The world's most innovative companies expect to grow by more than 60 percent over the next five years, adding a total of more than US$250 billion in new revenues as a result of sophisticated approaches to innovation in all areas of their operations.
A new PwC study, Breakthrough Innovation and Growth, released at a meeting of the World Economic Forum, found a direct correlation between excellence in innovation and superior revenue growth.
According to the study, the top 20 percent of innovators worldwide say their growth rate over the next five years will be double the global average and three times higher than that of the least innovative companies.
Companies are fundamentally changing the way they innovate, the study found. Innovation has moved beyond products and services and now regularly encompasses business models, operating systems and customer experience. Additionally, collaboration with both internal and external partners has become vital to innovation efforts.
“Innovation has gone mainstream. Five years ago, expansion into China was seen as the most powerful source of growth for just about every business," says David Percival, PwC's Global Client Innovation Leader. "Now, companies see that innovation presents them with greatest potential for growth.”
While innovation was once thought to be the province of technology and consumer goods companies in developed economies, it has now become a key driver of growth for companies regardless of sector or geography.
The top tier of innovators identified in the study come from a diverse range of sectors from healthcare to automotive to financial services, and from India, to the Netherlands and Brazil.
“Business leaders must understand that there are already innovation pioneers in their industry and around the world. Leaders must be ready to step up to disruptive challenges from their more innovative competitors,” said Robert Shelton, PwC's Global Innovation Strategy Leader.
The study found that successful innovation is dependent on well-developed strategies. Nearly 80 percent of top innovators said they had well defined innovation strategies, compared with less than half of among the least innovative companies.
The most innovative companies treat innovation in the same way as any other business or management process, the study found. Just one in five of the most innovative companies described their approach to innovation as ‘informal,’ compared with about one-third of the least innovative.
Executives from the most successful companies say they devote more time to innovation, have more incentives to collaborate and are more likely to be supported by senior management.
The study found major differences between the most and least innovative companies.
Among the findings is that the most innovative companies anticipate 62.2 percent revenue growth over the next five years compared with 20.7 percent for the least innovative.
The combined revenue growth of the most innovative companies is forecast to be US$252 billion over next five years compared with US$93 billion among the least innovative.
Two-thirds of the most innovative companies say innovation is a competitive necessity compared with 19% among the least innovative.
Nearly 80 percent of the most innovative say they have a well-defined innovation strategy compared with 47 percent of the least innovative.
The most innovative companies are almost twice as likely to be targeting breakthrough and radical innovations.
The most innovative companies are more likely to use corporate venturing to drive growth: 13 percent vs. 7 percent. The study also finds that the most innovative companies use social media more often to collaborate externally: 67 percent vs. 39 percent. Meanwhile, the most innovative are less likely to manage innovation efforts informally: 21 percent vs. 32 percent.