Innovation Systems
Need a Reboot
June 2024
By Justin Manly, Michael Ringel, Amy MacDougall, Johann Harnoss, Jacob Wolke-Perten,
Wendi Backler, Ketil Gjerstad, Ryoji Kimura, and Beth Viner

Contents
01

Innovation in 2024

14	Accelerating Innovation with
GenAI

06	To Close the Innovation
Readiness Gap, Start with
Strategy• The Strategic Foresight Imperative• For Novo Nordisk and Lilly, Persistence
Pays Off in the Obesity Domain• Aptiv’s Innovation System Is Not on
Autopilot• Nvidia’s Path to Becoming the AI
Revolution’s Brain

20

About the Authors

Innovation in 2024

H

ere’s a paradox. Companies have never placed ahigher priority on innovation—yet they have neverbeen as unready to deliver on their innovation aspirations.

Our annual survey of global innovators finds that the pandemic, a shifting macroeconomic climate, and rising geopolitical tensions have all taken a toll on innovation discipline. Faced with high uncertainty, leaders’ focus shiftedfrom medium-term advantage and value creation to shortterm agility. In that environment, the systems that guideinnovation activities and channel innovation investments
suffered, leaving organizations less fit for the race to come.
In particular, innovation readiness—as measured by BCG’sproprietary innovation maturity score—is down across theelements of the innovation system that align it with thecorporate value creation agenda. At the same time, executives report that innovation activities continue at pre-pandemic levels.

BOSTON CONSULTING GROUP

This finding evokes a troubling picture of “zombie” innovation organizations going through the motions in an endlessloop as the strategic environment shifts around them.
Without a sharp innovation strategy aligned with a clear
business strategy—offering clarity on target customers andthe most attractive innovation domains—even the mostefficient and flexible innovation system will fail to create
value, particularly in disruptive times.
How to get back on track? We’d argue for a reboot thatstarts by establishing—or strengthening—the link between
innovation strategy and business strategy.
And when you’re thinking about recalibrating your innovation system to be both more strategic and effective, don’t
ignore GenAI. With today’s strongest innovators alreadybuilding experience with the technology, there’s a real riskof falling further behind.

1

Innovation Prioritization Is Up
For 18 years, we’ve asked senior innovation executives where
innovation ranks in their company’s priorities. Is it at the top, inthe top three, one of the top ten, or lower? This year a record
83% respondents reported that their companies rank innovation among their top three areas of focus. (See Exhibit 1.)
Looking at regional patterns, China leads on prioritization,with 92% of companies ranking innovation as a top-threepriority. The two largest year-over-year increases in priority
are North America, which moved up 11 percentage points
to 81%, and Africa and Middle East, which moved up 10
percentage points to 85%. Europe, Central Asia, and therest of Asia all held roughly steady at around 80%.
From an industry perspective, the highest “top three” ranking, at 98%, was Tech Hardware—an industry that has perennially been at or near the top. The lowest was Wholesale
and Retail, at 67%. Media and Entertainment saw the biggest jump—from 68% in 2023 to 94% in this year’s research.

Innovation Readiness Is Down
It takes an effective innovation system to transform high aspirations into value creation. And this year’s research suggests thata whopping 97% of innovation systems need a tune-up.
We measured readiness using BCG’s proprietary Innovationto-Impact benchmark tool (i2i by BCG), which evaluates acompany’s innovation maturity along ten dimensions.

All respondents answered the full battery of questions.
Organizations answering “yes” to all questions received aperfect score of 100, but we view those scoring 80 or above
as being in the “ready zone.”
In the last two years, innovation readiness has plummeted,with just 3% of companies in the ready zone today, compared with 20% as recently as 2022. (See Exhibit 2.) We saw
these significant declines across all regions, with the exception of China, where the readiness level has remained
steady. The slumps were particularly strong across the seveni2i dimensions that focus on how the organization nurturesideas and guides them through development to market:• Ambition. Are there specific and aspirational goals
linked to strategy and value creation?
• Domains. Do we focus on a limited number of attractive innovation domains where we have a right to win?
• Governance. Are people and budgets aligned withpriorities?
• Portfolio and Performance Management. Is theportfolio rigorously managed, and are innovation decisions and compensation linked to strategy-aligned KPIs?
• Organization and Ecosystems. Is innovation championedby the C-suite, and are there fit-for-purpose innovation
teams/vehicles for different types of innovation anddifferent time frames?

Exhibit 1 - A Record 83% of Companies Rank Innovation as a Top-Three Priority
Where does innovation/R&D/product development rank among your company’s priorities? (%)
+8

72
66

66

66

71

77

76

77

76

2005

2006

75

75

42

42

79

83

65

45

53

52

53

57

47

53

43

43

39

23

23

25

26

24

24

22

22

23

2007

2008

2009

2010

2012

2013

2014

2015

2016

Top priority

47
42

40
19

82

64

32
47

75

79

30

2018

35
23
2019

2020

46

48

+2

33

33

33

35

2021

2022

2023

2024

Top-three priority

Sources: BCG Global Innovation Survey 2024; BCG analysis.
Note: n = 1,003 for global respondents. No data for 2011 and 2017 available.

2

INNOVATION SYSTEMS NEED A REBOOT

Since 2022, innovation readinesshas plummeted, with just 3% ofcompanies in the ready zone today.

Exhibit 2 - Innovation Readiness Has Declined Significantly Since 2022
Respondent companies scoring "Ready" vs. "Unready" (%)

80

80

20

20

2021

2022

91

9

97

3

2023
Ready

−17 percentage
points2024

Unready

Sources: BCG Global Innovation Survey 2021, 2022, 2023, 2024; BCG analysis.
Note: “Ready” represents the proportion of companies scoring 80 or above on BCG’s Innovation-to-Impact (i2i) benchmark.

• Talent and Culture. Do we have a culture of innovation, and is innovation seen as a career accelerator?
• Idea to Impact. Do we have ideation methods that can“see around corners” and processes to explore and scaleideas?
Between 2022 and 2024, median readiness scores on eachelement fell from the mid-70s to the 50s. And critically, top
quartile readiness scores, which had been securely in theready zone in 2022, are now at or below the 2022 median.
(See Exhibit 3.)

A Disconnect Between Concerns and Priorities
We then asked respondents to rank the challenges facedby their innovation teams. This year, strategy concerns
topped the list, with 52% of respondents citing an unclear
or overly broad strategy as one of their top three challenges. (See Exhibit 4.) Rising cost of capital and talent constraints followed at 47% and 44%, respectively.
While addressing the latter two challenges is not entirely inthe direct control of an individual company, sharpening astrategy is. And doing so can help with the other challenges.
A strong strategy that enables smarter capital allocationand more rigorous funnel management will focus investment on the most attractive innovation domains, making iteasier to earn returns above the cost of capital.

4And companies with a compelling strategy and clear trackrecord of success are most likely to have an edge in the war
for talent.
Unfortunately, not all companies are acting on their strategyrelated concerns. Just 30% reported planning to revisit theirinnovation strategies, while 70% plan to focus on processoptimization moves.
It’s not a comforting picture. Overall, innovation FTEs andactivity levels have remained constant. But without a strategic North Star to point the organization toward attractive
value pools, even the most efficient innovation system islikely to underperform its potential. And the senior executives seem to feel it: our study showed their self-reported
confidence in their organizations’ innovation capabilities
declining along with readiness.

Getting Ready to Win
Given the significant declines in readiness, it makes sense
for organizations to continue their efforts to strengthen theefficiency and consistency of their innovation processes.
But that alone won’t be enough to drive superior performance. Achieving real, exceptional outcomes will require
attention to two critical areas: first, sharpening strategy forthe race ahead—and aligning innovation strategy, resource
allocation, and pipeline shape to win in the priority domains; second, embracing GenAI to drive growth andaccelerate success across the whole innovation cycle.

INNOVATION SYSTEMS NEED A REBOOTExhibit 3 - 2024’s Top Quartile Innovators Have Fallen out of the Ready Zone
and Are Underperforming 2022’s Median Innovators on Nearly All Dimensions
BCG i2i Readiness
Dimensions

2022 top quartile

2024 top quartile

2022 median2024 median

Ready Zone

Ambition

Domains

Governance
Portfolio & performance
management
Organization &ecosystems
Talent & culture

Idea to impact
0

20

40

60

80

100

BCG i2i Readiness Score
Sources: BCG Global Innovation Survey 2022, 2024; BCG analysis.
Notes: n = 1,010 for global respondents in 2022; n = 1,003 for global respondents in 2024.

Exhibit 4 - More Than Half of Respondents Cite Unclear Strategy as a TopThree Challenge for Their Organization
What are the top three challenges your company is currently facing in innovation/R&D/product development? (%)

Unclear or overly broad strategy

52

Rising cost of capital

47

Talent pool constraints

44

Risk-averse culture

38

Siloed innovation

32

Risks of tech disruption (e.g., GenAI)

29

Lack of robust governanceDispersed innovation footprint

28
21

Sources: BCG Global Innovation Survey 2024; BCG analysis.
Note: n = 1,003 for global respondents. Percent are times mentioned in a respondent’s top three challenges.

BOSTON CONSULTING GROUP

5

To Close the Innovation Readiness
Gap, Start with Strategy

It seems obvious that business strategy should shapeinnovation strategy. But as we saw in the previous chapter,more than half of the global innovation leaders we surveyed this year cited an unclear or overly broad strategy as
one of their organization’s top three challenges. If they lacka strategy to focus innovation activities on the right opportunities, organizations risk falling short of their potential.

Innovation is a critical lever to realize strategic ambition.
But that can only happen if the strategy is clear and detailed on the innovation mission or missions—“Whatproblems are we solving for which customers?”—that will
maximize the organization’s growth and value creation.
While this is always true, in an era of rising rates and talentscarcity, it becomes particularly important.

Through a combination of insight and foresight, the best
strategists identify today’s and tomorrow’s most attractive
customers and value pools. They understand their organizations’ strengths—and how the sources of competitive
advantage are likely to shift. Then, based on this knowledge, they marshal investment and resources toward afocused list of opportunities in which they have the strongest right to win.

There’s a lot that innovators need to do to regain theirreadiness. But only by starting with strategy and weaving it
into the fabric of their innovation systems will they see thegreatest payoff.

6

INNOVATION SYSTEMS NEED A REBOOT

Too Many Organizations Lack Direction in
Their Innovation Efforts

Fixing this disconnect and positioning the organization tocapture its best opportunities starts outside the innovation
function. Organizations first need a sharp business strategy that makes crystal clear what’s in scope—and what’sout. Getting there demands superior strategic foresight tounderstand how the world is changing, where value pools
are shifting, and in what domains the organization has aright to win. (For more, see the sidebar “The Strategic
Foresight Imperative.”)

But, as we’ve noted, not every organization has gotten themessage. Just 30% of respondents this year, versus 36% in
2022, reported that refreshing their strategy is one of their
top three innovation priorities going forward. (See Exhibit 5.)
Instead, the focus is on agility, activity, and capabilities: 70%
plan to focus on boosting the efficiency and speed of theiroperating models, 63% seek to increase the number ofprojects in their portfolio, and 54% are prioritizing capability
development. And of those focused on increasing theirproject load, about one-third intend to put their efforts into
more short-term projects, suggesting a lack of clarity orconviction on medium- to long-term opportunities.

The strategy needs to be concrete enough to identify thepriority innovation domains that are expected to deliver
real results on the organization’s short-, medium-, andlong-term aspirations. Innovation leaders then can set
about the hard work of infusing the strategy throughout
their innovation systems: reallocating resources, acquiring
needed capabilities, reshaping the pipeline, and rethinking
success metrics and timelines.

Unless this disconnect between executives’ concerns andtheir organizations’ actions is repaired, it is easy to imagine“zombie” innovation organizations—lacking an animating
strategy to concentrate effort, going through the motions,pushing whatever projects seem interesting through theirfunnels to satisfy a need for activity. They may achieve some
growth, but will likely fall prey to disruption or miss out on
the most attractive emerging value pools.

Six Best Practices for Linking Innovation toStrategy
The most successful organizations align their innovation
systems to their business strategies in six critical ways.
We’ll illustrate through the example of leading innovator
Tata Group:

Exhibit 5 - Companies Are Prioritizing Efficiency and Throughput at the
Expense of Strategy
Looking ahead at the next year and beyond, what actions do you plan to take? (%)

70
63
54

Update innovation
operating model

Expand innovation
portfolio

Grow innovation
capabilities

3130

Embrace agile
teaming

Refresh innovation
strategy

Sources: BCG Global Innovation Survey 2024; BCG analysis.
Note: n = 1,003 for global respondents.

BOSTON CONSULTING GROUP

7

The Strategic Foresight Imperative
You have to see an opportunity before you can seize it. You
have to spot a risk before you can sidestep it. And organizations with superior strategic foresight have a significant
competitive advantage, particularly in uncertain times
when traditional forecasting approaches based on extrapolation from the past are unlikely to deliver valuable insights.
Rather than looking inward, organizations that are foresight leaders look across an uncertain landscape and scan
the horizon. They are able to separate signal from noiseand develop a perspective on what might be next—and
imagine their role in those futures. They don’t know exactly
what will happen, but they’re prepared for what might.
Their superior perception gives these companies an edgein identifying and responding to, among others:• Critical shifts in customer priorities and sentiment that
require new value propositions• An unexpected and attractive adjacent market that
could drive a new wave of growth• A new technology with the potential to disrupt businesseconomics

Foresight leaders make this discipline central to theirculture and not just a module bolted onto their annual
planning process. They understand the critical assumptions behind their strategy and the foundations of theircompetitive advantage. And they continually scan forpotential disruptions or accelerators—sometimes via acentral foresight team staffed with experts and supported
by technology, sometimes by empowering the broader
organization to sense weak signals and challenge thestatus quo, and sometimes both.
In one example, in 2011 BCG’s Center for Growth andInnovation Analytics (GIA) helped a leading semiconductor
equipment company that was facing slowing market
growth identify an unexpected adjacency by analyzing
patent-citation networks. The company’s expertise inmoving materials in a vacuum at ultra-low temperatures
could be of huge value in human tissue handling—a highly
fragmented market. By mining startup, investment, andpatent data, GIA identified potentially attractive acquisition
candidates that accelerated the company’s successful
move into life sciences. Today—after the $3 billion sale ofthe original semiconductor business to private equity—thepure-play life sciences business is the market leader, with a$3 billion market cap.

• An attractive partnership or acquisition candidate that
can accelerate progress toward a strategic objective• Weak signals of new moves by competitors—or the riseof potentially advantaged upstarts
The best organizations bring together advanced analytics
and strategic creativity to build a foresight advantage: Analytics to surface patterns and spot anomalies within diverse
sources from social media to scientific literature. Earnings
calls to patent citations. Analyst reports to smart money
flows. And creativity, scenario planning, and wargaming to
expand the thinking and imagine the implications. Whichnew opportunities might emerge? For what potential futures
do we need to prepare? How do we build resilience to potential new risks? How might competitors react?

8

INNOVATION SYSTEMS NEED A REBOOT• Senior Executive Ownership. Innovation is championed by the CEO or other prominent members of theC-suite. At Tata Group, executive chairman Natarajan
Chandrasekaran drives innovation from the top downwith a focus on three principles: think and aspire big;
direction first, velocity next; and company values before
market valuations. And the company is definitely thinking big—planning to deploy $120 billion in investment
between 2022 and 2027.
• Clarity on Innovation’s Role. There’s a shared story
on the purpose of innovation and how it supports thecompany’s strategic direction. At the Tata Group level,that story is all about accelerating India’s development
and industrial base in important areas like automotive
and semiconductors.
• Focus on Competitive Advantage. The organization
explicitly focuses on opportunities where it has a clear
right to win based on its unique strategic assets. As India’s
largest conglomerate, Tata has many advantages, among
them a brand that attracts top talent, strong access tocapital, and significant free cash flow. The company’s reputation and scale enable it to take on challenges—suchas the development of an Indian semiconductor industry—that would be out of reach to many others.
• Clearly Specified Domains. The innovation portfolio
is centered on specific innovation areas that support
the overall business strategy. Chandrasekaran clearlycommunicates to the organization that “some bets arefor us, some bets are not.” The company has identified
crosscutting themes, including sustainability and digital,
within which they make targeted investments into specific domains, such as electric vehicles (EVs) and 5G.
• Target Portfolio Structure. Innovation leadership has
a vision for how talent and resources should be deployedagainst domains and across time frames to fulfill theorganization’s strategic ambitions. When he took the reins
as executive chairman, Chandrasekaran worked with division leaders to harmonize the portfolio to focus on a setof clarified domains. And each division of Tata is expected
to balance its innovation portfolio between projects offering immediate profits and attractive longer-term bets.
• Quantified Objectives. The organization has a concrete, fact-based perspective on how innovation activities
will contribute to its financial objectives. And it also has
clear timelines and an analytical approach to quantifying risk. For example, Tata set ambitious targets to help
it drive India’s national goal of having EVs represent 30%of domestic vehicle sales by 2030. These clearly statedobjectives have helped Tata become India’s leading EV
supplier, with 75% market share.

BOSTON CONSULTING GROUP

About 48% of the executives we surveyed felt that theirorganization made some effort to link their business andinnovation strategies—but only about 12% reported strong
links that were delivering real impact. Exhibit 6 shows thatthe 12% of companies claiming strong links were also
dramatically more likely to embrace the six best practices
than those reporting no linkage. But even among thesecompanies, there’s room for improvement. The two thatare least embraced—establishing a target portfolio structure and quantifying objectives—are the ones that truly
link ambition to action.
Getting to a truly strategic and effective innovation system
is about embracing all six best practices—and doing sopays real dividends. Exhibit 7 shows that the 33% of oursample that incorporated four or more of the six outperform the median percentage of sales from new products
reported by respondents by 5 percentage points. Incorporating one to three conferred no benefit, while the 24%that embraced none of the elements underperformed by 5
percentage points.
Tata is not the only leading company showing the way tolink strategy and innovation. This year’s report offers stories of three other companies winning through the linkage
of business and innovation strategies:• Novo Nordisk’s and Eli Lilly’s long-term commitments todiabetes innovation positioned them to capture leadership positions in anti-obesity medications. (See thesidebar “For Novo Nordisk and Lilly, Persistence Pays Off
in the Obesity Domain.”)• Automotive supplier Aptiv has embraced a strategy-led
and highly rigorous innovation portfolio management
approach to ensure it succeeds in navigating the rapid
evolution of mobility-related technologies. (See the sidebar “Aptiv’s Innovation System Is Not on Autopilot.”)• AI chip giant Nvidia is now the world’s third most valuable company. It got there by staying true to its passion
to enable accelerated computing—while remaining
flexible on the best path to that goal. (See the sidebar“Nvidia’s Path to Becoming the AI Revolution’s Brain.”)W

hile this year’s research finds that global innovatorsneed to tune up their innovation systems across theboard, strategy is the place to start. It’s the only way toensure that the organization’s efforts are directed toward
the projects that will help it achieve or retain long-term
market leadership and create exceptional value for its
stakeholders.
One likely priority investment area for many companies isembracing Gen AI not only as a way to enhance the efficiency of their internal functions, including innovation, butalso as a key differentiator and enabler of new products,
services, and business models.

9

Exhibit 6 - Organizations with a Strong Link Between Business Strategy
and Innovation Strategy Are More Likely to Exhibit Six Best Practices
Percent of respondents exhibiting best practice (%)
+53

+61

83

+64

+59

84

82

+43

+52

78

69

61
30

Senior executive
ownership

22
Clear senseof purpose

20

20

Focus on competitive
advantage

Speciﬁed
domains

Reported link between businessstrategy and innovation strategy

None

18

18

Target portfolio
structure

Quantiﬁed
objectives

StrongSources: BCG Global Innovation Survey 2024; BCG analysis.
Notes: n = 124 for strong link; n = 525 for no link. Numbers may not sum due to rounding.

Exhibit 7 - Organizations Adopting Four or More Best Practices to Link Business
Strategy and Innovation Strategy See More Sales from New Products
Number of best practices
adopted (out of six)

Share of sales from new products,
diﬀerence from overall median (%)

4 or more+5%(33% of respondents)

1–3

0%

(43% of respondents)

None(24% of respondents)−5%

Sources: BCG Global Innovation Survey 2024; BCG analysis.
Notes: Overall median is 15% for 1,003 global respondents. Deltas refer to median values for subgroups.

10

INNOVATION SYSTEMS NEED A REBOOTFor Novo Nordisk and Lilly, Persistence
Pays Off in the Obesity Domain
In pharmaceuticals, focus matters. The monumental successes of Novo Nordisk’s Wegovy and Eli Lilly and Company’s Zepbound (respectively, the two firms’ obesity-targeted
formulations of their diabetes drugs Ozempic and Mounjaro) did not come out of thin air. Instead, they were thereward for sustained focus.
Both companies had long been committed to leadership in
the innovation domain for diabetes therapies. In fact, each
introduced its first diabetes medication in 1923. And that
depth of experience with the relevant biology and related
technologies—and with the lives and comorbidities ofdiabetes patients—positioned them to see opportunities
and take risks that others could not.
In the 1990s, both firms started exploring glucagon-like
peptide 1 (GLP-1) agonists, a new category of diabetes
drugs that promised to lower blood sugar levels by mimicking a hormone that stimulates the body to produce moreinsulin. And both knew from the academic literature that
GLP-1 agonists had potential weight-loss benefits. In 2005,
Lilly introduced Byetta, the first GLP-1-based therapy forType 2 diabetes based on the active ingredient exenatide.
Novo followed in 2010 with Victoza, based on liraglutide.
Novo was the first to start studying the obesity adjacencyof these drugs. The company made a strategic decision toresearch this area in the late 1990s. It was a risky choice.
Many other companies had failed to create a workableobesity drug because of adverse side effects. Moreover,there were concerns that patients might be uncomfortablewith injecting themselves to lose weight—and that healthinsurers might not be willing to pay for the drugs.

BOSTON CONSULTING GROUP

But Novo persisted, and in 2014 it received FDA approval for
Saxenda, also based on liraglutide, the first drug specificallytargeted as a weight-loss therapy. Then, in 2017, the FDA
approved Novo’s Ozempic for diabetes. Ozempic was basedon semaglutide, had to be administered only once a week
(unlike Victoza, which had to be injected daily), and proved
to have more pronounced weight-loss benefits. In 2019, thecompany also received approval for Rybelsus for diabetes,the first pill based on a GLP-1 agonist (semaglutide).
Both companies then doubled down to capture the obesity
adjacency. Novo secured FDA approval for Wegovy (based onsemaglutide) for weight loss in 2021. In short order, Lilly
launched Mounjaro for type 2 diabetes in 2022, and thenZepbound for obesity in 2023. Both are based on tirzepatide,
the first treatment that activates both GLP-1 receptors andglucose-dependent insulinotropic polypeptide (GIP) receptors.
These drugs have been transformative for patients, with
benefits going well beyond diabetes and obesity. Bothcompanies are exploring additional advantages of GLP-1
agonists: Novo seeing significant reduction in cardiac
events, and Lilly seeing value in the treatment of obstructive sleep apnea. But it has been equally transformative forthe companies—approximately doubling their market
cap—a major feat given that both Novo and Lilly have long
been among the sector’s top performers, appearing regularly on BCG’s annual ranking of the top 50 value creators.
These successes are a testament to the depth of expertise,commitment, and curiosity of the companies’ researchers.
And both companies are continuing to innovate in thisdomain, each pursuing combination therapies and exploring other compounds with potential for patients withdiabetes and obesity.

11

Aptiv’s Innovation System Is Not on Autopilot
Aptiv is a $20 billion automotive technology supplier anda key player in the drive toward an electric-powered, software-defined future. Its business strategy is a rooted in aclear vision of the future that it refreshes, at the corporate
level, regularly. This vision then informs decisions aboutpriority innovation domains—or as Aptiv refers to them,
future platforms—for the business units.
Within the business units, Aptiv has a rigorous portfolio
approach to drive continued success both today and tomorrow. On the hardware side, it manages the portfolio
using a well-established review and technology-development process across three timeframes: near-, mid-, andlong-term. And it manages the software side for an evenfaster cycle time.
A few years ago, the company’s vision exercise saw traditional“hardware-defined” vehicles continuing to give way to“software-defined” ones with dynamically updatable features. These software-defined vehicles would include theinitial steps toward autonomy, although full autonomy—
with cloud-native vehicles embedded into the Internet ofThings—was not envisioned to arrive until at least 2030.
With an eye toward developing partial autonomy andsoftware-defined vehicles as future platforms, Aptiv defined
clear innovation domains for both hardware and software.
These included central vehicle controllers, high-voltage
power electronics, radars, cameras, and their related software. It also focused on untethering software from hardware (known as “hardware abstraction”) by enabling easierand more frequent software updates. This will allow thecompany to accelerate progress.
This strategy-led approach has driven many successes; forexample, Aptiv’s Gen 6 advanced driver-assistance system,
which can handle driving scenarios (e.g., tunnels, bridges, fog)with which radar has traditionally struggled while also reducing compute demand. The organization is also making boldmoves such as the $3.5 billion acquisition of Wind River, aleader in edge computing, to accelerate its progress toward
hardware abstraction and software life cycle management.

12

INNOVATION SYSTEMS NEED A REBOOT

Nvidia’s Path to Becoming the AI
Revolution’s Brain
Nvidia was founded in 1993 with the aspiration to be aleader in the growing market for accelerated computing—an approach that enabled demanding applications to run
faster and more efficiently by separating out data-intensive
elements and processing them on specialized hardwareand chips that work in concert with the CPU.
The company’s initial success was in computer graphics. In
1999, it developed the GeForce 256, the first graphics
processing unit (GPU) chip. The product was targeted at
the high-end computer gaming market. Its success earned
the firm the right to develop the graphics hardware for thelaunch of Microsoft’s Xbox gaming platform.
But the company saw gaming as just one application for its
chips. And perhaps its most important move to realize its
broader ambition was the creation of CUDA, a parallel
computing platform and application programming interface that opened up the GPU’s hardware and software,
enabling the global community of programmers to explore
new use cases for the GPU.
That bet revealed a potentially huge opportunity in 2012
when the ImageNet Large-Scale Visual Recognition Challenge was won by AlexNet, a neural network that wastrained on a system powered by Nvidia GPUs. While Nvidia
had been experimenting with AI on its own—it had used
its GPUs to train a machine learning model to identify catsin YouTube videos in 2010—the AlexNet victory put thecompany and the world on notice that Nvidia’s GPUs could
be central to the next generation of AI progress.
Following this win, CEO Jensen Huang shifted the organization’s innovation focus away from its core in computer graphics to leading the nascent market for AI chips—even though
for the first few years, it was, in his words, “a zero-billion-dollar
market.” Huang invested in new capabilities and chiparchitectures to capture the leadership position in data
centers for AI.
Today, Nvidia’s Hopper microarchitecture is at the heart of
OpenAI and ChatGPT. Nvidia is now the world’s third mostvaluable company after Microsoft and Apple, and it ranks
first on BCG’s 2024 listing of top value creators.

BOSTON CONSULTING GROUP

13

Accelerating Innovation with GenAIGenAI has huge potential to transform the innovation
process as well as to enable new products, services, andbusiness models. Recent BCG research found that 65% ofexecutives view it as having the most disruptive potentialof any technology over the next five years. According to
BCG’s AI Radar, 89% of executives surveyed cited GenAI
and AI as one of their organization’s top 3 technology
investment priorities for 2024—and about half said it was
their top priority.
The executives in our sample mirror those results, with
86% reporting that their companies are at least experimenting with GenAI in their innovation organizations.
Those that were already proficient with predictive AI technology are further along, with 21% reporting that they have
implemented GenAI with impact in an innovation-related
use case.

14

Building expertise in both GenAI and predictive AI is important because, like the two hemispheres of the brain,
they complement one another when they work together
and further expand the art of the possible. Traditional
predictive AI is the left brain, supporting analytical decision
making and optimization. GenAI is the right brain, boosting creativity, developing content, and distilling the essenceof vast troves of information.
In this early stage of the race, the readiest innovators are
moving out ahead and further extending their advantage
through both AI and GenAI.

INNOVATION SYSTEMS NEED A REBOOTNearly All Innovators Are Exploring GenAIInterestingly, the rise of GenAI as a new dimension ofmachine intelligence seems to have shaken many innovators’ assessments of the quality of their AI achievements
to date. Between 2022 and 2024, the proportion of executives reporting that their companies had implemented AI
with impact declined from 37% to 10%.
Today, most organizations are adopting GenAI to somedegree. While just 8% are now applying it at scale, over
one-quarter have implemented it in select applications,and over half reported they are experimenting with it inlimited areas. (See Exhibit 8.) And as alluded to earlier,
ready innovators—those that earned a score of 80 or more
on BCG’s i2i benchmark—are moving ahead of the rest
when it comes to GenAI. They are 1.5 times more likely tohave implemented GenAI in one or more applications—and five times more likely to be applying the technology at
scale.
Yet not every industry is investing in a manner consistent
with its perceived risk of disruption by GenAI. Exhibit 9
shows the average GenAI adoption score for the industry(calculated from self-reported behavior) and the percent ofrespondents for the industry that rank potential disruption
from GenAI as a top three challenge for their company.
Perhaps not surprisingly, four industries are leading thecharge: Software and Services, Tech Hardware, and Telecom Services, likely due to the importance of technology
leadership; and Media and Entertainment, presumably
because of GenAI’s capacity for content creation.

And while, on average, every industry is taking steps tobuild GenAI capability, some (for example, Financial Institutions and Consumer and Durable Goods) are investing in
GenAI despite a lower level of concern, while others (notably Public Sector and Wholesale and Retail) would seem tobe underinvesting given their perceived risk.

Three GenAI Value Plays
GenAI is an investment priority, and the lion’s share ofcompanies have already begun to experiment. Yet in our
experience, many are unclear about how to identify anddeliver on their most attractive GenAI opportunities.
BCG has developed a helpful framework to aid organizations in mapping out their GenAI journeys. It identifies
three broad value plays that all companies should pursue:• Deploy. This is where nearly every organization begins—focusing on quick wins using off-the-shelf GenAI
tools to boost productivity and build experience either
as one-offs or for a specific, narrow organization-wide
use case. It’s a great way to start gaining traction, identify champions, and spotlight small-scale applications
with greater potential. For instance, companies can use
ChatGPT to write first drafts of reports, or take advantage of Zoom’s automated meeting summaries.

Exhibit 8 - Nearly All Companies Are Experimenting with GenAI for
Innovation, but Most Are in the Early Stages of Their Journey
How extensively is GenAI being integrated into your company's innovation/R&D/product development function? (%)

51
27
14
Not at all

8
Experimenting inlimited areas

Implementing inselect applications

Applying it at scale

Sources: BCG Global Innovation Survey 2024; BCG analysis.
Note: n = 1,003 for global respondents.

BOSTON CONSULTING GROUP

15

Exhibit 9 - Many Industries Are Matching Their GenAI Adoption with Their
Concern over Its Disruptive Power, but Not All
Higher40

Telecom Services
Public Sector

EnergyAutomotive

Wholesale & Retail

Tech Hardware

Transportation

Insurance

30

Materials

Travel & Tourism
MedianMedia & Entertainment

Consumer & Durable Goods

Pharmaceuticals

Perceived GenAI
Disruption Risk2

Software & Services

MedTechFinancial Institutions

20
ChemicalsIndustrial Goods

Lower
10

35

30
Lower

Median40

45

GenAI Adoption Score1

50

55Higher

Sources: BCG Global Innovation Survey 2024; BCG analysis.
BCG score based on responses to the question “How extensively is Gen AI being integrated into your company’s innovation function?”(industry average).

1

Percent seeing potential disruption from GenAI as a top-three challenge (industry average).

2• Reshape. In this value play, companies rethink critical internal functions through the GenAI lens to drive
improvements in quality, speed, and efficiency. GenAI becomes a powerful new addition to the business transformation toolbox, freeing staff to work on more value-added activities. And it builds GenAI expertise throughout
the organization, creating home-grown experts who, given the scarcity of GenAI talent, will be critical to futureadvantage. For example, Sanofi, a leading health carecompany, is rethinking three functions—R&D, manufacturing, and commercial—through pilots with the twingoals of improving business economics and freeing up
resources and time to reinvest in R&D.
• Invent. Companies can leverage GenAI to drive value
creation by enabling new products, services, and business models—and enhancing the attractiveness of existing ones. This will inevitably generate the highest returns
by creating new pathways to top-line growth. These capabilities may still be a bit down the road for the many
companies that are just starting to experiment withGenAI. Microsoft, however, is further along the adoption
path and showing the way. It recently introduced Copilot,
a subscription-based assistant for Microsoft 365 that lets
users apply GenAI to their own data, resulting in significant potential to increase customer productivity. Analysts estimate that Copilot has the potential to generate$7.3 billion in incremental recurring revenue by the endof fiscal 2025.

16

While “invent” generally represents the biggest opportunity
for an organization, “reshape” is typically an easier place
to start building transformational GenAI expertise. For thisreason—and the fact that the global imperative to increase
innovation readiness now also includes building GenAI into
the innovation system—we’ll focus here on ways thatleaders can reshape (and are reshaping) their innovation
systems with GenAI. A crucial benefit: a reshaped innovation function will be able to invent faster and better.

Reshaping Your Innovation System with GenAI
There are myriad ways that GenAI can speed, streamline,
and bring fresh perspective to an organization’s innovation
system. Exhibit 10 offers a non-exhaustive roster of potential use cases. We’ll spotlight ten that are already making
important contributions across the three phases of theinnovation cycle: strategize, create, and scale.
Strategize. This is the phase in which the business strategy and complementary innovation strategy are shaped. It’s
where innovation ambition is set, domains are defined, andtarget portfolio aspirations and metrics are established.
Three areas in which GenAI can help:

INNOVATION SYSTEMS NEED A REBOOTGenAI has huge potential totransform the innovation process
as well as to enable new products,
services, and business models.

• Test strategic assumptions. Every organization
should operate on the basis of a set of shared strategic
assumptions—for example, about customers, competitors, business economics, competitive advantage, andtechnology. Staying ahead in disruptive times requires
sensing when core assumptions need to be rethought.
GenAI, lacking emotional bonds and biases, can help bybringing an external perspective, making connections
you might have missed that support or undermine yourconvictions. Organizations are articulating their assumptions and then asking chatbots to critique them. They’realso asking chatbots to develop a perspective on theassumptions of a traditional rival or upstart. Even thetechnology’s potential to confidently produce incorrect
output can be helpful by forcing leaders to sharpen theirarguments for the status quo. (See “To Drive Innovation
with GenAI, Start by Questioning Your Assumptions.”)• Identify and explore innovation domains. As discussed in the previous chapter, an organization needs
to focus its innovation investment on a focused list of
domains consistent with its business strategy. GenAI canhelp innovators connect the dots to identify and develop a richer understanding of the shifting landscape ofdemand. For instance, Nestlé is using GenAI to look forpatterns in online and social media, strengthening its
trend analysis capabilities.

• Develop ecosystem insights. It’s important for organizations to have a clear sense of the landscape of supply.
This includes not only key competitors but also theuniverse of complementors, and how they all fit together.
What are our competitors up to? Who are candidates forpartnerships or acquisition? GenAI can help. For example, a leader in blockchain technology, eager to identify
new and interesting applications of its technology, isusing GenAI to rapidly summarize, categorize, and extract key themes from its—and its competitors’—patentcitation networks, including automatically generating
summaries of the product offerings of the corporate
patent owners.
Create. This is the phase most people think of as innovation. It’s an iterative cycle of ideation, design and prototyping, and testing and validation. It’s where new products,
services, and business models are born and perfected.
We’ll spotlight four use cases here:• Generate new product and service ideas. GenAI isa great support for the divergence phase of any focused
ideation exercise. By adjusting the “temperature,” it can
rapidly complement the inventory of human-generated
ideas with a universe of options ranging from more nearin to more far out. And it can also work with humans to
help evaluate which ideas are most promising for further
development. In one example, Mattel has used GenAI
to quadruple the number of Hot Wheels concept images
it produces, providing its innovation teams with usefulideas for new designs or features.

Exhibit 10 - A Sampling of GenAI Use Cases to Reshape the Innovation Cycle
Not exhaustive; highly industry dependent

Strategize

CreateDeﬁneambition

Identify/explore
domains

Shapepipeline

Ideate• Test strategic
assumptions• Identify
investment
themes• Support
scenarioplanning• Surfaceinnovation
opportunities
and key trends• Identify
patterns inlarge data sets
• Assess
competitive
landscape• Develop
ecosystem
insights• Develop
ecosystem
insights (e.g.,targets forpartnership or
acquisition)• Analyze
portfolio
health andgenerate
improvement
recommendations• Researchreference
products forpatent ﬁlings• Generate new
product andservice ideas• Challenge
ideas withalternative
perspectives• Generatedetailed
product
speciﬁcations• Generatesegment
personas or
customerjourneys

Scale

Prototype/designTest/
validate

Manufacture/develop• Generate
images, UX
designs, 3Dmodels, andvideos• Write, debug,
and evaluate
code• Generate andadjust designs
to meetspeciﬁc criteria• Suggest ideal
materials toachieve costandperformancetargets• Scan code forsecurity issues
and bugs• Create textual
and visualvariations fortesting• Summarize
testing outputs
and generatereports• Generate
synthetic
audience forearly-stage
validation• Pressure testwith a virtual
devil’s
advocate• Optimize
designs andprocesses for
manufacturing
at scale• Create text-,
image-, andvideo-based
standard
operatingprocedures• Act as virtual
operations
assistant on
shop ﬂoor

Commercialize• Craft pitch
decks, sales
presentations• Support hyperpersonalized
dynamic
customerjourneys• Develop
e-commerce
text andimagery• Describe
personas for
digitaltargeting• Support andcoach sales
reps

Source: BCG analysis.
Note: UX = user experience.

18

INNOVATION SYSTEMS NEED A REBOOT• Generate images, UX designs, 3D models, andvideos. GenAI is a huge help in the process of exploring
and refining ideas. Platforms like Midjourney can create
realistic images of potential new products, and innovators can invest in custom models. For example, Orbital
Materials’ GenAI model, Linus, helps product teams
streamline material discovery and design by generating
3D molecular structures based on natural language
prompts. Successes include the development of a more
efficient and cost-effective carbon dioxide filter.
• Generate reports. GenAI can be a powerful aid instreamlining the creation of innovation-related content.
Sanofi, for example, cut out 40% of the time needed tocreate clinical trial reports by starting with a GenAIcreated draft. Since these reports are critical to the regulatory approval process, submitting them faster has thepotential to drive higher returns on R&D investment by
shortening time-to-market.
• Act as a devil’s advocate to challenge early ideas.
Another promising GenAI application is to use it asa sparring partner to strengthen ideas as they movethrough the innovation funnel. For example, Innovation
CoPilot—a proprietary BCG tool currently in development—is a GenAI chatbot that iteratively challenges
ideas at each innovation stage, helping teams enrich andimprove them.
Scale. This phase focuses on transforming innovation into
growth and value through manufacturing and commercialization. We’ll illustrate with three examples:• Support hyper-personalized dynamic customer
journeys. GenAI’s conversational skills make it a powerful personalization engine that can accelerate andenhance outreach to target customers. L’Oréal has
developed Beauty Genius, a GenAI advisor that offers
personalized beauty advice via an app. Trained on over
6,000 images as well as hundreds of thousands of customer-care conversations—and tested by makeup artists
across 50 countries using over 10,000 products—Beauty
Genius offers customers playful and interactive advice
on skin care and cosmetics.

BOSTON CONSULTING GROUP• Develop e-commerce text and imagery. GenAI is also
speeding, and decreasing the cost of, bringing products
to market. L’Oréal’s Content Lab leverages GenAI to help
create storyboards for new product launches, generatesocial media content, adapt materials for different languages, and generate images and text for product pages
faster than previously possible.
• Support and coach sales reps. Rather than using AI inplace of sales reps, leaders can use GenAI to assist themby providing a digital support team via four sales-related
personas: a talented sales assistant that can brief reps
before every call, a data scientist that can help reps find
new prospects, a personal assistant that can polish andpersonalize emails, and a wise sales coach that can help
reps become top performers. This support will improve
efficiency. But the real prize is boosting effectiveness.

Reshaping their innovation system with GenAI should bea top priority for nearly all companies. It can inspireand challenge teams. It can take critical time out of processes, freeing staff to focus on more value-added activities. And it’s likely to become table stakes for any ambitious innovator, making it an increasingly importantdimension of an organization’s innovation readiness.
However, reshaping your innovation function with GenAI is
only a first step, and one that, given technological progress,
never really ends. Not all industries need to act with thesame urgency, because each faces a different degree of
disruptive threat from GenAI. But all organizations need tostart building their capabilities. Ultimately, the big payoff
comes from moving from reshaping to inventing. It’s onlywith the creation of winning new products, services, andbusiness models that leverage GenAI that innovators havethe opportunity to achieve a sustainable competitive advantage and deliver superior value creation. And in thequest to capture the next big wave in an industry, innovation systems reshaped with GenAI will have an edge.

19About the Authors
Justin Manly is a managing director and partner in the
Chicago office of the Boston Consulting Group. You may
contact him by email at manly.justin@bcg.com.

Michael Ringel is a managing director and senior partnerin the firm’s Boston office. You may contact him by email
at ringel.michael@bcg.com.

Amy MacDougall is a partner in BCG’s Los Angeles office.
You may contact her by email at macdougall.amy@bcg.com.

Johann Harnoss is a partner and associate director for
innovation based in the firm’s Washington, DC office. You
may contact him by email at harnoss.johann@bcg.com.

Jacob Wolke-Perten is an associate director for innovation strategy based in the firm’s Berlin office. You may
contact him by email at wolke-perten.jacob@bcg.com.

Wendi Backler is a partner and director for innovation
analytics and intellectual property in BCG’s Toronto office.
You may contact her by email at backler.wendi@bcg.com.

Ketil Gjerstad is a managing director and senior partner
in BCG’s Oslo office. You may contact him by email at
gjerstad.ketil@bcg.com.

Ryoji Kimura is a managing director and senior partner
in BCG’s Tokyo office. You may contact him by email at
kimura.ryoji@bcg.com.

Beth Viner in a managing director and partner in the
New York office of BCG X. You may contact her by email atviner.beth@bcg.com.

For Further Contact

Acknowledgments

If you would like to discuss this report, please contact theauthors.

The authors are grateful to a number of colleagues fortheir assistance in the preparation of this report: Jannik
Wiegert, Alexandra Ritter, and Laura Niemann for theircomprehensive analysis; and Michael Wahlen, Jon Campos, Gabriel Wang, Duc Anh Phi, and Chensu Wang fortheir research and analytics support.

Methodology
This year’s research is based on a global survey of over
1,000 senior innovation executives that was conducted
between November 2023 and January 2024.

20

INNOVATION SYSTEMS NEED A REBOOTBoston Consulting Group partners with leaders in businessand society to tackle their most important challenges andcapture their greatest opportunities. BCG was the pioneerin business strategy when it was founded in 1963. Today,
we work closely with clients to embrace a transformational
approach aimed at benefiting all stakeholders—empoweringorganizations to grow, build sustainable competitive
advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional
expertise and a range of perspectives that question thestatus quo and spark change. BCG delivers solutions
through leading-edge management consulting, technology
and design, and corporate and digital ventures. We workin a uniquely collaborative model across the firm andthroughout all levels of the client organization, fueled by
the goal of helping our clients thrive and enabling themto make the world a better place.

For information or permission to reprint, please contact
BCG at permissions@bcg.com. To find the latest BCG
content and register to receive e-alerts on this topic orothers, please visit bcg.com. Follow Boston Consulting
Group on Facebook and X (formerly Twitter).
© Boston Consulting Group 2024. All rights reserved. 06/24

bcg.com
22

INNOVATION SYSTEMS NEED A REBOOT