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Economic Recovery Inspires Innovation and Frustration By Robert Shelton November 18, 2009 7:02AM Currently every aspect of business is fair game for reinvention -- revenue and margin models, functional areas, and even the organization itself. The risks are also a lot higher than in the past. With so many moving parts and so much riding on the outcome, it's no wonder executives are anxious that they will miss the target when they execute.   Related Topics Recession Economic Recovery Innovation Virgin Galactic General Electric Latest News Endeavour Inspected for Damage Autism Risk for Kids of Older Mothers Go Online and You Can Save the Planet In Haiti, Relief Gaps Are Spreading U.S. To Form Climate-Change Agency While they continue to slog through the longest economic downturn in decades, companies are no longer making cost-cutting their primary focus. Innovation is now front and center on the corporate agenda, according to a global survey we recently conducted with 65 senior executives from diverse industries. Executives are adding more breakthrough innovations and business model changes to their portfolio to fuel the growth engine for the recovery. Yet our survey reveals that companies by and large are having trouble making innovation efforts work. Executives are struggling to find the right combination of business strategy, operational model, and execution to deliver profitable growth. Why the concern with execution? Currently every aspect of business is fair game for reinvention -- revenue and margin models, functional areas, and even the organization itself. The risks are also a lot higher than in the past. With so many moving parts and so much riding on the outcome, it's no wonder executives are anxious that they will miss the target when they execute. As one executive told us: "Management feels very comfortable about our ability to manage costs -- we have a good track record. We don't have the same track record for organic growth from innovation." In other words, it's harder to innovate than it used to be. There's no magic formula for successful execution, of course. But there is evidence of growing interest in business model innovation, whereas in the past the focus was mostly on product and technology innovation. Roughly one-quarter of the companies surveyed are developing bundled products and services to provide solutions. General Electric, for example, created Power by the Hour, bundling jet engines, financing, fuel services, and operations and maintenance contracts. Bundling products and services creates stronger customer loyalty and improves both revenues and margins. Serving Future Needs: Virgin Galactic An additional quarter of companies is developing B2B offerings, or back-office services, with the goal of improving customers' business performance. These business model innovations typically improve a customer's return on assets by squeezing more out of what they already have. They are potent ways to refresh customer relationships and gain competitive advantage. A further 25 percent of companies are investing in anticipation of entirely new customer needs, such as the space flights planned by Virgin Galactic. Creating the next new thing can be risky, but this type of business model innovation provides rapid growth via entirely new products and services. (continued...) 1  |  2  |  3  |  Next Page >   © 2010 Business Week Online under contract with MarketWatch. All rights reserved.   Tell Us What You Think Your Comment: Also Visit: iPad Info Center Billions of Bytes Mobile Device Now Apple Info Center TopTechWire.com Advertisement  Innovation 1.   U.S. Losing in Clean-Tech Innovation 2.   How To Encourage Small Innovations 3.   'Smart Pedals' Could Stop Crashes 4.   'Airport Scanners Not Intrusive' 5.   Remote Control Could Soon Be You

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