Economy affecting innovation plans, survey says

Thursday April 16, 2009
Written by
BOSTON, Mass. - Economic concerns continue to weigh on many companies' innovation plans, according to the Boston Consulting Group's (BCG) sixth annual global survey and report on innovation, Innovation 2009: Making Hard Decisions in the Downturn.

The survey revealed that 14 percent of companies plan to reduce innovation investment in 2009; and the percentage that plan to increase spending is at its lowest point in the survey's history - 58 percent, down from 63 percent in 2008. North American executives were particularly bearish: a sizable 21 percent said their company would lower spending. Asia-Pacific companies have the most aggressive plans, with 73 percent planning to increase spending.

But still, innovation remains a key focus for the majority of companies. Sixty-four percent of the more than 2,700 executives who responded said they consider innovation a top-three strategic priority; one critical to their company's long-term competitiveness. Many companies, however, are changing the focus of their innovation efforts by strengthening their emphasis on innovation aimed at lowering production costs.

"Companies remain firm believers in the importance of innovation, but they can't ignore what is happening in the economy," says BCG senior partner James P. Andrew, lead author of the report. "So they are increasingly orienting their innovation efforts toward the here and now, emphasizing immediate sales and the reduction of costs and risk. And, for the most part, those moves make sense."

Andrew believes, however, that some companies will overreact and adopt too defensive a stance. "Cutting your commitment to innovation is always risky, but the effects often do not show up in the first year. We're really urging companies to take the opposite approach, where possible, and be opportunistic. Companies can make offensive moves in the downturn that will position them far ahead of their competitors when the recovery comes."  
The report, which was based on a global survey of executives that BCG conducted in partnership with BusinessWeek in late 2008 and early 2009, addresses these and other topics central to the pursuit of effective innovation, including the establishment of meaningful objectives and the development of best-practice tactics and capabilities. For more information, visit www.bcg.com.

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