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Approaches to innovation - EY - Global

Approaches to innovationHow do corporates and entrepreneurs approach innovation differently?

Exceptional Enterprise diagnostic

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Innovation needs a strategic focus. Entrepreneurs and general corporates agree that their ability to get innovation right is a key to their success.


Four ways that entrepreneurs and general corporates think differently about innovation

Innovation fuels business growth. The ability to keep on generating winning ideas for new products and services is one of the keys to business success.

Entrepreneurial companies know this; their natural understanding of innovation is what makes them unique. But what about general corporates? Are their views on innovation any different? And if they are, what can each type of business learn from the other?

To start a debate around those questions we surveyed entrepreneurial companies and general corporates about their attitudes to innovation.

We also found some interesting differences in the way these two groups approach innovation. Four stand out.

The four key differences


Making innovation a strategic priority

Innovation needs a strategic focus. Entrepreneurs and general corporates agreed that their ability to get innovation right was key to their future success. But around half the entrepreneurs said they were struggling to integrate innovation into their strategic priorities. And a quarter told us that innovation didn't feature anywhere in their top-end plans.

The general corporates were doing much better on this point. Some 70% felt they had effectively integrated innovation into their strategic goals. Less than a tenth said it wasn't included at all.

Perhaps entrepreneurs feel that because innovation is so integral to what they do, there is no need to reference it explicitly in their business goals? But there is a risk in taking sustained innovation for granted.

If you want to grow, you need to find a way of embedding innovation in your strategic priorities.


Where innovation takes place

Innovation is about more than new products and services. Yet very few of the entrepreneurs were innovating in the "back office" or support functions needed to sustain a growing business. General corporates were far more active here. A third of them innovated in their finance function, compared to a fifth of entrepreneurs, for example.

Exceptional Enterprise diagnostic

Our Exceptional Enterprise diagnostic maps out the six core business areas in which a growth company must excel if it is to become a market leader. Innovation is one of them. But successful companies also need to apply their creative enthusiasm to other elements of the diagnostic, such as human resources and risk management.

If you want to grow, you need to innovate around what you do and how you do it.


Encouraging innovation

Innovation needs to be part of your business culture. The entrepreneurs’ most common means of encouraging innovation was to recruit creative people or to work with outside agencies. These are effective techniques, and general corporates used them too. But they were more likely to give staff specific “ideas time” and were twice as likely to offer staff cash rewards for innovative solutions: 59% offered some kind of ideas bonus, compared to 26% of entrepreneurs.

If a business relies on recruitment and alliances to access creative resources, what does that say about its ability to generate and retain homegrown innovators? If you want your company to become a market leader, reflect on that question.

If you want to grow, you need to build a culture of innovation, using an approach that suits your business.


Finding a structured approach

Innovation needs to be a measurable, focused activity. There is nothing wrong with innovation “for the sake of it”; many of the best ideas emerge that way. But to sustain its growth a business needs to find ways of making innovation a managed process.

Most entrepreneurs (69%) said their approach to innovation was “unstructured and free-flowing”. The general corporates gave the opposite answer: innovation was “structured and managed”, most of them (65%) said.

Both groups wanted to develop a pipeline of innovations, and to establish a scaleable process for developing and exploiting new ideas. As companies grow and mature, this challenge doesn’t get any easier.

If you want to grow, you need to make innovation a focused activity.


Despite these key differences, we found a lot of agreement on just how hard it is to innovate. Both groups said their efforts were hampered by a lack of time, resources and capital. They each struggled with the challenge of turning fresh ideas into bottom-line profits. And they agreed it had become harder to keep on innovating as their businesses had grown and become more complex.

You can read more about our survey of entrepreneurs in our report Connecting innovation to profit: five key insights from the world’s leading entrepreneurs.

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