In the new world order today, staying relevant using effective business strategies is sine qua non for CEOs. In order to run a successful organisation, business leaders should intuit the needs of an ever changing environment and have the ability to improvise with agility to meet the growing needs. Given the current volatile and, in some cases, saturated market business scenario, innovation is more vital than ever to stay ahead of the curve and ensure businesses don’t suffer. The fast-evolving customer profile and shifting demands along with the dire need to maintain a differentiation in the market, is leaving CEOs with no choice but to innovate.
India is at a vantage point of expanding its economy. It needs to maintain the coveted position of being one of the most successful emerging markets of the world. Companies across sectors possess the power to convert this rhetoric into reality. Innovation will be what catapults them to success. With 93% of Indian CEOs mentioning innovation as one of the top three issues on their personal agenda, in KPMG’s Global CEO Outlook Survey, 2016, it has been firmly established as the path to be followed. As for the areas that require innovation, 62% of CEOs surveyed mentioned that improvement in product/service offerings and increased sales are the two key focus areas for innovation.
So what do CEOs mean when they say their focus is on innovation? Is it higher R&D spends, inorganic growth, leveraging technology to innovate the business model or create new categories? The answer is yes, to all of the above. The Indian CEOs, surveyed, said they were placing greater emphasis on investing in innovation while also looking at new ways to innovate. In an ever-changing business environment, CEOs are typically concerned about evolving customer needs and their preparedness to meet the new expectations. Nearly 84% of Indian CEOs mentioned their concerns about relevance of their products/services in the next three years, 92% were concerned about their organisation’s pace of staying on top of new services and products, and 91% highlighted the differing needs of millennials and their impact on organisation’s business. The dynamic operating environment is likely to have an even bigger impact on business models of organisations in the next three years. As a result, innovation will no longer be a choice, but mandatory for sheer survival.
It’s fairly clear from this year’s CEO Survey that business transformation through technology adoption and innovation will be on top of their agenda. In fact, 93% CEOs mentioned innovation is now high up on their personal agenda. There is a strong emphasis on product innovation. In order to stay relevant in the market, companies should be nimble, move from new product idea to development of product, and then to launch. The CEOs should consider the fact that a brand remains ‘new’ for about two years. Due to long-purchase cycles a good time to re-launch a product or reinvent a business is after three years of its original launch.
CEOs are likely to grow their company’s innovation quotient. This could include adoption of technology to build efficiencies, connect to customers, build relevant products/services, and even acquire/partner with other players to strengthen core competencies. In the survey, 45% of the Indian CEOs consider ‘connecting in a beneficial way with start-ups’ an important factor of innovation. When these two entities come together, startups can successfully proof concepts, while large firms can scale them better. However, many CEOs still shy away from investing in adequate research and development, which could result in enhanced innovation. So in a way, innovation is still largely reactive in our country. Only 48% of them believe their organisation has adopted innovation in all their business functions. What these leaders fear most is an unfavourable return on investment (RoI) that may shrink their sales and market share. It’s time they shed this inhibition and embrace innovation as a survival tactic.
Business leaders need to understand that while innovation may not be easy, it isn’t impossible either. An ideal way to adapt innovation is to align it with the organisation’s business goals to fulfil a need gap. The advantage of aligning innovation and business objectives is that both secure equal value and get promoted broadly within the organisation, thus getting infused into its business culture. The responsibility then lies with those who are innovating to develop new products and services that suit the corporate goals as well as the market conditions. In fact, the world is rife with examples of how innovation can disrupt and create leaders. Take for example, social networking websites and application based cab services, both are leading examples that highlight how innovation changed the way people did things. They both cater to the new-age consumer’s demand and created platforms that allowed them to simplify an important aspect of their lives.
In a natural order of things, every business or organisation learns from its consumers, and, in many cases also from its previous mistakes. Increasing one’s market share and earning profits is the bottom line for every CEO who is running a successful business. However, the profit graphs may not necessarily soar in a ‘slow-growth market’ environment. During such times, smart investments made in innovation, help make provisions for a stable, and in some cases even a profitable future.
The author is Akhil Bansal deputy CEO, KPMG, India. Views are personal