Value Creation Through Innovation

Our first insights article discussed how Crowd Innovation offers services that increase speed of innovation delivery as well as reduces innovation costs, and risks. In this post we discuss why organisations should consider innovating at all, and in our next blog we’ll talk about how one could go about innovating. Again, our blog contains a free downloadable to facilitate discussion with others.

Creativity Is Only Part of Innovation

Creativity and innovation are not the same. The creative idea only becomes an innovation when it has been implemented and creates quantifiable value. It is therefore worth looking at the circumstances under which innovation creates the best value:

McKinsey’s 2025 paper found that the top growing companies, in almost any industry globally, had a big emphasis on innovation, and that the innovations helped them:

1. grow

2. protect against disruption in their market, and

3. thrive in an unpredictable business environment.

In which part of the organisation does innovation have the most impact?

Innovation within the core business made the biggest impact to revenue streams. With this known to many large competitors, companies also innovated in non-core areas in differentiate themselves. Non-core innovation included entering into markets where companies had not previously operated, both through acquisitions, as well as starting new operations. Interestingly this type of innovation influenced the entire industry and not just the company innovating.

Additionally, in turbulent markets it is most effective to both curtail costs as well as focus on innovation that will introduce new products and services to the market that will increase revenue. If one really had to choose between cost cutting and growth in these circumstances, it seems that cost cutting is the better strategy.

When considering innovation, focusing on large scale innovation that increases revenue streams should be seriously considered over incremental growth when conditions are volatile to the point that the current business model is likely to be eroded. For instance, a move to digital offerings can help manage disruptions. Covid would have been a good example of this. Having said this, it is important to keep a balance of short term versus long term innovation. Short-term innovations often create the cost savings to fund the longer-term innovation that is likely to increase revenue streams.

Returns On Innovation Investment

In a 2023 study that reported the shareholder returns of companies in a 10 year study declined for companies that had neither a growth or innovation focus. Against this background, companies that focused on innovation and growth showed returns of about 2% higher than their markets. While 2% does not seem impressive to African markets that have higher inflation and growing, these results are from markets where “business as usual” leads to contracting shareholder returns.

In another 2023 study, the research considered whether cost cutting, or innovation, or a combination of both was the optimal approach to achieving shareholder growth. This approach saw companies grow by between 3,4% and 4,1% more than if they had focused only curtailing costs, or only innovation. It’s therefore not surprising that in a 2025 survey, McKinsey reported that most CEOs were expecting higher returns from innovation teams, and were simultaneously freezing budgets.

Declining Profitability

In studies published by McKinsey in 2023 showed that global markets are declining in profitability and that innovation was an effective means of reversing that trend. It seems many types of innovation are useful when facing declining profits: innovations that lead to reduced costs, eg. increased operational efficiency; and those that lead to increased revenue, including new products, or entering new markets with new or existing products.

In the example mentioned earlier of the company focusing on only incremental growth, the organisation restructured the innovation portfolio and introduced projects with a higher Net Present Value, and introduced bottom-up designs. These two together produced a 300% increase in revenue and reduced time to market by 40%.

During the early stages of Covid, top performing companies were shown to innovate twice as fast as the bottom performing companies, making speed an important innovation critical success factor. This sometimes makes it easier to acquire or partner with firms in adjacent industries, as posed to developing new companies in that industry. It also creates a compelling argument from why you may want to consider crowdsourcing your solutions with Crowd Innovation, it offers speed. Strategic alliances and partnerships were another way of innovating and accessing talent pools outside the company’s own. This too is something that Crowd Innovation can support.

The world does not appear to be becoming a more stable place. It may become even more unstable with increasing tensions between the USA and Iran. We are already experiencing petrol price increases as a result, innovation may be a viable business, government and public response to adjusting to the instability.

Additional Innovation Benefits

The McKinsey research omits three other important known innovation benefits:

1. Innovative brands attract higher prices

2. Talent attraction and retention

3. Enhancing the dynamic capabilities of the firm

Innovation Branding Commands Higher Prices

Innovative brands command higher prices by differentiating from competitors. By offering features that competitors cannot match companies are able to attract higher prices. The research seems to suggest that prices for innovative products can be as much as twice that of the less innovative product. Price sensitivity decreases as customers feel justified spending the extra amount. It also allows the innovative brand to charge value-based pricing.

Talent Attraction And Retention

Top talent are attracted and are retained by working on new and innovative projects. They thrive on the challenge and want to keep their skills current and leading edge. By offering this, the organisation achieves continuity, which in turn fuels further innovation and growth.

Dynamic Capabilities

Dynamic capabilities are the company’s ability to respond to changing circumstances. It’s driven by the ability to scan the external environment, seize opportunities and transform itself so as to adapt and thrive in new circumstances. It leads to resilient and responsive organisations. Having built innovation capability lends itself to greater responsiveness to seize opportunities and transform.

Crowd Innovation is an innovation execution partner. We crowdsource solutions to desired specifications. We are able to enhance internal activities by adding speed and reduced cost and risk to your delivery.

So much international research omits Africa. A small percentage of companies listed on African stock exchanges list innovation as a core strategy. Drop a note on the LinkedIn page and let me know why this is. What do you think we could learn from this research?