Study: Regardless of Industry, Innovation is Key to Growth
McKinsey and Company recently surveyed executives representing more than 1,030 companies around the globe, asking each to identify the biggest factors that determine an organization’s capacity for growth.
Talent ranked high. So did relationships with both business partners and customers. Operational excellence was also frequently cited as a major contributing factor to potential growth. But one component alone ranked among the top three for every respondent, regardless of the industry they served — healthcare, financial services, technology, consumer goods, energy and others — the ability to innovate.
For some industries, the power of innovation carried more weight than others. Not surprisingly, the ability to innovate was the single biggest factor in determining growth potential in the healthcare and high-tech sectors. Meanwhile, the ability to innovate slipped to the number three slot in financial services, which may not be surprising given the financial services’ dependence on legacy technologies and its inherent aversion to risk.
However, when averaged across all seven industries included in the survey, innovation ranked highest in determining an organization’s potential for growth.
As McKinsey determined, “Companies that build new businesses and develop new offerings, processes, or business models are better able to capture growth opportunities and hedge against disruption in a highly uncertain business environment.” But simply being able to innovate may not be enough. McKinsey also found that what helps determine which organizations emerge as “top economic performers” is their “comprehensive approach to innovation and growth — both within and outside their current industries or geographies.”
Venturing Beyond Business Models
Those respondents that McKinsey classified as “top performers” were also the ones that said they were treating new offerings as their “number-one investment priority for accelerating growth over the next 12 months.” Additionally, top performers were also “more than 63 percent more likely to innovate at scale by building or acquiring new businesses outside their current industries and 50 percent more likely to expand geographically compared with their lower-performing peers.”
Worth noting: McKinsey found that about 80 percent of corporate growth emerges from the organization’s core industry, yet the data showed that innovation is still critical to that growth. “While overall industry momentum and commercial levers such as pricing and marketing are critical,” McKinsey’s wrote, “the next two largest factors, noted by 38 and 34 percent of … survey respondents, respectively, are innovation of new offerings within the core business and expanding into new regions.”
The report also looks at companies that found success by innovating outside of their traditional business models. Case in point: Apple, which broke ground in the music industry when it introduced the iPod and launched “entirely new platforms” with the introduction of the iPad and Apple Watch.
Want to know more? Read McKinsey and Company’s full report here.
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