The world's most innovative companies expect to grow by more than 60% over the next five years, adding a total of more than US$250 billion in new revenues as a result of sophisticated approaches to innovation in all areas of their operations.

A new PwC study, Breakthrough Innovation and Growth - your $250 billion opportunity, has found a direct correlation between excellence in innovation and superior revenue growth. According to the study, the top 20% of innovators worldwide say their growth rate over the next five years will be double the global average and three times higher than that of the least innovative companies.

The report will make interesting reading for both the UK water utilities and the supply chain alike, given the continuing focuson the need to innovate in order to deliver a long-term sustainable Uk water industry. Key issues highlighted in the study include:

• Leading innovators are taking a more sophisticated approach to innovation:
• Seventy nine percent of the most innovative companies in the study have well-defined innovation strategies, compared with only 47% of the least innovative companies.
• Top innovators treat innovation just like any other business or management process that can be disciplined and successfully scaled.
• Only a fifth of the most innovative manage innovation informally, compared with a third of the least innovative companies.
• They are targeting a higher proportion of breakthrough and radical innovations, particularly around products, services, technology and business models.

Planning a wider range of innovation operating models is among other areas highlighting how the most successful companies use innovation to drive their business strategy. The top 20% of innovators in the study are twice as likely to consider corporate venturing as a means to drive growth and they are also prepared to collaborate more than their less innovative peers. On new products and services that are collaboratively developed with external partners, the study shows that the most innovative companies collaborate over three times more often (34%) than the least innovative. (10%).

Innovation – the competitive challenge

Rob Shelton, PwC’s Global Innovation Strategy Lead said that business leaders need to realise that innovation pioneers already exist within their own industry and across all parts of the world. If they are not among those pioneers, they need to be ready to step up to the competitive challenge, to avoid being marginalised.

The report says that widespread rejuvenation of innovation should have a profound impact on the way businesses plan for the future.  Including significantly higher amounts of breakthrough and radical innovation is a major shift in the traditional approach to innovation - by paying more attention to breakthrough and radical advances, companies are setting the stage for higher growth rates.

The study suggests that leaders are now using innovation to transform the business models that define the way they do business, with companies innovating and commercialising new value propositions for their customers that provide complete solutions where historically they have provided a single product or service. In addition, many companies are looking for new ways to monetise their offerings, charging for the quality of the outcome as opposed to the product – a particularly interesting approach in light of Ofwat’s new focus on outcomes rather than outputs for PR14 investment. The report says that while priorities vary widely by sector, technology and services are emerging as top priority areas for sectors like utilities and retail. It also makes the interesting point that in terms of innovation timespan, companies too focused on the short-term never challenge existing thinking, while those too focused on the long-term overlook immediate delivery.

Executives "too comfortable with the status quo" among key barriers to innovation

In terms of potential blockers to innovation, executives "too comfortable with the status quo" are identified as one of the main barriers to greater innovation. It also asks whether organisations have the mechanisms in place to commercialise and scale innovations, with the last mile of turning innovations into significant revenue growth is often the hardest.

The study concludes with the following key questions executives should ask about their business and the role they play in supporting innovation efforts:

• Are you paying enough attention to innovation and when was the last time that innovation was discussed at your management board?
• Do you have an innovation strategy and how do you plan to harness innovation to accelerate growth?
• Is your innovation portfolio right and where are you prioritising your innovation resources and investments?
• What is your innovation timespan -are you creating the business of tomorrow while running the business of today?
• Is innovation an integral part of the executive and organisational mindset?
• Are operational efficiency and innovation metrics part of all management meetings?
• Are the resources, investments, processes, organisation and governance sufficient to provide the space for innovation to thrive?
• Do you know how to explore and find the really great innovations that drive unprecedented levels of growth and is exploration something that people are incentivised to do?
• Are you an innovation blocker or enabler?