Digital leaders need to innovate further and faster, according to a Deloitte and Spencer Stuart survey

7 June 2011

• 90% of organisations believe embracing ‘good failure’* is important;
• 97% of organisations look beyond their traditional boundaries for innovative ideas.

Deloitte, the business advisory firm, and Spencer Stuart, the executive search consulting firm, have combined their expertise to produce the final edition of the Digital Leadership series, ‘Innovating for a digital future, the leadership challenge’. The report focuses on how TMT** companies can innovate beyond their traditional products and deeply ingrained ways of working.

The findings were discussed at a Deloitte and Spencer Stuart debate of 40 leading TMT leaders, including Virgin Media’s CEO, Neil Berkett. The survey taken at the debate reflects the three unexpected paradoxes illustrated in the report:

1. 'Good’ failure is critical to the innovation process***.
   For innovation to flourish, organisations need to embrace failure; yet not many CEOs would survive if they made failure a virtue. The majority (90%) of the digital leaders surveyed, agreed that organisations need to embrace failure and ‘good’ failure is critical to the innovation process. A small number of the leaders (10%) questioned whether any form of failure was acceptable.
2. Innovation is a social sport.
   Deloitte and Spencer Stuart’s analysis found that innovation was not the preserve of ‘lone geniuses’: these ‘geniuses’ needed to work effectively with others to produce innovative ideas. The majority of digital leaders (97%) looked for innovative ideas from outside their traditional organisational boundaries. Actively seeking customer feedback was cited by 80%, looking at ideas from different industry sectors (70%) came second, and working with creative agencies/consultancies (68%) was the third most popular place to turn for inspiration.
3. Innovation is somewhat anarchic; ‘organisation’ can impede it.
   Deloitte found that innovation rates substantially increase where there is a large population of people, yet large organisations do not appear to gain an innovation premium. Effective digital leadership is imperative to overcome this. The digital leaders ranked: creating an organisation which people want to be part of (27%), recruiting the right people (25%), and making sure you have people leaders in leadership roles (21%) as the most important areas for an effective leader to tackle.

Will Gosling, Deloitte media partner, said: “In other words creating an innovative organisation means leaders need to think in a systemic way. Looking across the whole organisation and challenging it to think and act differently. A true leadership challenge.”

Grant Duncan, leader of Spencer Stuart’s UK media practice, said: “What our research has clearly indicated, is that digital transformation is not something that either one great leader or one great technologist can deliver. It's about a fundamental redesign of the organisation, its interrelationships and leadership philosophy whereby ownership of decisions and actions is more widely distributed. For a classic command and control culture this is likely to feel uncomfortable but the benefits in terms of the creation of a genuinely future-facing business, more than outweigh the pain.”

Deloitte’s research also uncovered some common areas where innovative companies focus their energy, including:

1. Having an explicit, or implicit, approach to building a portfolio of innovations;
2. Creating a culture which embraces experimentation and a degree of risk taking;
3. Building mechanisms into their organisation to financially reward innovation and making innovation everyone’s job;
4. Having a relentless focus on acquiring the right talent and creating an environment where people can flourish.

Will Gosling, concludes: “Innovation is not a simple task, if it was, the world would be full of innovative organisations. Yet it is one that leaders in the TMT world need to apply themselves to. Leaders are looking to challenge their organisations to innovate further, faster. This acceleration is also reflected in consumers’ willingness to embrace new technologies and inception to mass adoption can now take place over only a couple of years. Even well entrenched market leaders can quickly lose their footing unless they adapt quickly to the new market conditions.”

“Because of these market pressures, companies that are built on creating and monetising intellectual property within the digital economy need to consider how they need to transform in order to remain relevant, competitive, and continually responsive to this pace of change. Many existing major corporations are finding that orthodox management practices and organisational principles are not well suited to support them on this journey.” The event was held at Deloitte’s new iZone facility****, a space developed to foster collaborative working and innovative thinking.

Notes to editors
*Good failure is defined as the willingness to take risks when organisations’ innovate.

** Technology, Media and Telecommunications companies.

*** ‘Good failure’ is where organisations accept that trials of new products or services may not at first yield the planned results. These organisations are often the most successful innovators.

**** Deloitte’s iZone was opened in January 2011 and offers a radically different problem-solving environment in which to work with Deloitte’s clients. It is an exciting, market-leading facility that sets Deloitte apart in its emphasis on client collaboration. The whole focus is on accelerated problem solving using a range of facilitation methods.

Questions asked at the Digital Leader event

1. Do you agree with the following? Organisations need to embrace failure. ‘Good’ failure is critical to the innovation process.
   • Yes – 90%
   • No – 10%
2. Do you look for innovative ideas from outside your traditional organisational boundaries?
   • We actively seek customer feedback - 80%
   • We look at ideas from different industry sectors – 70%
   • We work with creative agencies/consultancies – 68%
   • We link up with industry bodies – 65%
   • We look at ideas reported in the media – 55%
   • We work with universities – 45%
   • We link up with your competitors – 33%
   • Other – 28%
   • No we don’t – 3%
3. What is the most important challenge for digital leaders?
   • Creating an organisation which people want to be part of - 27%
   • Recruiting the right people - 25%
   • Making sure you have people leaders in leadership roles - 21%
   • Promoting an open environment - 13%
   • Improving the physical workspace - 3%
   • Showing respect for each other’s expertise - 12%

Innovation emerges as key differentiator

Over the past 18 months Deloitte has been interviewing leaders of technology, media and telecommunications (TMT) firms to understand how the phenomenon of digital transformation is impacting on them and their businesses.

The first paper in the digital leadership series explored organisation design; the second explored the importance of establishing leadership at all levels of your organisation. Both can be downloaded at www.deloitte.co.uk and www.spencerstuart.co.uk.

Deloitte Institute of Innovation and Entrepreneurship at London Business School (LBS)

Deloitte has launched the Deloitte Institute of Innovation and Entrepreneurship at London Business School (LBS). This is a landmark commitment for both organisations, strengthening our firm’s relationship with the world’s leading business school, and a signal to our clients and the market of the value we place on the role of innovation in progressing the UK economy.

The Deloitte Institute will be an engine for growth for both the UK and global economy. Our goal is that, looking ahead, some of the biggest new ideas to stimulate business growth and innovation will be attributable to the Institute. The Deloitte Institute provides a fresh and distinctive way to deepen relationships with our clients, offering them deeper and tailored insight to accelerate their own growth, and helping to drive innovation and entrepreneurship to the top of the corporate agenda.

About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.

Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

About Spencer Stuart

Spencer Stuart is one of the world’s leading executive search consulting firms. Privately held since 1956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 51 offices in 27 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments. For more information on Spencer Stuart, please visit www.spencerstuart.com.

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