New research: Danish companies are giving lower priority to innovation
A new study of the strategic work in Danish companies shows an overall focus on productivity and customers, while innovation is very low on the companies’ agenda.
Taking point of departure in 3,500 Danish top executives, middle managers and employees from more than 1,700 private and public companies, researchers Jens Holmgren and Ole Uhrskov Friis from the Department of Business Development and Technology at Aarhus BSS, Aarhus University, have explored the strategic focus of companies. Innovation and thus new products and services are lagging significantly behind internal optimisation and a focus on existing customers.
“All in all, it is surprising and worrying that innovation is faring so badly in Danish companies, since the way out of the crisis towards a more development-oriented period is only found by focusing more on renewal and innovation,” says Ole Uhrskov Friis, associate professor at the Department of Business Development and Technology in Herning.
Innovation is deselected
Of all strategic areas, innovation is given the lowest priority, and there is little structure and systematics in the way companies work with innovation. This is also reflected in the fact that most of the business ideas which companies invest in fail to reach the market.
“We can see that top management focuses primarily on productivity and existing customers, while innovation is given less priority - probably because it takes more of an effort and is more risky,” says Associate Professor Jens Holmgren.
Jan Jacobsen, managing director/CEO of the company A-tex, is one of the executives who took part in the study, and he says:
“Personally, I try to be innovative in my work, but I am also encountering opposition - for example from the board of directors which is due to the necessity of ensuring a decent bottom line. But in my opinion, companies need to be more courageous and take a more long-term perspective. Of course, the company’s finances must be in order, but it’s also necessary to allocate funds to develop, say, new products and markets, because if we don’t renew ourselves, we will die.”
Putting strategy into action
The two researchers emphasise several areas that need to be addressed in order to change the trends currently found within the strategic work of companies. It turns out that many companies are not very good at putting strategy into action. For things to change, it first of all requires that middle managers and employees take greater part in the strategic work, so that they feel a greater ownership. Second of all, the strategy needs to be the focal point of everything the company does, and it should be communicated more extensively to the employees.
Management and employees disagree
On a general level, almost all areas reveal great differences between how management and employees evaluate the company’s strategic work. This is particularly noticeable in connection with the level of awareness of the strategy in the company, and whether or not sufficient financial and non-financial resources are being allocated towards implementing the strategy.
“The employees do not feel that they are being involved; that the strategy is converted into action plans; or that sufficient resources are being allocated towards implementing the strategy. In contrast, the top executives are much more positive where these aspects are concerned. With such diverging opinions, it’s no wonder that the strategy is not put into action,” says Associate Professor Jens Holmgren.
There is widespread agreement that employees have a lot of responsibilities in their work, but it is worth noting that employees in particular believe that their motivation has not increased during the past few years. Top executives generally have the opposite impression, which suggests that they are slightly out of sync with the atmosphere among the company’s employees and with what is going on at employee level.
Difference between private and public companies
These results are even more pronounced when zooming in on the difference between private and public companies. In public companies, the difference between the employees’ and management’s impression of the company’s ability to adjust the strategy on an ongoing basis is significantly higher than in private companies. The same goes for the level of awareness of the strategy in the entire company and whether or not the necessary resources have been allocated towards implementing the strategy.