Top 5 innovation killers in GCC, and what to do about them

Corporate managements in the Gulf need to take more risks and develop staff to think creatively, according to a new survey designed to help companies stop wasting their best ideas and flushing hundreds of billions of dollars down the drain.

Announced in Abu Dhabi by PA Consulting Group, the report highlights an overwhelming view that the top managements of corporates in the UAE, Saudi Arabia and Qatar may not be nurturing innovation.

It says that companies in the three Gulf countries polled (as part of the 15 countries surveyed) are not big risk-takers when it comes to innovation, and only about a little over a quarter (27 per cent) is striving to become pioneers or pursuing risky but high potential innovations.

The research identified five common ‘innovation killers’ that are stopping organisations from realising the potential of their innovation activity.

These are:

•        Fear of backing high potential risky innovations

•        Lack of focus and a clear innovation strategy

•        Failure by organisations to develop and commercialise their best ideas at pace,

•        Difficulty in measuring ROI

•        Reluctance to invest

The overriding message of the survey of 750 senior executives, spanning 15 countries and nine sectors is that innovation, one of the key factors that determine productivity levels, is broken, the group said in a media statement.

“Seven years on from the global financial crisis, many executives still refuse to invest in projects that do not guarantee a strong ROI [return on investment],” said Jason Harborow, Head of PA Consulting Group, Middle East and North Africa.

“Yet these tight expenditure controls are actually stifling future growth by preventing potentially brilliant ideas from making it to market,” he added.

Innovation, said Harborow, was an add-on for regional firms, not a critical component of the growth equation.

“Taken together, it [the survey] points to a deeply ingrained culture of risk-aversion where cost-cutting almost always takes precedence and investment in innovation is viewed as a ‘nice to have’,” said Harborow.

So what can be done to put the global and indeed regional corporates back on the innovation track?

“Our overall view is that companies need to shake up the board and bring in new skills and talent, create a Chief Innovation Officer role; focus on value, not profit and loss; make innovation a whole-company priority and incentivise employees by making innovation part of their total reward,” said Harborow.

“We think getting innovation right, and preventing brilliant ideas failing for avoidable reasons, can solve the productivity crisis,” he noted.

According to 67 per cent of survey respondents in the Gulf, less risky types of incremental innovation deliver greater value to them than breakthroughs. Only 22 per cent say they talk more about innovation than they do it.

“These figures are encouraging, but a low failure rate does not mean the best ideas are being developed in the Gulf,” said Harborow.

“Managers in the region appear to acknowledge the need for more creative approaches, with 78 per cent saying they need to develop staff to think more creatively.”

The study is based on an international survey conducted between March and May 2015 involving 750 senior business and government executives from Denmark, Germany, the Gulf (Qatar, Saudi Arabia and UAE), Mexico, the Netherlands, Norway, Sweden, Austria, Belgium, Luxembourg, Switzerland, the UK and the US.

Private sector respondents comprised 75 per cent of the total, and of these, 47 per cent had annual revenues between $100 million and $1 billion, and 32 per cent had revenues exceeding $1 billion.

The group estimates that UK organisations alone are flushing Dh1 billion down the drain every day of the year (£64.7bn per year) on innovation failures. This amount is the equivalent of over half of the EU’s annual budget of €145bn, and the opportunity cost in terms of lost revenue will be many times this figure, it notes.

Gulf survey scorecard

Main survey findings from respondents in UAE, Saudi Arabia and Qatar

16% - Have seen a brilliant idea fail for reasons that could have been avoided 27% - Are striving to be pioneers 60% - Are developing digital capabilities to disrupt or lead their sector 38% - Say innovation has, at times, proven to be a costly failure 22% - Talk about innovation more than they do innovation 35% - Say people use ‘innovation’ to describe different things 4% - Provide rewards or bonuses to staff to encourage innovation 0% - Strongly agree their leadership is good at nurturing innovation

Top barrier to innovation (44%): Difficulty in measuring ROI Top strategy to improve innovation (78%): Developing staff to think creatively Top area for investment (49%): Product and service development

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