In KPMG's annual survey of 800 global technology industry leaders, from startups to Fortune 500 companies, the results were clear: the barriers to innovation are high. But there are still opportunities.
Unlike many surveys, these results different from those in similar survey conducted last year. This year, the big challenges to innovation that came to the top of the list were platform consolidation and ROI, while these made the challenge list much lower down last year.
Among the barriers for innovative disruption:
Platform companies such as Google, Amazon, Microsoft and more are are integrating different elements of a complete ecosystem into their offering. Those huge behemoth are getting bigger through acquiring startups to complete their offerings.
I have personally experienced this barrier when I worked for a company that made thin clients, when all of a sudden a major platform player (HP) began offering the clients for free with the purchase of their servers. A startup can only compete with devices that use the platforms, but when the platform companies integrate those devices or applications, what else can you do? Twenty four percent of the survey respondents put this barrier in first place.
Ability to demonstrate ROI
As investors are increasingly demanding proof of a positive return on their investments, companies that receive those investments now carry that burden of proof. The main challenge is the lack of clear ROI indicators, and new ones have to be developed. Twenty two percent of respondents ranked the ability (or hardship) to demonstrate ROI as a top barrier. Leading the pack was Israel, where 31 percent of respondents ranked it as high.
Access to capital
Access to capital is a critical success factor for startup companies, but also for mature ones launching internal innovation. While it appears that funding is available for startups, mainly because it is provided by firms that specialize in and profit purely on these investments and willing to take the associated risks, Fortune 500 companies limit their investments in innovation significantly.
One reason could be the ever-declining employment tenure, especially for CEOs, which prevents them from seeing the fruit of their investments, and thus don't support investment in long-term projects. Twenty one percent ranked this barrier at the top. Again, Israel leads in ranking this barrier at the top (24 percent).
Barriers to commercialization
KPMG separately ranked the barriers to technology commercialization (as opposed to innovation). Here, 26 percent ranked technology complexity at the top. Other notable categories were access to capital (36 percent), risk management (35 percent), cyber security concerns (32 percent), regulatory compliance requirements (29 percent), privacy governance (29 percent), and government policies (28 percent).
Where is the opportunity?
While platform consolidation is ranked as the top barrier to innovation by startups, there is an opportunity here, as well. "If you can't beat them, join them," the saying goes. Platform companies are on a shopping spree to acquire small startups that complete this consolidation.
Develop something (hardware, software, application, service, or anything else) that runs on top of those platforms, and get acquired. Just like Cycle Computing got acquired by Microsoft for its cloud computing application, running on Microsoft Azure. In fact, build something that can run on all platforms, and let Microsoft, Google, Amazon, IBM, and other fight over you. One of them will acquire you, if only to prevent the others from getting access to the technology you have.