Poll: U.S. has conservative tack on innovation

U.S. technology executives identify innovation as essential to improving their competitiveness, yet their approach to innovation is conservative, mainly focusing on existing products and services, according to a study published Thursday by consulting company A.T. Kearney Inc.

Top executives at manufacturers, software companies, and IT service companies in the U.S. clearly feel the pressure from the risk of falling behind global competition in technology and telecommunications, according to a survey of more than 300 executives. The survey was conducted in late 2004 and early 2005.

“Ninety percent of the executives see the major changes going on. But they don’t seem to react to them,” said John Ciachella, vice president of A.T. Kearney’s high technology practice.

The respondents said their competitors, which today are often international companies, have become larger and more agile. Still, only about one-third of the executives indicated that they have instituted formal functions for measuring their position in the market. The majority, 54 percent, said they use informal discussions to measure competitiveness.

“They are trapped in their company’s structure, organized in product groups and market groups. With the ongoing change of market boundaries, if you only look at the current peer group, the real competition is not coming up on your screen,” Ciachella said, asking for more formal and regular planning of strategies at a company level instead of at a product or strategy level.

The survey respondents, most of whom were chief executive officers, pointed to product and service innovation as the most critical element of competitive success in technology and telecommunications.

“But the companies’ actions — improvement of existing products, bundling products and service offerings and continuous investment in research and development — add up to innovation around the core: around the current offering,” Ciachella said.

Ciachella attributed this cautious approach to innovation to the aftermath of the IT bubble of the late 1990s. “In the pre-bubble time, there were bets all over the place — too many. Now, maybe the pendulum has swung too far to the other side.”

Larry Keeley, president of the innovation strategy company Doblin and adjunct professor at Illinois Institute of Technology, was surprised by the survey results.

Doblin’s own diagnostics and Keeley’s experience indicates that U.S. tech companies are even more conservative than A.T. Kearney found them to be. “Tech companies overemphasize on products to the exclusion of changing business models or improving the customer experience,” Keeley said, pointing to telecommunications equipment manufacturers and carriers as an example.

“Compared to the tremendous value of the global telecom market, the level of innovation is lamentable. The industry chases obvious feature enhancements, equipping the phones with all these features and function variations, but in the end they only chew each other up,” Keeley said.

By way of contrast, Keeley pointed to innovations by two foreign companies in the mobile telecommunications industry. Virgin Mobile Telecoms has introduced an uncomplicated prepaid service and Samsung Electronics has created a more graceful product experience on its phones, he said.

Keeley sees two reasons for U.S. companies’ lack of innovation.

“They have given up. Instead of saying, ‘Let’s invent the next Tivo,’ they back up and cut the operating costs by consolidating. And there are too many engineers. That’s why you can’t buy an easy-to-use telephone without all these features,” Keeley said. Other types of professionals in the companies should get involved in innovation, he said.

The A.T. Kearney study was conducted with the Business Performance Management Forum, which includes over 500 companies, and the Chief Marketing Officers Council, which represents over 1,000 technology companies.

About 60 percent of the respondents were chief executive officers, with the rest mostly chief technical officers, chief marketing officers or heads of strategy at small to large original equipment manufacturers, software companies and IT service companies.