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1、Innovation Systems Need a Reboot June 2024 By Justin Manly,Michael Ringel,Amy MacDougall,Johann Harnoss,Jacob Wolke-Perten,Wendi Backler,Ketil Gjerstad,Ryoji Kimura,and Beth VinerContents01 Innovation in 202406 To Close the Innovation Readiness Gap,Start with Strategy The Strategic Foresight Imperat

2、ive For Novo Nordisk and Lilly,Persistence Pays Off in the Obesity Domain Aptivs Innovation System Is Not on Autopilot Nvidias Path to Becoming the AI Revolutions Brain14 Accelerating Innovation with GenAI20 About the AuthorsBOSTON CONSULTING GROUP 1Heres a paradox.Companies have never placed a high

3、er priority on innovationyet they have never been as unready to deliver on their innovation aspi-rations.Our annual survey of global innovators finds that the pan-demic,a shifting macroeconomic climate,and rising geo-political tensions have all taken a toll on innovation disci-pline.Faced with high

4、uncertainty,leaders focus shifted from medium-term advantage and value creation to short-term agility.In that environment,the systems that guide innovation activities and channel innovation investments suffered,leaving organizations less fit for the race to come.In particular,innovation readinessas

5、measured by BCGs proprietary innovation maturity scoreis down across the elements of the innovation system that align it with the corporate value creation agenda.At the same time,execu-tives report that innovation activities continue at pre-pan-demic levels.This finding evokes a troubling picture of

6、“zombie”innova-tion organizations going through the motions in an endless loop as the strategic environment shifts around them.Without a sharp innovation strategy aligned with a clear business strategyoffering clarity on target customers and the most attractive innovation domainseven the most effici

7、ent and flexible innovation system will fail to create value,particularly in disruptive times.How to get back on track?Wed argue for a reboot that starts by establishingor strengtheningthe link between innovation strategy and business strategy.And when youre thinking about recalibrating your innova-

8、tion system to be both more strategic and effective,dont ignore GenAI.With todays strongest innovators already building experience with the technology,theres a real risk of falling further behind.Innovation in 20242 INNOVATION SYSTEMS NEED A REBOOT Innovation Prioritization Is UpFor 18 years,weve as

9、ked senior innovation executives where innovation ranks in their companys priorities.Is it at the top,in the top three,one of the top ten,or lower?This year a record 83%respondents reported that their companies rank innova-tion among their top three areas of focus.(See Exhibit 1.)Looking at regional

10、 patterns,China leads on prioritization,with 92%of companies ranking innovation as a top-three priority.The two largest year-over-year increases in priority are North America,which moved up 11 percentage points to 81%,and Africa and Middle East,which moved up 10 percentage points to 85%.Europe,Centr

11、al Asia,and the rest of Asia all held roughly steady at around 80%.From an industry perspective,the highest“top three”rank-ing,at 98%,was Tech Hardwarean industry that has pe-rennially been at or near the top.The lowest was Wholesale and Retail,at 67%.Media and Entertainment saw the big-gest jumpfro

12、m 68%in 2023 to 94%in this years research.Innovation Readiness Is DownIt takes an effective innovation system to transform high aspira-tions into value creation.And this years research suggests that a whopping 97%of innovation systems need a tune-up.We measured readiness using BCGs proprietary Innov

13、ation-to-Impact benchmark tool(i2i by BCG),which evaluates a companys innovation maturity along ten dimensions.All respondents answered the full battery of questions.Organizations answering“yes”to all questions received a perfect score of 100,but we view those scoring 80 or above as being in the“rea

14、dy zone.”In the last two years,innovation readiness has plummeted,with just 3%of companies in the ready zone today,com-pared with 20%as recently as 2022.(See Exhibit 2.)We saw these significant declines across all regions,with the excep-tion of China,where the readiness level has remained steady.The

15、 slumps were particularly strong across the seven i2i dimensions that focus on how the organization 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 attrac-

16、tive 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 deci-sions and compensation linked to strategy-aligned KPIs?Organization and Ecosystems.Is innova

17、tion championed by the C-suite,and are there fit-for-purpose innovation teams/vehicles for different types of innovation and different time frames?Exhibit 1-A Record 83%of Companies Rank Innovation as a Top-Three PriorityWhere does innovation/R&D/product development rank among your companys prioriti

18、es?(%)200520062007200820092010201220132014201520162018201920202021202220232024667266666471767775797677826575757983194023232526242422222330352333333335473243433945525353575347474242424648Top priorityTop-three priority+8+2Sources:BCG Global Innovation Survey 2024;BCG analysis.Note:n=1,003 for global r

19、espondents.No data for 2011 and 2017 available.Since 2022,innovation readiness has plummeted,with just 3%of companies in the ready zone today.4 INNOVATION SYSTEMS NEED A REBOOT Talent and Culture.Do we have a culture of innova-tion,and is innovation seen as a career accelerator?Idea to Impact.Do we

20、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.And critically,top quartile readiness scores,which had been securely in the ready zone in 2022,are now at or below

21、 the 2022 median.(See Exhibit 3.)A Disconnect Between Concerns and PrioritiesWe then asked respondents to rank the challenges faced by their innovation teams.This year,strategy concerns topped the list,with 52%of respondents citing an unclear or overly broad strategy as one of their top three challe

22、ng-es.(See Exhibit 4.)Rising cost of capital and talent con-straints followed at 47%and 44%,respectively.While addressing the latter two challenges is not entirely in the direct control of an individual company,sharpening a strategy is.And doing so can help with the other challenges.A strong strateg

23、y that enables smarter capital allocation and more rigorous funnel management will focus invest-ment on the most attractive innovation domains,making it easier to earn returns above the cost of capital.And companies with a compelling strategy and clear track record of success are most likely to have

24、 an edge in the war for talent.Unfortunately,not all companies are acting on their strategy-related concerns.Just 30%reported planning to revisit their innovation strategies,while 70%plan to focus on process optimization moves.Its not a comforting picture.Overall,innovation FTEs and activity levels

25、have remained constant.But without a stra-tegic North Star to point the organization toward attractive value pools,even the most efficient innovation system is likely to underperform its potential.And the senior execu-tives seem to feel it:our study showed their self-reported confidence in their org

26、anizations innovation capabilities declining along with readiness.Getting Ready to WinGiven 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 wont be enough to dri

27、ve superior perfor-mance.Achieving real,exceptional outcomes will require attention to two critical areas:first,sharpening strategy for the race aheadand aligning innovation strategy,resource allocation,and pipeline shape to win in the priority do-mains;second,embracing GenAI to drive growth and acc

28、elerate success across the whole innovation cycle.Exhibit 2-Innovation Readiness Has Declined Significantly Since 2022Sources:BCG Global Innovation Survey 2021,2022,2023,2024;BCG analysis.Note:“Ready”represents the proportion of companies scoring 80 or above on BCGs Innovation-to-Impact(i2i)benchmar

29、k.Respondent companies scoring Ready vs.Unready(%)ReadyUnready20212022202320242020938080919717 percentagepointsBOSTON CONSULTING GROUP 5Exhibit 3-2024s Top Quartile Innovators Have Fallen out of the Ready Zone and Are Underperforming 2022s Median Innovators on Nearly All DimensionsExhibit 4-More Tha

30、n Half of Respondents Cite Unclear Strategy as a Top-Three Challenge for Their OrganizationSources:BCG Global Innovation Survey 2022,2024;BCG analysis.Notes:n=1,010 for global respondents in 2022;n=1,003 for global respondents in 2024.Sources:BCG Global Innovation Survey 2024;BCG analysis.Note:n=1,0

31、03 for global respondents.Percent are times mentioned in a respondents top three challenges.020406080100BCG i2i Readiness ScoreAmbitionDomainsGovernancePortfolio&performancemanagementBCG i2i ReadinessDimensionsOrganization&ecosystemsTalent&cultureIdea to impact2022 top quartile2024 top quartile2022

32、median2024 medianReady ZoneWhat are the top three challenges your company is currently facing in innovation/R&D/product development?(%)Unclear or overly broad strategy52Rising cost of capital47Talent pool constraints44Risk-averse culture38Siloed innovation32Risks of tech disruption(e.g.,GenAI)29Lack

33、 of robust governance28Dispersed innovation footprint216 INNOVATION SYSTEMS NEED A REBOOT It seems obvious that business strategy should shape innovation strategy.But as we saw in the previous chapter,more than half of the global innovation leaders we sur-veyed this year cited an unclear or overly b

34、road strategy as one of their organizations top three challenges.If they lack a strategy to focus innovation activities on the right opportu-nities,organizations risk falling short of their potential.Through a combination of insight and foresight,the best strategists identify todays and tomorrows mo

35、st attractive customers and value pools.They understand their organi-zations strengthsand how the sources of competitive advantage are likely to shift.Then,based on this knowl-edge,they marshal investment and resources toward a focused list of opportunities in which they have the stron-gest right to

36、 win.Innovation is a critical lever to realize strategic ambition.But that can only happen if the strategy is clear and de-tailed on the innovation mission or missions“What problems are we solving for which customers?”that will maximize the organizations growth and value creation.While this is alway

37、s true,in an era of rising rates and talent scarcity,it becomes particularly important.Theres a lot that innovators need to do to regain their readiness.But only by starting with strategy and weaving it into the fabric of their innovation systems will they see the greatest payoff.To Close the Innova

38、tion Readiness Gap,Start with StrategyBOSTON CONSULTING GROUP 7Too Many Organizations Lack Direction in Their Innovation EffortsBut,as weve noted,not every organization has gotten the message.Just 30%of respondents this year,versus 36%in 2022,reported that refreshing their strategy is one of their t

39、op three innovation priorities going forward.(See Exhibit 5.)Instead,the focus is on agility,activity,and capabilities:70%plan to focus on boosting the efficiency and speed of their operating models,63%seek to increase the number of projects in their portfolio,and 54%are prioritizing capability deve

40、lopment.And of those focused on increasing their project load,about one-third intend to put their efforts into more short-term projects,suggesting a lack of clarity or conviction on medium-to long-term opportunities.Unless this disconnect between executives concerns and their organizations actions i

41、s repaired,it is easy to imagine“zombie”innovation organizationslacking an animating strategy to concentrate effort,going through the motions,pushing whatever projects seem interesting through their funnels to satisfy a need for activity.They may achieve some growth,but will likely fall prey to disr

42、uption or miss out on the most attractive emerging value pools.Fixing this disconnect and positioning the organization to capture its best opportunities starts outside the innovation function.Organizations first need a sharp business strate-gy that makes crystal clear whats in scopeand whats out.Get

43、ting there demands superior strategic foresight to understand how the world is changing,where value pools are shifting,and in what domains the organization has a right to win.(For more,see the sidebar“The Strategic Foresight Imperative.”)The strategy needs to be concrete enough to identify the prior

44、ity innovation domains that are expected to deliver real results on the organizations short-,medium-,and long-term aspirations.Innovation leaders then can set about the hard work of infusing the strategy throughout their innovation systems:reallocating resources,acquiring needed capabilities,reshapi

45、ng the pipeline,and rethinking success metrics and timelines.Six Best Practices for Linking Innovation to StrategyThe most successful organizations align their innovation systems to their business strategies in six critical ways.Well illustrate through the example of leading innovator Tata Group:Exh

46、ibit 5-Companies Are Prioritizing Efficiency and Throughput at the Expense of StrategySources:BCG Global Innovation Survey 2024;BCG analysis.Note:n=1,003 for global respondents.Looking ahead at the next year and beyond,what actions do you plan to take?(%)Update innovationoperating modelExpand innova

47、tionportfolioGrow innovationcapabilitiesEmbrace agileteamingRefresh innovationstrategy70635431308 INNOVATION SYSTEMS NEED A REBOOT You have to see an opportunity before you can seize it.You have to spot a risk before you can sidestep it.And organi-zations with superior strategic foresight have a sig

48、nificant competitive advantage,particularly in uncertain times when traditional forecasting approaches based on extrapo-lation from the past are unlikely to deliver valuable in-sights.Rather than looking inward,organizations that are fore-sight leaders look across an uncertain landscape and scan the

49、 horizon.They are able to separate signal from noise and develop a perspective on what might be nextand imagine their role in those futures.They dont know exactly what will happen,but theyre prepared for what might.Their superior perception gives these companies an edge in identifying and responding

50、 to,among others:Critical shifts in customer priorities and sentiment that require new value propositions An unexpected and attractive adjacent market that could drive a new wave of growth A new technology with the potential to disrupt business economics An attractive partnership or acquisition cand

51、idate that can accelerate progress toward a strategic objective Weak signals of new moves by competitorsor the rise of potentially advantaged upstartsThe best organizations bring together advanced analytics and strategic creativity to build a foresight advantage:Ana-lytics to surface patterns and sp

52、ot anomalies within diverse sources from social media to scientific literature.Earnings calls to patent citations.Analyst reports to smart money flows.And creativity,scenario planning,and wargaming to expand the thinking and imagine the implications.Which new opportunities might emerge?For what pote

53、ntial futures do we need to prepare?How do we build resilience to poten-tial new risks?How might competitors react?Foresight leaders make this discipline central to their culture and not just a module bolted onto their annual planning process.They understand the critical assump-tions behind their st

54、rategy and the foundations of their competitive advantage.And they continually scan for potential disruptions or acceleratorssometimes via a central foresight team staffed with experts and supported by technology,sometimes by empowering the broader organization to sense weak signals and challenge th

55、e status quo,and sometimes both.In one example,in 2011 BCGs Center for Growth and Innovation Analytics(GIA)helped a leading semiconductor equipment company that was facing slowing market growth identify an unexpected adjacency by analyzing patent-citation networks.The companys expertise in moving ma

56、terials in a vacuum at ultra-low temperatures could be of huge value in human tissue handlinga highly fragmented market.By mining startup,investment,and patent data,GIA identified potentially attractive acquisition candidates that accelerated the companys successful move into life sciences.Todayafte

57、r the$3 billion sale of the original semiconductor business to private equitythe pure-play life sciences business is the market leader,with a$3 billion market cap.The Strategic Foresight Imperative BOSTON CONSULTING GROUP 9 Senior Executive Ownership.Innovation is champi-oned by the CEO or other pro

58、minent members of the C-suite.At Tata Group,executive chairman Natarajan Chandrasekaran drives innovation from the top down with a focus on three principles:think and aspire big;direction first,velocity next;and company values before market valuations.And the company is definitely think-ing bigplann

59、ing to deploy$120 billion in investment between 2022 and 2027.Clarity on Innovations Role.Theres a shared story on the purpose of innovation and how it supports the companys strategic direction.At the Tata Group level,that story is all about accelerating Indias development and industrial base in imp

60、ortant areas like automotive and semiconductors.Focus on Competitive Advantage.The organization explicitly focuses on opportunities where it has a clear right to win based on its unique strategic assets.As Indias largest conglomerate,Tata has many advantages,among them a brand that attracts top tale

61、nt,strong access to capital,and significant free cash flow.The companys rep-utation and scale enable it to take on challengessuch as the development of an Indian semiconductor indus-trythat would be out of reach to many others.Clearly Specified Domains.The innovation portfolio is centered on specifi

62、c innovation areas that support the overall business strategy.Chandrasekaran clearly communicates to the organization that“some bets are for us,some bets are not.”The company has identified crosscutting themes,including sustainability and digital,within which they make targeted investments into spe-

63、cific domains,such as electric vehicles(EVs)and 5G.Target Portfolio Structure.Innovation leadership has a vision for how talent and resources should be deployed against domains and across time frames to fulfill the organizations strategic ambitions.When he took the reins as executive chairman,Chandr

64、asekaran worked with divi-sion leaders to harmonize the portfolio to focus on a set of clarified domains.And each division of Tata is expected to balance its innovation portfolio between projects offer-ing immediate profits and attractive longer-term bets.Quantified Objectives.The organization has a

65、 con-crete,fact-based perspective on how innovation activities will contribute to its financial objectives.And it also has clear timelines and an analytical approach to quantify-ing risk.For example,Tata set ambitious targets to help it drive Indias national goal of having EVs represent 30%of domest

66、ic vehicle sales by 2030.These clearly stated objectives have helped Tata become Indias leading EV supplier,with 75%market share.About 48%of the executives we surveyed felt that their organization made some effort to link their business and innovation strategiesbut only about 12%reported strong link

67、s that were delivering real impact.Exhibit 6 shows that the 12%of companies claiming strong links were also dramatically more likely to embrace the six best practices than those reporting no linkage.But even among these companies,theres room for improvement.The two that are least embracedestablishin

68、g a target portfolio struc-ture and quantifying objectivesare the ones that truly link ambition to action.Getting to a truly strategic and effective innovation system is about embracing all six best practicesand doing so pays real dividends.Exhibit 7 shows that the 33%of our sample that incorporated

69、 four or more of the six outper-form the median percentage of sales from new products reported by respondents by 5 percentage points.Incorpo-rating one to three conferred no benefit,while the 24%that embraced none of the elements underperformed by 5 percentage points.Tata is not the only leading com

70、pany showing the way to link strategy and innovation.This years report offers sto-ries of three other companies winning through the linkage of business and innovation strategies:Novo Nordisks and Eli Lillys long-term commitments to diabetes innovation positioned them to capture lead-ership positions

71、 in anti-obesity medications.(See the sidebar“For Novo Nordisk and Lilly,Persistence Pays Off in the Obesity Domain.”)Automotive supplier Aptiv has embraced a strategy-led and highly rigorous innovation portfolio management approach to ensure it succeeds in navigating the rapid evolution of mobility

72、-related technologies.(See the side-bar“Aptivs Innovation System Is Not on Autopilot.”)AI chip giant Nvidia is now the worlds third most valu-able company.It got there by staying true to its passion to enable accelerated computingwhile remaining flexible on the best path to that goal.(See the sideba

73、r“Nvidias Path to Becoming the AI Revolutions Brain.”)While this years research finds that global innovators need to tune up their innovation systems across the board,strategy is the place to start.Its the only way to ensure that the organizations efforts are directed toward the projects that will h

74、elp it achieve or retain long-term market leadership and create exceptional value for its stakeholders.One likely priority investment area for many companies is embracing Gen AI not only as a way to enhance the effi-ciency of their internal functions,including innovation,but also as a key differenti

75、ator and enabler of new products,services,and business models.10 INNOVATION SYSTEMS NEED A REBOOT Exhibit 6-Organizations with a Strong Link Between Business Strategy and Innovation Strategy Are More Likely to Exhibit Six Best PracticesExhibit 7-Organizations Adopting Four or More Best Practices to

76、Link Business Strategy and Innovation Strategy See More Sales from New ProductsSources:BCG Global Innovation Survey 2024;BCG analysis.Notes:n=124 for strong link;n=525 for no link.Numbers may not sum due to rounding.Sources:BCG Global Innovation Survey 2024;BCG analysis.Notes:Overall median is 15%fo

77、r 1,003 global respondents.Deltas refer to median values for subgroups.3020Percent of respondents exhibiting best practice(%)Senior executiveownership+53+61+64+59+43+52Clear senseof purposeFocus on competitiveadvantageSpecifieddomainsTarget portfoliostructureQuantifiedobjectives22201818838284786169R

78、eported link between businessstrategy and innovation strategyNoneStrong Number of best practicesadopted(out of six)4 or more(33%of respondents)13(43%of respondents)None(24%of respondents)Share of sales from new products,difference from overall median(%)+5%0%5%BOSTON CONSULTING GROUP 11In pharmaceuti

79、cals,focus matters.The monumental suc-cesses of Novo Nordisks Wegovy and Eli Lilly and Compa-nys Zepbound(respectively,the two firms obesity-targeted formulations of their diabetes drugs Ozempic and Mounja-ro)did not come out of thin air.Instead,they were the reward for sustained focus.Both companie

80、s had long been committed to leadership in the innovation domain for diabetes therapies.In fact,each introduced its first diabetes medication in 1923.And that depth of experience with the relevant biology and related technologiesand with the lives and comorbidities of diabetes patientspositioned the

81、m to see opportunities and take risks that others could not.In the 1990s,both firms started exploring glucagon-like peptide 1(GLP-1)agonists,a new category of diabetes drugs that promised to lower blood sugar levels by mimick-ing a hormone that stimulates the body to produce more insulin.And both kn

82、ew from the academic literature that GLP-1 agonists had potential weight-loss benefits.In 2005,Lilly introduced Byetta,the first GLP-1-based therapy for Type 2 diabetes based on the active ingredient exenatide.Novo followed in 2010 with Victoza,based on liraglutide.Novo was the first to start studyi

83、ng the obesity adjacency of these drugs.The company made a strategic decision to research this area in the late 1990s.It was a risky choice.Many other companies had failed to create a workable obesity drug because of adverse side effects.Moreover,there were concerns that patients might be uncomforta

84、ble with injecting themselves to lose weightand that health insurers might not be willing to pay for the drugs.But Novo persisted,and in 2014 it received FDA approval for Saxenda,also based on liraglutide,the first drug specifically targeted as a weight-loss therapy.Then,in 2017,the FDA approved Nov

85、os Ozempic for diabetes.Ozempic was based on semaglutide,had to be administered only once a week(unlike Victoza,which had to be injected daily),and proved to have more pronounced weight-loss benefits.In 2019,the company also received approval for Rybelsus for diabetes,the first pill based on a GLP-1

86、 agonist(semaglutide).Both companies then doubled down to capture the obesity adjacency.Novo secured FDA approval for Wegovy(based on semaglutide)for weight loss in 2021.In short order,Lilly launched Mounjaro for type 2 diabetes in 2022,and then Zepbound for obesity in 2023.Both are based on tirzepa

87、tide,the first treatment that activates both GLP-1 receptors and glucose-dependent insulinotropic polypeptide(GIP)receptors.These drugs have been transformative for patients,with benefits going well beyond diabetes and obesity.Both companies are exploring additional advantages of GLP-1 agonists:Novo

88、 seeing significant reduction in cardiac events,and Lilly seeing value in the treatment of obstruc-tive sleep apnea.But it has been equally transformative for the companiesapproximately doubling their market capa major feat given that both Novo and Lilly have long been among the sectors top performe

89、rs,appearing regu-larly on BCGs annual ranking of the top 50 value creators.These successes are a testament to the depth of expertise,commitment,and curiosity of the companies researchers.And both companies are continuing to innovate in this domain,each pursuing combination therapies and explor-ing

90、other compounds with potential for patients with diabetes and obesity.For Novo Nordisk and Lilly,Persistence Pays Off in the Obesity Domain12 INNOVATION SYSTEMS NEED A REBOOT Aptiv is a$20 billion automotive technology supplier and a key player in the drive toward an electric-powered,soft-ware-defin

91、ed future.Its business strategy is a rooted in a clear vision of the future that it refreshes,at the corporate level,regularly.This vision then informs decisions about priority innovation domainsor as Aptiv refers to them,future platformsfor the business units.Within the business units,Aptiv has a r

92、igorous portfolio approach to drive continued success both today and to-morrow.On the hardware side,it manages the portfolio using a well-established review and technology-develop-ment process across three timeframes:near-,mid-,and long-term.And it manages the software side for an even faster cycle

93、time.A few years ago,the companys vision exercise saw traditional“hardware-defined”vehicles continuing to give way to“software-defined”ones with dynamically updatable fea-tures.These software-defined vehicles would include the initial steps toward autonomy,although full autonomy with cloud-native ve

94、hicles embedded into the Internet of Thingswas not envisioned to arrive until at least 2030.With an eye toward developing partial autonomy and software-defined vehicles as future platforms,Aptiv defined clear innovation domains for both hardware and software.These included central vehicle controller

95、s,high-voltage power electronics,radars,cameras,and their related soft-ware.It also focused on untethering software from hard-ware(known as“hardware abstraction”)by enabling easier and more frequent software updates.This will allow the company to accelerate progress.This strategy-led approach has dr

96、iven many successes;for example,Aptivs Gen 6 advanced driver-assistance system,which can handle driving scenarios(e.g.,tunnels,bridges,fog)with which radar has traditionally struggled while also reduc-ing compute demand.The organization is also making bold moves such as the$3.5 billion acquisition o

97、f Wind River,a leader in edge computing,to accelerate its progress toward hardware abstraction and software life cycle management.Aptivs Innovation System Is Not on Autopilot BOSTON CONSULTING GROUP 13Nvidia was founded in 1993 with the aspiration to be a leader in the growing market for accelerated

98、 computingan approach that enabled demanding applications to run faster and more efficiently by separating out data-intensive elements and processing them on specialized hardware and chips that work in concert with the CPU.The companys initial success was in computer graphics.In 1999,it developed th

99、e GeForce 256,the first graphics processing unit(GPU)chip.The product was targeted at the high-end computer gaming market.Its success earned the firm the right to develop the graphics hardware for the launch of Microsofts Xbox gaming platform.But the company saw gaming as just one application for it

100、s chips.And perhaps its most important move to realize its broader ambition was the creation of CUDA,a parallel computing platform and application programming inter-face that opened up the GPUs hardware and software,enabling the global community of programmers to explore new use cases for the GPU.Th

101、at bet revealed a potentially huge opportunity in 2012 when the ImageNet Large-Scale Visual Recognition Chal-lenge was won by AlexNet,a neural network that was trained on a system powered by Nvidia GPUs.While Nvidia had been experimenting with AI on its ownit had used its GPUs to train a machine lea

102、rning model to identify cats in YouTube videos in 2010the AlexNet victory put the company and the world on notice that Nvidias GPUs could be central to the next generation of AI progress.Following this win,CEO Jensen Huang shifted the organiza-tions innovation focus away from its core in computer gr

103、aph-ics to leading the nascent market for AI chipseven though for the first few years,it was,in his words,“a zero-billion-dollar market.”Huang invested in new capabilities and chip architectures to capture the leadership position in data centers for AI.Today,Nvidias Hopper microarchitecture is at th

104、e heart of OpenAI and ChatGPT.Nvidia is now the worlds third most valuable company after Microsoft and Apple,and it ranks first on BCGs 2024 listing of top value creators.Nvidias Path to Becoming the AI Revolutions Brain14 INNOVATION SYSTEMS NEED A REBOOT GenAI has huge potential to transform the in

105、novation process as well as to enable new products,services,and business models.Recent BCG research found that 65%of executives view it as having the most disruptive potential of any technology over the next five years.According to BCGs AI Radar,89%of executives surveyed cited GenAI and AI as one of

106、 their organizations top 3 technology investment priorities for 2024and about half said it was their top priority.The executives in our sample mirror those results,with 86%reporting that their companies are at least experi-menting with GenAI in their innovation organizations.Those that were already

107、proficient with predictive AI tech-nology are further along,with 21%reporting that they have implemented GenAI with impact in an innovation-related use case.Building expertise in both GenAI and predictive AI is im-portant because,like the two hemispheres of the brain,they complement one another when

108、 they work together and further expand the art of the possible.Traditional predictive AI is the left brain,supporting analytical decision making and optimization.GenAI is the right brain,boost-ing creativity,developing content,and distilling the essence of vast troves of information.In this early st

109、age of the race,the readiest innovators are moving out ahead and further extending their advantage through both AI and GenAI.Accelerating Innovation with GenAIBOSTON CONSULTING GROUP 15Nearly All Innovators Are Exploring GenAI Interestingly,the rise of GenAI as a new dimension of machine intelligenc

110、e seems to have shaken many innova-tors assessments of the quality of their AI achievements to date.Between 2022 and 2024,the proportion of execu-tives reporting that their companies had implemented AI with impact declined from 37%to 10%.Today,most organizations are adopting GenAI to some degree.Whi

111、le just 8%are now applying it at scale,over one-quarter have implemented it in select applications,and over half reported they are experimenting with it in limited areas.(See Exhibit 8.)And as alluded to earlier,ready innovatorsthose that earned a score of 80 or more on BCGs i2i benchmarkare moving

112、ahead of the rest when it comes to GenAI.They are 1.5 times more likely to have implemented GenAI in one or more applicationsand five times more likely to be applying the technology at scale.Yet not every industry is investing in a manner consistent with its perceived risk of disruption by GenAI.Exh

113、ibit 9 shows the average GenAI adoption score for the industry(calculated from self-reported behavior)and the percent of respondents for the industry that rank potential disruption from GenAI as a top three challenge for their company.Perhaps not surprisingly,four industries are leading the charge:S

114、oftware and Services,Tech Hardware,and Tele-com Services,likely due to the importance of technology leadership;and Media and Entertainment,presumably because of GenAIs capacity for content creation.And while,on average,every industry is taking steps to build GenAI capability,some(for example,Financi

115、al Insti-tutions and Consumer and Durable Goods)are investing in GenAI despite a lower level of concern,while others(nota-bly Public Sector and Wholesale and Retail)would seem to be underinvesting given their perceived risk.Three GenAI Value PlaysGenAI is an investment priority,and the lions share o

116、f companies have already begun to experiment.Yet in our experience,many are unclear about how to identify and deliver on their most attractive GenAI opportunities.BCG has developed a helpful framework to aid organiza-tions in mapping out their GenAI journeys.It identifies three broad value plays tha

117、t all companies should pursue:Deploy.This is where nearly every organization be-ginsfocusing on quick wins using off-the-shelf GenAI tools to boost productivity and build experience either as one-offs or for a specific,narrow organization-wide use case.Its a great way to start gaining traction,iden-

118、tify champions,and spotlight small-scale applications with greater potential.For instance,companies can use ChatGPT to write first drafts of reports,or take advan-tage of Zooms automated meeting summaries.Exhibit 8-Nearly All Companies Are Experimenting with GenAI for Innovation,but Most Are in the

119、Early Stages of Their JourneySources:BCG Global Innovation Survey 2024;BCG analysis.Note:n=1,003 for global respondents.How extensively is GenAI being integrated into your companys innovation/R&D/product development function?(%)Not at allExperimenting inlimited areasImplementing inselect application

120、sApplying it at scale145127816 INNOVATION SYSTEMS NEED A REBOOT Reshape.In this value play,companies rethink criti-cal internal functions through the GenAI lens to drive improvements in quality,speed,and efficiency.GenAI be-comes a powerful new addition to the business transfor-mation toolbox,freein

121、g staff to work on more value-add-ed activities.And it builds GenAI expertise throughout the organization,creating home-grown experts who,giv-en the scarcity of GenAI talent,will be critical to future advantage.For example,Sanofi,a leading health care company,is rethinking three functionsR&D,manufac

122、-turing,and commercialthrough pilots with the twin goals of improving business economics and freeing up resources and time to reinvest in R&D.Invent.Companies can leverage GenAI to drive value creation by enabling new products,services,and busi-ness modelsand enhancing the attractiveness of exist-in

123、g ones.This will inevitably generate the highest returns by creating new pathways to top-line growth.These ca-pabilities may still be a bit down the road for the many companies that are just starting to experiment with GenAI.Microsoft,however,is further along the adoption path and showing the way.It

124、 recently introduced Copilot,a subscription-based assistant for Microsoft 365 that lets users apply GenAI to their own data,resulting in signif-icant potential to increase customer productivity.Ana-lysts estimate that Copilot has the potential to generate$7.3 billion in incremental recurring revenue

125、 by the end of fiscal 2025.While“invent”generally represents the biggest opportunity for an organization,“reshape”is typically an easier place to start building transformational GenAI expertise.For this reasonand the fact that the global imperative to increase innovation readiness now also includes

126、building GenAI into the innovation systemwell focus here on ways that leaders can reshape(and are reshaping)their innovation systems with GenAI.A crucial benefit:a reshaped innova-tion function will be able to invent faster and better.Reshaping Your Innovation System with GenAIThere are myriad ways

127、that GenAI can speed,streamline,and bring fresh perspective to an organizations innovation system.Exhibit 10 offers a non-exhaustive roster of poten-tial use cases.Well spotlight ten that are already making important contributions across the three phases of the innovation cycle:strategize,create,and

128、 scale.Strategize.This is the phase in which the business strate-gy and complementary innovation strategy are shaped.Its where innovation ambition is set,domains are defined,and target portfolio aspirations and metrics are established.Three areas in which GenAI can help:Exhibit 9-Many Industries Are

129、 Matching Their GenAI Adoption with Their Concern over Its Disruptive Power,but Not AllSources:BCG Global Innovation Survey 2024;BCG analysis.1BCG score based on responses to the question“How extensively is Gen AI being integrated into your companys innovation function?”(industry average).2Percent s

130、eeing potential disruption from GenAI as a top-three challenge(industry average).30102030403540455055Financial InstitutionsConsumer&Durable GoodsMedTechChemicalsIndustrial GoodsPharmaceuticalsInsuranceWholesale&RetailPublic SectorTransportationMaterialsAutomotiveEnergyTelecom ServicesTech HardwareSo

131、ftware&ServicesTravel&TourismMedia&EntertainmentMedianMedianPerceived GenAIDisruption Risk2HigherLowerHigherLowerGenAI Adoption Score1GenAI has huge potential to transform the innovation process as well as to enable new products,services,and business models.18 INNOVATION SYSTEMS NEED A REBOOT Test s

132、trategic assumptions.Every organization should operate on the basis of a set of shared strategic assumptionsfor example,about customers,compet-itors,business economics,competitive advantage,and technology.Staying ahead in disruptive times requires sensing when core assumptions need to be rethought.G

133、enAI,lacking emotional bonds and biases,can help by bringing an external perspective,making connections you might have missed that support or undermine your convictions.Organizations are articulating their assump-tions and then asking chatbots to critique them.Theyre also asking chatbots to develop

134、a perspective on the assumptions of a traditional rival or upstart.Even the technologys potential to confidently produce incorrect output can be helpful by forcing leaders to sharpen their arguments for the status quo.(See“To Drive Innovation with GenAI,Start by Questioning Your Assumptions.”)Identi

135、fy and explore innovation domains.As dis-cussed in the previous chapter,an organization needs to focus its innovation investment on a focused list of domains consistent with its business strategy.GenAI can help innovators connect the dots to identify and devel-op a richer understanding of the shifti

136、ng landscape of demand.For instance,Nestl is using GenAI to look for patterns in online and social media,strengthening its trend analysis capabilities.Develop ecosystem insights.Its important for organi-zations to have a clear sense of the landscape of supply.This includes not only key competitors b

137、ut also the universe of complementors,and how they all fit together.What are our competitors up to?Who are candidates for partnerships or acquisition?GenAI can help.For exam-ple,a leader in blockchain technology,eager to identify new and interesting applications of its technology,is using GenAI to r

138、apidly summarize,categorize,and ex-tract key themes from itsand its competitorspatent citation networks,including automatically generating summaries of the product offerings of the corporate patent owners.Create.This is the phase most people think of as innova-tion.Its an iterative cycle of ideation

139、,design and prototyp-ing,and testing and validation.Its where new products,services,and business models are born and perfected.Well spotlight four use cases here:Generate new product and service ideas.GenAI is a great support for the divergence phase of any focused ideation exercise.By adjusting the

140、“temperature,”it can rapidly complement the inventory of human-generated ideas with a universe of options ranging from more near in to more far out.And it can also work with humans to help evaluate which ideas are most promising for further development.In one example,Mattel has used GenAI to quadrup

141、le the number of Hot Wheels concept images it produces,providing its innovation teams with useful ideas for new designs or features.Exhibit 10-A Sampling of GenAI Use Cases to Reshape the Innovation CycleSource:BCG analysis.Note:UX=user experience.Test strategic assumptions Identify investment theme

142、s Support scenario planning Surface innovation opportunities and key trends Identify patterns in large data sets Assess competitive landscape Develop ecosystem insights Develop ecosystem insights(e.g.,targets for partnership or acquisition)Analyze portfolio health and generate improvement recommenda

143、-tions Research reference products for patent filings Generate new product and service ideas Challenge ideas with alternative perspectives Generate detailed product specifications Generate segment personas or customer journeys Generate images,UX designs,3D models,and videos Write,debug,and evaluate

144、code Generate and adjust designs to meet specific criteria Suggest ideal materials to achieve cost and performance targets Scan code for security issues and bugs Create textual and visual variations for testing Summarize testing outputs and generate reports Generate synthetic audience for early-stag

145、e validation Pressure test with a virtual devils advocate Optimize designs and processes for manufacturing at scale Create text-,image-,and video-based standard operating procedures Act as virtual operations assistant on shop floor Craft pitch decks,sales presentations Support hyper-personalized dyn

146、amic customer journeys Develop e-commerce text and imagery Describe personas for digital targeting Support and coach sales repsDefineambitionIdentify/exploredomainsStrategizeShapepipelineIdeatePrototype/designCreateTest/validateManufacture/developCommercializeScaleNot exhaustive;highly industry depe

147、ndentBOSTON CONSULTING GROUP 19 Generate images,UX designs,3D models,and videos.GenAI is a huge help in the process of exploring and refining ideas.Platforms like Midjourney can create realistic images of potential new products,and innova-tors can invest in custom models.For example,Orbital Material

148、s GenAI model,Linus,helps product teams streamline material discovery and design by generating 3D molecular structures based on natural language prompts.Successes include the development of a more efficient and cost-effective carbon dioxide filter.Generate reports.GenAI can be a powerful aid in stre

149、amlining the creation of innovation-related content.Sanofi,for example,cut out 40%of the time needed to create clinical trial reports by starting with a GenAI-created draft.Since these reports are critical to the regu-latory approval process,submitting them faster has the potential to drive higher r

150、eturns on R&D investment by shortening time-to-market.Act as a devils advocate to challenge early ideas.Another promising GenAI application is to use it as a sparring partner to strengthen ideas as they move through the innovation funnel.For example,Innovation CoPilota proprietary BCG tool currently

151、 in develop-mentis a GenAI chatbot that iteratively challenges ideas at each innovation stage,helping teams enrich and improve them.Scale.This phase focuses on transforming innovation into growth and value through manufacturing and commercial-ization.Well illustrate with three examples:Support hyper

152、-personalized dynamic customer journeys.GenAIs conversational skills make it a pow-erful personalization engine that can accelerate and enhance outreach to target customers.LOral has developed Beauty Genius,a GenAI advisor that offers personalized beauty advice via an app.Trained on over 6,000 image

153、s as well as hundreds of thousands of cus-tomer-care conversationsand tested by makeup artists across 50 countries using over 10,000 productsBeauty Genius offers customers playful and interactive advice on skin care and cosmetics.Develop e-commerce text and imagery.GenAI is also speeding,and decreas

154、ing the cost of,bringing products to market.LOrals Content Lab leverages GenAI to help create storyboards for new product launches,generate social media content,adapt materials for different lan-guages,and generate images and text for product pages faster than previously possible.Support and coach s

155、ales reps.Rather than using AI in place of sales reps,leaders can use GenAI to assist them by providing a digital support team via four sales-related personas:a talented sales assistant that can brief reps before every call,a data scientist that can help reps find new prospects,a personal assistant

156、that can polish and personalize emails,and a wise sales coach that can help reps become top performers.This support will improve efficiency.But the real prize is boosting effectiveness.Reshaping their innovation system with GenAI should be a top priority for nearly all companies.It can inspire and c

157、hallenge teams.It can take critical time out of pro-cesses,freeing staff to focus on more value-added activi-ties.And its likely to become table stakes for any ambi-tious innovator,making it an increasingly important dimension of an organizations innovation readiness.However,reshaping your innovatio

158、n function with GenAI is only a first step,and one that,given technological progress,never really ends.Not all industries need to act with the same urgency,because each faces a different degree of disruptive threat from GenAI.But all organizations need to start building their capabilities.Ultimately

159、,the big payoff comes from moving from reshaping to inventing.Its only with the creation of winning new products,services,and business models that leverage GenAI that innovators have the opportunity to achieve a sustainable competitive ad-vantage and deliver superior value creation.And in the quest

160、to capture the next big wave in an industry,innova-tion systems reshaped with GenAI will have an edge.20 INNOVATION SYSTEMS NEED A REBOOT About the AuthorsJustin Manly is a managing director and partner in the Chicago office of the Boston Consulting Group.You may contact him by email at .Amy MacDoug

161、all is a partner in BCGs Los Angeles office.You may contact her by email at .Jacob Wolke-Perten is an associate director for innova-tion strategy based in the firms Berlin office.You may contact him by email at wolke-.Ketil Gjerstad is a managing director and senior partner in BCGs Oslo office.You m

162、ay contact him by email at .Beth Viner in a managing director and partner in the New York office of BCG X.You may contact her by email at .Michael Ringel is a managing director and senior partner in the firms Boston office.You may contact him by email at .Johann Harnoss is a partner and associate di

163、rector for innovation based in the firms Washington,DC office.You may contact him by email at .Wendi Backler is a partner and director for innovation analytics and intellectual property in BCGs Toronto office.You may contact her by email at .Ryoji Kimura is a managing director and senior partner in

164、BCGs Tokyo office.You may contact him by email at .For Further ContactIf you would like to discuss this report,please contact the authors.MethodologyThis years research is based on a global survey of over 1,000 senior innovation executives that was conducted between November 2023 and January 2024.Ac

165、knowledgmentsThe authors are grateful to a number of colleagues for their assistance in the preparation of this report:Jannik Wiegert,Alexandra Ritter,and Laura Niemann for their comprehensive analysis;and Michael Wahlen,Jon Cam-pos,Gabriel Wang,Duc Anh Phi,and Chensu Wang for their research and ana

166、lytics support.Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities.BCG was the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformationa

167、l approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.B

168、CG delivers solutions through leading-edge management consulting,technology and design,and corporate and digital ventures.We work in a uniquely collaborative model across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them

169、to make the world a better place.For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and X(formerly Twitter).Boston Consulting Group 2024.All rights reserved.06/2422 INNOVATION SYSTEMS NEED A REBOOT