Innovation in Danish companies is lagging behind
In this day and age, strategy development is a major concern in a lot of Danish companies, but they neglect to focus on innovation. A new study from Aarhus University's department i Herning shows a general lack of innovation in the business community. Instead, what is currently ‘top of mind’ in the boardrooms is productivity.
New research results show that Danish companies are currently very concerned with strategy development and improving productivity. But at the same time, the business community has not been very focused on being innovative, which has caused Danish companies to lag behind in this area. 725 employees from 140 companies have participated in a survey about strategy development approaches in Danish companies. The study has been conducted by researchers from Aarhus University’s School of Business and Social Sciences, AU Herning.
In terms of a company’s strategic focus on developing new products and services, there seems to be a tendency for Danish companies to invest in simple business ideas, while the companies’ focus on gathering new ideas and measuring the progress of their innovation activities is very limited. As a consequence, companies have not been very good at bringing new business ideas to the table.
“It is very problematic for a country like Denmark, when our capacity for innovation starts to deteriorate. We are a knowledge society, and it’s essential and absolutely decisive that we focus on innovation, simply because it’s fundamental for our future labour market and for our competitiveness on an international scale. We cannot compete with the production countries, so we are forced to take the lead in other areas, such as knowledge and innovation,” explains Jens Holmgren, who is one of the researchers behind the study.
Employee involvement is crucial
The study suggests that management in many Danish companies are working determinedly with strategy development and continuously work to adjust the strategy in accordance with the customers and the market. It is worth noting, however, that the companies that took part in the study have increased their earnings and improved their image over the course of the last two years – but this has happened without a great deal of employee involvement.
“Involving the employees in the strategy development process may have a considerable impact on how well and how quickly a strategy is implemented, and in turn it will affect the company’s bottom line. If the employees get to take part in the work to develop the company’s strategy, it will likely increase their motivation, commitment and job satisfaction; and all of this is key to improving a company’s productivity. In the long run, a company cannot expect to improve its profit performance and image without involving the employees and making them feel that their views are being heard,” says Jens Holmgren.
The companies in the study have had a strong focus on productivity recently, which has also led to a significant improvement of the productivity. But the companies’ core business has not been very well protected from competitors and other matters that may affect the rules of the sector. Accordingly, there will be too much competition, and the companies will be too vulnerable.
New markets are not on the agenda
Entering new markets has not been on the companies’ agenda over the last two years. In the same period, their market share has not increased significantly either.
“One explanation for this may be that companies are not conducting market analyses and customer surveys to a very great extent to uncover the future needs and expectations of their customers. This means that the companies do not have proper insight into the market and the needs and demands of the customers. If this preliminary work is not conducted, it will be hard for companies to keep abreast of the development,” explains Ole Friis, one of the researchers at AU Herning, and proceeds:
“It is a positive development that Danish companies are focused on strategy development, that they work to improve productivity and continuously adjust the strategy in keeping with the current conditions. However, it is disturbing to see that they are not focusing more on new developments and entering new markets. This is what it will take to consolidate and improve the position of Danish companies in the domestic and international markets.”
Facts about the study
The study of strategy development processes in Danish companies has been conducted by researchers from Aarhus University’s department in Herning, AU Herning. 725 senior executives, middle managers and employees from 140 companies answered questions about the approaches to and content of strategic development processes in their workplace. The participating companies represented all sizes, ages and sectors. Approx. one third of all the responses received were from public or self-governing institutions.