Like short skirts, innovation has traditionally swung into and out of fashion: popular in good times and tossed back into the closet in downturns. But as globalization tears down the geographic boundaries and market barriers that once kept businesses from achieving their potential, a company’s ability to innovate—to tap the fresh value-creating ideas of its employees and those of its partners, customers, suppliers, and other parties beyond its own boundaries—is anything but faddish. In fact, innovation has become a core driver of growth, performance, and valuation.
Our research bears out this point. More than 70 percent of the senior executives in a survey we recently conducted say that innovation will be at least one of the top three drivers of growth for their companies in the next three to five years.1 Other executives see innovation as the most important way for companies to accelerate the pace of change in today’s global business environment.2 Leading strategic thinkers are moving beyond a focus on traditional product and service categories to pioneer innovations in business processes, distribution, value chains, business models, and even the functions of management (see “Innovative management: A conversation with Gary Hamel and Lowell Bryan”).
Our...