60% of Companies Plan to Increase Innovation Budgets Due to COVID-19, But Threatens Opportunities

A recent study reveals longstanding innovation operation issues create a deep-seated risk to corporate growth performance.

While innovation has grown as a result of the COVID-19 pandemic, internal innovation operation issues threaten to derail future growth - resulting in wasted resources, capital, and revenue opportunities for corporations.

This data results from a poll by Wellspring, an innovation solution organization, in their third annual R&D and Innovation study.

The study includes over 65 senior decision makers - C-Suite executives of U.S. and U.K. healthcare organizations with revenues of at least $1 billion - who were polled to examine trends that have dominated the healthcare, pharma and medical device corporate innovation sector during the COVID-19 pandemic.

“The pandemic has driven an exciting shift in innovation interest among both corporate boardrooms and the general public,” said Robert Lowe, CEO and co-founder of Wellspring, in a release. “Unfortunately, per our findings, it has also exposed what many observers of corporate innovation have known for years - that a vast majority of today’s corporations simply fail to employ many of the necessary habits that translate into tangible, long-term innovation success.”

COVID Boosts Innovation Ambitions

The COVID-19 pandemic represents one of the most disruptive and unsettling periods in corporate innovation history. This has resulted in widespread efforts by healthcare, pharma and medical device corporations to overhaul their innovation operations in hopes of responding effectively to a myriad of supply chain disturbances, demand explosions, digital transformation needs, and other issues.

For example, according to this year’s study:

  • 60% of respondents reported that their corporate innovation budgets were expected to increase – with many respondents saying they expected a major bump in investment. This statistic dwarfs those companies anticipating budget cuts by a whopping six-to-one ratio.
  • 57% of respondents said that they are interested in being leaders and disruptors in innovation vs. following the pack.

Execution Threatens to Derail Innovation

Despite the promise of growing innovation ambitions, many healthcare, pharma and medical device corporations lack the cohesive approach needed to drive material success from their investments, according to the release. Of particular concern is that these execution related missteps are wide-ranging and interconnected - spanning from C-Suite buy-in and coordination issues to poorly constructed innovation metrics and measurements.

C-Suite Disengagement and Disconnect

Only 6% of C-suite leaders believe that a lack of C-suite engagement in innovation is a “very significant” impediment to Innovation Ops success, versus a third of VPs and senior innovators at every other level from Manager to VP.

“All too often, there is a disconnect between the C-Suite and other innovation leadership, whereby C-Suite leaders simply adjust innovation strategies and then move on, leaving other Innovation Ops leaders to deliver on goals with minimal oversight” said Lowe. “As a result, employees fall back into old, ineffective habits and processes, instead of driving innovation forward.”

Metrics Not Fit For Purpose

Measurement of innovation remains one of the biggest challenges for Innovation Ops leaders in healthcare, pharma and medical devices, with many still relying on a grab bag of KPIs versus an overarching measurement approach. Furthermore, the KPIs that are in place do not accurately reflect innovation success. For example, 43% of respondents said that a straight project-by-project financial reckoning was their most common innovation measurement metric -- with nearly a fifth saying it was their only meaningful innovation measure.

“The time has come for companies to rethink the way they measure their innovation progress, yet many still rely on metrics that are simply not appropriate for measuring innovation,” said Lowe. “This has resulted in confusion among decision-makers, which has created a longstanding climate of pulling the plug on promising innovation initiatives too early -- or investing in safer yet less impactful innovation projects.”

Disjointed Innovation Priorities

Conflicting on-the-ground priorities for Innovation Ops teams also interfere with success. While an overwhelming proportion of respondents buy into their firm’s top-level innovation strategy, their on-the-ground efforts often devolve into parochial concerns and short-term fixes. For example, breakaway growth companies regularly cited innovation priorities such as capturing new markets or novel whitespace (76% of respondents) and introducing disruptive innovations (59% of respondents) as important or very important. However, these two outcomes were the least important among all other companies.

“Having lofty ambitions is great, but without long-term strategic priorities that can be pursued deliberately across a firm’s Innovation Ops, the chances of success are virtually nil,” said Lowe. “Better orchestration of strategic innovation programs needs to be a foremost concern for corporate decision-makers, especially as they plan to ramp up innovation investments post-COVID.”

Disorganized Approach to Collaboration

Nearly two-thirds of respondents said that a lack of internal coordination between innovation groups was either a “very significant” or “somewhat significant” impediment to innovation success - making it the number one obstacle according to respondents in this year’s study.

“It would seem to be common sense to make inter-department collaboration a priority, but unfortunately, it is not – which is wreaking havoc on both Innovation Ops performance and financial outcomes,” said Lowe. “As innovation departments expand, many corporations now have at least several disparate innovation teams, which all too frequently results in miscommunication and disorganization. If left unaddressed, corporations are likely to squander their stepped-up innovation investments at a record pace.”