Faculty & Research
Faculty & Research
Is innovation crucial to a company’s success? Not everyone thinks so
By Juan Fernandez, Emily David, Sophie Chen and Maria J. Puyuelo
Innovation is the key to success. Innovate or die. Innovation, not emulation. Phrases like these are repeated daily in boardrooms, news broadcasts and articles across the world. The importance of innovation in today’s interconnected global economy is emphasised so strongly and widely that it has almost become an accepted truism. And, yet, it turns out that not everyone believes that they need to innovate to succeed – or even to survive.
In our recently published CEIBS 2021 Innovation Survey, we aimed to gauge the opinions of leading business figures about the role of innovation in their organisations, how it manifests itself, what benefits it brings, and whether or not they consider it an important factor in driving their company’s success.
To this last point, an overwhelming majority (96%) responded that they did indeed think that a culture of innovation was critical to the success of their organisation. With a majority that large, it begs the obvious question: why don’t the other 4% feel they need to innovate?
To offer some context, our survey collected answers from 950 respondents holding a wide range of roles in companies spanning a variety of industries. The largest sector represented was industrial (25%), with services, tech and telecoms, consumer goods, construction/real estate, healthcare, and financial services all contributing between 8-16% each. 71% of the respondents’ companies were Chinese-owned, and 15% of them were state-owned companies (SOEs).
When it came to the 4% – those who thought that innovation was not a crucial factor for their ongoing success – the group was diverse, but still largely representative of the overall sample. Most worked for Chinese-owned companies in China (70%), though 19% worked at foreign-owned companies located in China, and 12% worked in companies outside of China. Of the Chinese-owned companies, 80% worked for private companies, 17% worked for SOEs, and 3% worked for a hybrid or mixed-ownership company.
As for their industries, most worked in manufacturing (21%), services (21%), consumer goods (14%), or energy firms (14%). A much smaller proportion, however, worked in sectors that have stronger reputations for being innovative – specifically, technology and telecommunications (12%), healthcare (7%), real estate and construction (5%), and financial firms (5%).
We also found that middle- and lower-level managers (as compared to upper-level managers) were slightly more likely to suggest that innovation was not a critical factor for success.
Anticipating that most respondents would agree that innovation is important for driving success, we included a section in our survey asking those who disagreed with this notion to explain why. Their answers (though based on subjective opinions rather than hard empirical data) provide some interesting insights into the various mind-sets that go against the ‘prevailing wind’ of aspiring to be innovative in modern business.
One common refrain was that innovation was not as important as preserving tradition, maintaining consistency, and reinforcing the prevailing organisational culture that had been honed and perfected over many years. One respondent stated, for example, that, “Culture is the result of gradual and organic development; innovation, in contrast, is more akin to artificial grafting,” while another replied, somewhat astonishingly, that, “The business model of my industry has not changed for four hundred years.”
Other respondents highlighted the costs and potential risks of failure associated with pursuing innovation. One, for example, said that hard work was more likely to produce success, adding that, “Pointless innovation will only increase costs and the probability of failure.” Still, another pointed out that, “It’s not that innovation is not important, but sticking to tradition is less risky.”
Others said they believe that innovation isn’t suitable for or a consistent priority for many firms when compared with the need to survive and establish connections. For example, one respondent commented that, “In China, connections (renmai/guanxi) are the most important factors.” Yet another stated, “Small businesses rely mainly on the boss’s ability and vision, and the corporate culture is just about the boss’s style.”
Through these insights, we are reminded that while innovation might currently be in the spotlight, it is not the only perceived path to success. For a small but statistically significant minority of professionals, innovation consistently takes a backseat to leveraging ‘tried and true’ commercial techniques and the cultivation of valuable connections with customers and potential partners. This, for a minority of companies across various sectors, is perceived as a more reliable approach to ensuring current and future successes.
Juan Fernandez, Emily David and Sophie Chen are professors at CEIBS. For more on their teaching and research interests, please visit their faculty profiles here. Maria J. Puyuelo is a Ph.D. candidate at the University of Zaragoza (Spain).