With tech startups rapidly eating into traditional sectors, large organisations face an increased pressure to innovate. The challenge is that traditional innovation approaches are broken. A recent study revealed that only 5% of R&D staff feel highly motivated to innovate. In certain sectors, more than 85% of new products fail and an overwhelming 90% of companies consider they are too slow in launching new products and services.
The weaknesses of traditional innovation approaches have led some organisations to explore different avenues and seek new inspiration. These organisations have launched innovation centres in major technology hubs with the explicit mandate to accelerate digital innovations. These innovation centres, comprising teams of people and often physical sites, are established in a global tech hub. The goal is to leverage the ecosystem of startups, venture capitalists, accelerators, vendors, and academic institutions that these hubs provide.
Major global technology hubs are the preferred destinations for setting up innovation centres. 60% of companies that have set up these centres have a presence in the Silicon Valley but many more hubs are emerging – the top 10 cities in our analysis represent only 33% of total innovation centres. The US and Europe have the largest share with 29% of total innovation centres closely respectively, followed by Asia at 25%. Penetration varies significantly between sectors; manufacturing is a clear leader at 58%, but despite facing increasing pressures from digital disruptions, Financial Services lags at only 28%.
It is extremely challenging to make a success of innovation centres. Success factors include clarity on the role of the innovation center, governance for innovation implementation, and a strong connection with the rest of the business.