have adopted cloud computing and 45 percent have adopted Internet of Things (IoT) technologies. Nearly one-quarter thin artificial intelligence (AI) will have the greatest positive impact on the future growth of their company in the next five years, followed by machine learning (23 percent).
The survey found that effectively leveraging data for business insights and developing new products and services are top innovation priorities at organizations. Although the strategies to realize these objectives might vary, 46 percent of respondents said their companies are refining hiring practices to attract talent with diverse, "future-focused" skill sets.
Finding talent is such a critical component that 44 percent of respondents said the percentage of their workforce with future-focused skill sets is the best measurement of the effectiveness of their innovation strategy, followed by the number of innovative products and/or services offered (40 percent).
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While 90 percent of the surveyed executives said their company's board is involved with innovation to some degree, the senior leadership team was most often cited as being the primary drivers of innovation within the organization (38 percent). Some 42 percent of the respondents said their organizations plan to create a role such as chief innovation officer to foster innovation.
Organizations are continuing to recognize the importance of fostering a culture that will support rather than stifle innovation, the report said. Nearly 80 percent of the executives said their organizations are tolerant of failure, which EY said is often a key element of the innovation process.
To further engage employees in innovation, respondents said their organizations provide incentives for innovative accomplishments (44 percent), support external workshops or training (43 percent), and offer special innovation-focused events such as hackathons (42 percent).