21Percent of Organizations Achieve Their Innovation Goals, as Many Challenges Stand in the Way

NTT DATA 2023 Innovation Index reveals what the most innovative companies do differently to succeed

96% of executives believe innovation — the development of new processes, products or services that increase business value over existing offerings — will be a primary source of achieving growth over the next two years. However, according to NTT DATA’s 2023 Innovation Index research findings only 21% of executives definitively met their innovation goals as reported in the research of 1,000 North American executives across a wide range of industries and company sizes.

The NTT DATA report, “Innovation Index 2023: How North American Organizations are Achieving Growth, Value and High Performance,” explores the primary drivers of innovation, and where organizations focus their resources to support innovation.

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“A failure to achieve innovation goals leaves organizations at a disadvantage,” said Tanvir Khan, Chief Digital and Strategy Officer, NTT DATA Services. “When faced with big tech leaps like generative AI, most organizations are ill-prepared to handle or implement this or other technologies into existing infrastructure to reap the full benefits. What I think is most critical is the speed of adoption of these new technologies. Waiting is not an option. If you wait, you’ll be playing catch-up.”

Five Significant Challenges Hinder Innovation Initiatives:

• Data Challenge: Innovation depends on data to power technologies like predictive analytics and generative AI, but only 22% of organizations trust their own data. Nearly half (46%) of organizations don’t use data to gain insights or make decisions because a whopping 72% don’t consider their data a strategic asset.
• Workforce Challenge: Organizations need top-shelf talent and skills to innovate, but the number one challenge for both innovation and data capabilities is lack of employee skills. 88% say lack of employee skills holds back innovation efforts. And 43% (a three-fold increase from 16% in 2021) say lack of employees with needed data analysis skills is their biggest challenge for using their data. Furthermore, organizations are not investing enough to build data capabilities for their workforce:
  • 44% are reskilling existing resources
  • 42% are enhancing the extended workforce through contractors and service providers
  • 33% are recruiting new employees

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“It’s not a winning strategy to rely on the marketplace to change the skills in your workforce,” said Kim Curley, Vice President of People & Organization Consulting, NTT DATA Services. “All of us — from the highest level of leader to the folks early in their careers — need to be learning constantly. Investing in-house is a no-brainer.”

• Technology Modernization Challenge: Technology is the backbone of innovation initiatives, but 86% of executives say their technology is outdated. Outdated IT infrastructure is a barrier to:
  • Effectively using data (35%)
  • Delivering high-quality customer experiences (32%)
  • Providing exceptional employee experiences (31%)
• Customer Experience (CX) Challenge: Customer experience drives business growth, but when we asked what hinders their CX efforts, executives listed in order:
  • Inefficient processes (40%)
  • Lack of resources to deliver products and services on time (37%)
  • Rapidly changing customer demands (34%)
  • Outdated IT (32%)

Organizations are not performing in innovation and speed to market either, both critical elements for CX. 54% said they were average or below average in product and service innovation and 63% said the same for speed to market.

• Leadership and Culture Challenges: Leadership, accountability and cross-functional collaboration can go a long way in driving a culture of innovation, but:
  • 78% of executives say poor organizational culture holds back their innovation efforts.
  • 58% rate the level of their organization readiness in culture as “weak” or “mixed” as it relates to fostering innovation.
  • 40% report that their culture is not conducive to fostering enriching employee experiences and retaining talent.

Meet the Innovators

The study also identified a select group of organizations as being more advanced and mature in innovation systems and infrastructure, leadership, culture and digital customer experience. These “Innovators” (11% of survey respondents) are exceeding expectations from innovation investments compared to the rest of the market. Interestingly, the Innovators believe that using new technology to create a new market or disrupt an existing market will achieve the biggest impact for their organizations. This is a different, more aggressive view from the majority of executives who believe innovation that builds on past successes (gradual, incremental, and significant innovation) will produce the best ROI for their organizations in the coming two years. The higher-risk bets that Innovators take pay off with higher revenue growth, profit and innovation ROI compared with the rest of the organizations:

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• Innovators are more profitable: 54% more Innovators achieved net profit margins of 10% or greater than the rest of the market.
• Innovators grow faster: 38% more Innovators achieved growth rates of 10% or greater than the rest of the market.

• Innovators exceed ROI expectations: 64% more of the Innovators Group exceeded senior leadership expectations on investment returns for innovation over the rest of the market.

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