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Innovation key to success: Report
Product innovation is seen as the most successful initiative for boosting profitability by global private businesses, according to the annual Grant Thornton International Business Report released on Monday.
The study polled 7,200 private businesses in 36 economies, asking them to identify the factor that has the biggest influence on profitability. Twenty per cent cited innovation followed by cost cutting (18 per cent) and pricing strategy (13 per cent).
Product innovation was rated highest in Italy (39 per cent), almost double the global average, followed by mainland China and the Netherlands, both at 32 per cent. It was rated lowest in Sweden and Thailand (9 per cent).
Cutting costs was regarded as the most successful profitability initiative in Taiwan (28 per cent), Spain (26 per cent) and Finland (24 per cent). A further 15 per cent globally cited productivity reviews and outsourcing as the major factors, both closely related to cost reduction.
In Viet Nam, the most successful initiative for boosting profitability was pricing strategies at 21 per cent, with product innovation following closely at 18 per cent. Cost cutting did not figure highly in Viet Nam, at only 7 percent versus the global average of 18 per cent, which can partly be attributed to the country’s continued high inflationary environment in the past few years.
Kenneth Atkinson, Managing Partner at Grant Thornton Vietnam, explained: "During a downturn, innovation budgets are often the first to be cut. However, based on these figures, businesses may want to consider less radical cuts to innovation budgets to safeguard their future competitiveness. Innovation in the current climate is about making processes more efficient. A lot of companies are trying to work smarter as they plan ahead."
Grant Thornton said businesses wishing to innovate their way out of the recession should look for new opportunities created by the effects of the economic crisis.
Tailoring existing products and services to current marketing conditions, being open to ideas, carefully managing risks, collaborating with customers and suppliers to develop new ideas, and examining innovative processes and business models, as well as products, to improve efficiency were other things they should implement, it added.
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