Many are already taking action: Executives at the more than 350 companies we surveyed say they currently spend 8.1 percent of their R&D budgets on digital tools, suggesting that of the US$638 billion spent on R&D by the Global Innovation 1000 in 2013, about $52 billion was invested in digital enablers. But as we know from our ongoing annual studies of R&D spending, when it comes to successful innovation, what really counts is not how much money you spend, but how you spend it. Our 2013 study found that respondents whose companies made significant use of these digital enablers were 77 percent more likely to report that they outperformed competitors than were those with low or moderate usage rates (see Exhibit 2). However, because our results revealed that usage of digital tools does not necessarily correlate with the tools’ effectiveness, companies need to choose the enablers that are right for their company and that align with their overall innovation strategy. Digital tools are only as good as the underlying innovation process they support. Those companies that understand that are poised for success.
The Customer Insight Advantage
The new entrants in the digital tool kit tend to appear more frequently in the earlier stages of the innovation process, when gathering feedback and insights from consumers and customers can lead to better decisions that will reverberate throughout the life cycle of product development. When it comes to these new tools, we often find that fewer companies are using them (especially as compared to the more established productivity tools). But these lower usage rates reflect the fact that many of these tools are still untested, and many companies are just dipping their toe in the water.
Customer immersion labs, for example, are used by only 14 percent of companies, but those few already find them highly effective. These labs enable companies to gather reactions and data on new product designs directly from individuals using them by providing a digital, simulated experience. At construction and mining equipment manufacturer Caterpillar, they have become an integral part of the early stages of research and development. Chief technology officer Gwenne Henricks says that the company “makes significant use of immersive visualization, where we can bring in customers, service technicians, or assemblers from the assembly line and expose them to three-dimensional, real-time virtual depictions of new product designs. It’s here that we are able to capture their feedback [in terms of] usability, serviceability, manufacturability, and the like—all of those design aspects of our product that involve interactions with humans.”
Automated product usage tools, or sensors, are used by just 14 percent of our respondents, but have proven quite effective for some companies. They enable companies to passively collect and analyze product or service usage data direct from the customer via automatic tracking technologies. One example is Salesforce.com, a leading cloud provider of customer relationship management services. Because all its products are cloud-based, the company has great visibility into how customers use them. That means that rather than developing and releasing new versions of its products every two or three years, Salesforce.com can update its products every quarter. Says Bill Blau, senior director of partner marketing and strategic alliances, “Every time someone logs in to something or clicks on something, we can see what fields they’re using, what fields they aren’t using, how much data they’re putting in the system. We’re constantly getting that from more than 100,000 customers.”
Other market and customer insight tools, such as software used to analyze big data and to profile customers, are more commonly used and also rated highly in terms of effectiveness. One-third of our survey respondents say their companies are employing these tools to exploit their massive pools of structured and unstructured data and gather insights into customers.