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Analysis of BCG Report on New Product Development and Innovation

Analysis of BCG Report on New Product Development and Innovation

Analysis of BCG Report on New Product Development and Innovation

   The Boston Consulting Group’s (BCG) report found that most of the innovation occurred in the digital environment. The report states that 11 of the top 50 companies and 7 of the top 10 companies were digital natives. Also, digital technologies were influential in the success of most of the other companies included in the report. The report highly emphasizes digitalization in the success of companies in multiple industries. As such, the report focuses on the digital aspect of innovation to provide information on how companies can leverage digital technologies to improve their innovativeness and product development processes. The BCG Group (2018) noted that the top 50 companies in 2018 were highly similar to the same list in the 2017 most innovative companies. Some of the takeaways from the report are that Uber and Alibaba shot up the list and entered the top 10 list, thus these companies had experienced drastic improvements in revenue generation potential or efficiency. Other entrants into the top 50 list included Marriott, Orange, Cisco Systems, SpaceX, and Airbnb. Regionally, Europe appears to have come out of its economic downturn since 27 countries featured in the report were from Europe. North America continues to be the most represented region in the top 50 rankings. The report emphasizes that digitization can affect an entire enterprise, making it a difficult process to engage in. One of the most revealing findings in the report is that more than a third of the survey respondents stated that they did not think that the utility of digitalization improved their innovativeness. The BCG report suggests that one third is unaware or partially aware of the utility of going digital to the innovation process. However, other factors might be limiting weak innovators from fully embracing digitization in their business processes.

    Big data analysis was the major innovative process cited in the BCG report. Multiple companies in different industries, including the financial services, entertainment, media, and energy companies have engaged in big data analytics to improve their business processes. Since the proliferation of the internet and the development of computing power, the internet has amassed significant amounts of data on consumer behavior that could be useful if converted into information. Consequently, companies have sought big data analytics to make sense of the amorphous data to acquire competitive advantage over other companies or to obtain information that could reveal a new product or service innovation for a salient market need. The insights obtained from big data analytics can lead to the development of disruptive products, services or business models. Disruption refers to the process by which a new product, service or business model emerges, which completely changes an existing industry environment, thereby displacing the dominant market players. The major disruptors in the BCG report were Alibaba and Uber; they interrupted their business environments through innovative technologies, showing the importance of understanding and responding to emerging trends, tastes, preferences, and needs in the marketplace (The BCG Group, 2018). Big data analytics is a tool designed specifically to ensure that companies are in tune with their operating environment to acquire the informational assets available in the marketplace. According to the BCG report (2018), over half of the respondents reported using big data analytics to improve their business processes. However, many companies in different sectors are still struggling with big data analytics. They do not have the competencies to implement it effectively to achieve innovativeness, as is apparent in the ranking of the biggest increases in activity and innovations.

    The activity and innovation rankings show that supporting capabilities, marketing, and digital design are the least important business processes for companies included in the 2016-2017 report. On the other hand, companies placed significant emphasis on big data analytics, technology platforms, and new products development. While the three highest ranked activities and innovations are crucial to business success, the BCG Group (2018) cited that digitalization should be enterprise-wide. This assertion was reported at the beginning, but it does not feature prominently as a major realization. The importance of an enterprise-wide application of digitalization is apparent in the seemingly contradictory findings contained in the BCG report. A third of the respondents surveyed stated that they did not find digitalization useful in their innovation and product development despite an overwhelming emphasis on digitalization as the future of innovation among the BCG respondents, which is a contradiction (The BCG Group, 2018). The major reason for the contradiction is the overemphasis on one extreme of the activities and innovations. Equally important are supporting capabilities, marketing, and other processes that support the core product development and innovation process. The failure of a third of the companies to realize the benefits of digitalization in product innovation could be attributed to focus on some elements of the enterprise while ignoring others that they consider unimportant. 

    The literature on process engineering shows that failure to focus on aspects of the enterprise in innovation and focusing only on the core innovation process could lead to failure. Varma, Reklaitis, Blau and Pekny (2007) stated that management science and operations research used to focus “on disparate processes and functions within the enterprise” (692). The term disparate processes means that researchers in the aforementioned fields used to consider business processes as discrete elements rather than part of an enterprise whole. Consequently, there emerged concepts such as continuous manufacturing systems, scheduling and planning in batch, and upstream research and development pipeline management (Varma, Reklaitis, Blau & Pekny, 2007). These concepts do not consider the systemic nature of the organization, which is considered as a collection of disparate elements that could be optimized separately to lead to innovative product development. However, research evidence demonstrated that an enterprise-wide optimization of business processes is a better view of organizational processes. Research and organizations have recognized the utility of viewing organizations as a system, thereby striving to optimize organizational systems rather than particular processes during innovation (Varma, Reklaitis, Blau & Pekny, 2007).  Evidence from the BCG report shows the importance of thinking of organizations as systems in innovation rather than a collection of disparate elements.

    The companies that considered supporting capabilities, marketing, and digital design as the least important digital expectations and activities were also weak innovators. On the other hand, the companies that highly valued these three activities and expectations were strong innovators (The BCG Group, 2018). The explanation for the BCG report finding is the systemic view of the organization. Weak innovators highly undervalued some business processes because they were unconnected to the core innovation processes such as developing new products and big data analytics. However, as Varma, Reklaitis, Blau and Pekny (2007) found, enterprise-wide cross-functional coordination is crucially tied to the improved performance of growth projects, sustainability initiatives and the entire enterprise. The researchers define cross-functional coordination as “the integration of strategic and tactical decision-making processes” concerned with resource deployments, internal and external financial and inventory flows (Varma, Reklaitis, Blau and Pekny 2007, p. 692). Varma, Reklaitis, Blau and Pekny (2007) proposed a network model that includes all aspects of an organization in the R&D process, including supporting functions. A network-enterprise model of organizations has acquired significant support in the research literature over the years.

Using case studies and a network model conceptual framework, Varma, Reklaitis, Blau and Pekny (2007) reinforced the notion that all organizational processes need to be integrated to achieve optimum efficiency in growth, sustainability initiatives and enterprise performance. The integration helps organizations to function as a system, leading to the optimization of all business processes in the internal business environment because they are seamlessly integrated with each other. A change in one part of the system, such as financing, creates a noticeable change in another part, such as R&D. Consequently, it is easier to perceive deficiencies in a systemic organization and fix it to improve product innovation and development.

Additional findings on the relationship between the systemic view of organizations and performance come from sustainability studies. Gaziulusoy, Boyle and McDowall (2010) reported an increasing awareness that for success in sustainability, there should be coordinated efforts at the organizational, sociocultural, and institutional levels. The researchers refer to the massive mobilization of all aspects of society in sustainability initiatives as the system innovation for stability. In such an approach to sustainability, all the actors relevant to sustainability initiatives should be considered important to the success of the initiatives (Gaziulusoy, Boyle & McDowall, 2010). Similarly, the weak innovators in the BCG report need to understand that even the seemingly mundane business processes within their organizations are important in product development and innovation. Pollock and Williams (2008) emphasized the systemic nature of organizations by comparing organizations to software. Organizations as software was the paradigm used in developing enterprise resource planning (ERP) systems, which are programs used to manage enterprise-wide business processes. The enterprise-wide approach in business software development has improved the management of back-office business functions that support other business processes such as innovation.

            The analysis of the 2018 BCG innovation report demonstrated that major players in the top 50 companies relied heavily on technology to achieve competitive advantage. They included companies such as Uber and Alibaba, which had leveraged digital business models to create new opportunities and disrupt their respective market and consumer segments. Digitalization was a major factor in developing disruptive services, products, and business models because of tools such as big data analytics that allow companies to acquire information from the mass of data available online and within their internal business environments. However, some companies reported low success in digitalization for innovation. Their innovation processes were not system-wide; thus, they did not optimize all areas of their enterprise. The report showed that strong innovators had a relatively balanced view of the organizational processes, even for business processes that were considered mundane by the weak innovators. Research cited in the analysis demonstrated that a systemic enterprise-wide view of the organization is a better perspective in innovative processes that could improve the implementation of digitalization to improve product development and innovation among weak innovators. 

References

Gaziulusoy, I., Boyle, C., & McDowall, R. (2010). System innovation for sustainability at

product development level: a scenario method and a workshop process. Retrieved from

https://openrepository.aut.ac.nz/bitstream/handle/10292/3700/Gaziulusoy_Boyle_McDowall_SystemInnovation_2010_paper.pdf?sequence=2&isAllowed=y

Pollock, N., & Williams, R. (2008). Software and organisations: The biography of the

enterprise-wide system or how SAP conquered the world. Routledge.

The BCG Group. (2018). The Most Innovative Companies 2018.  

Retrieved from Vttp://image-src.bcg.com/Images/BCG-Most-Innovative-Companies-Jan-2018_tcm9-180700.pdf

Varma, V. A., Reklaitis, G. V., Blau, G. E., & Pekny, J. F. (2007). Enterprise-wide modeling &

optimization—An overview of emerging research challenges and opportunities. Computers & Chemical Engineering, 31(5-6), 692-711.

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