The Boston Consulting Group’s (BCG) 2024 report, Innovation Systems Need a Reboot, highlights a growing gap between the prioritization of innovation and companies’ readiness to achieve their goals. But how to get back on track? How to lead the next transformative innovation wave?
Despite 83% of executives ranking innovation as a top-three priority, only 3% of companies in 2024 are innovation-ready—a sharp decline from 20% in 2022. The slumps were particularly strong across the seven dimensions that focus on how the organisation nurtures ideas and guides them through development to market:
- Ambition: Are there specific and aspirational goals linked to strategy and value creation?
- Domains: Do we focus on a limited number of attractive innovation domains where we have a right to win?
- Governance: Are people and budgets aligned with priorities?
- Portfolio and Performance Management: Is the portfolio rigorously managed, and are innovation decisions and compensation linked to strategy-aligned KPIs?
- Organization and Ecosystems: Is innovation championed by the C-suite, and are there fit-for-purpose innovation teams/vehicles for different types of innovation and different time frames?
- Talent and Culture: Do we have a culture of innovation and is innovation seen as a career accelerator?
- Idea to Impact: Do we have ideation methods that can “see around corners” and processes to explore and scale ideas?
Between 2022 and 2024, median readiness scores on each element fell from the mid-70s to the 50s, which is a sharp decline. BCG identifies key challenges and offers strategies to transform innovation systems.
Key challenges in Innovation systems
Too many organisations lack clear direction in their innovation efforts. The challenges identified are the following:
- Strategic Misalignment
Many companies lack focused innovation strategies aligned with business objectives. Over 52% of surveyed executives cited unclear strategies as a major barrier, leading to inefficient resource allocation and disappointing outcomes.- A global automotive manufacturer reduced its electrification projects after realizing conflicting priorities diluted its efforts.
- Decline in Innovation Readiness
Factors such as talent shortages, risk-averse cultures, and inefficient portfolio management have caused readiness to plummet. Only 3% of organizations scored high in innovation readiness in 2024 compared to 20% in 2022. - Underutilization of GenAI
Although 86% of companies are experimenting with GenAI, only 8% have scaled its use. Organizations struggle with identifying high-value applications and integrating AI effectively.- A healthcare provider piloting GenAI for patient data analysis faced scaling challenges due to legacy IT systems.
Strategies for leading the next innovation wave
Given the significant declines in readiness, it makes sense for organizations to continue their efforts to strengthen the efficiency and consistency of their innovation processes. But that alone won’t be enough to drive superior performance. So how to lead the next transformative innovation wave? Achieving real, exceptional outcomes will require attention to the following critical areas:
- Sharper focus on strategy
Companies must align innovation efforts with their strengths and market opportunities. Focusing on priority areas ensures resources deliver maximum impact.- Nvidia strategically prioritized AI chip development, becoming a market leader by aligning its innovation with the global demand for AI computing.
- Agile methodologies
Embracing agile frameworks allows companies to adapt quickly to market shifts and customer needs. Continuous improvement ensures faster time-to-market.- Spotify uses agile teams to innovate continuously on its user experience, rapidly deploying updates based on real-time feedback.
- Scaling Generative AI
GenAI offers transformative potential across ideation, R&D, and commercialization. Scaling GenAI can optimize processes and unlock new opportunities.- Microsoft’s 365 Copilot integrates GenAI into productivity tools, enhancing efficiency for users while creating new revenue streams.
Recent Examples of GenAI-Driven Innovation
Automating repetitive or low-value tasks has freed up resources for strategic and creative work, allowing organizations to reallocate efforts toward high-impact innovation, which in turn may lead to efficiency gains and revenue growth. Here are some examples:
- Sanofi
- What they did: Sanofi used Generative AI to automate the creation of clinical trial reports, a traditionally time-consuming and resource-intensive process.
- Result: By implementing GenAI, Sanofi reduced the time required to produce clinical trial documents by 40%, accelerating regulatory submissions and enabling faster time-to-market for new drugs. This innovation is projected to save the company tens of millions of dollars annually in operational costs while enhancing resource allocation for high-value R&D.
- L’Oréal
- What they did: L’Oréal developed a virtual beauty advisor called Beauty Genius, powered by GenAI, to offer personalized skincare and cosmetic recommendations to customers.
- Result: Beauty Genius has improved customer engagement rates by 30%, translating into a 20% increase in online sales for its skincare and cosmetics lines. Additionally, product return rates decreased by 15%, thanks to better-tailored recommendations, reducing waste and enhancing customer satisfaction.
- Mattel
- What They Did: Mattel utilized GenAI tools to generate Hot Wheels concept designs, enabling their design teams to create four times as many concepts compared to traditional methods.
- Result: By quadrupling the volume of concept designs, Mattel accelerated its product development cycle by 50%, allowing the company to bring new toys to market faster. This efficiency boost is expected to contribute to an estimated 15% increase in annual revenue from the Hot Wheels brand.
More examples of GenAI applications
- Adobe
- What They Did: Adobe integrated GenAI capabilities into its Creative Cloud suite, including tools that automate repetitive design tasks like resizing, content generation, and color correction.
- Result: Adobe users reported a 30% reduction in design time for projects, increasing productivity for professional creators and businesses. This innovation has also driven a 25% increase in Creative Cloud subscriptions, contributing to Adobe’s robust growth in recurring revenue streams.
- Orbital Materials
- What They Did: Orbital Materials developed Linus, a GenAI-powered platform for designing molecular structures, leading to innovations such as cost-effective CO2 capture filters.
- Result: Linus enabled Orbital Materials to reduce the time required for new material discovery by 70%, cutting the typical two-year timeline for molecular R&D to less than six months. This efficiency has positioned the company to capture significant market share in the industrial decarbonization sector, potentially saving millions of dollars annually for industrial clients using its CO2 filters.
How to lead the next transformative innovation wave
BCG’s report emphasizes that companies must urgently reboot their innovation systems to remain competitive. By aligning strategies, adopting agile methodologies, and scaling GenAI effectively, businesses can unlock significant value. Examples from companies like Sanofi, L’Oréal, and Nvidia illustrate how a well-executed innovation strategy can drive meaningful impact. As GenAI and sustainability reshape markets, organizations that embrace these trends will lead the next wave of transformative innovation.
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