Nearly every second company lacks the necessary innovative strength

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Berlin It was not so long ago that Chancellor Angela Merkel warned companies against too much self-assurance in their typical pack of sentences. Given the pace of technological development and changes in the world, she is a little worried that "in the German economy, the willingness to go disruptive ways and to choose new approaches, could be a little slowed down, because today is still quite good stands, "said the head of government in June at the Day of German Industry.

In a nutshell: Faced with ever shorter innovation cycles and the fact that pioneering inventions now mostly come from abroad, Germany's successful industry must be careful not to fall behind in international competition. This is also shown in a new study by the Bertelsmann Foundation and the research institute IW Consult, which is exclusively available to Handelsblatt.

Accordingly, only a quarter of companies have the necessary innovation competence and culture to secure their competitive position in the long term. On the other hand, almost half of the companies missed in the past few years to adapt their innovation profile to new conditions. This is especially true for small and medium-sized enterprises (SMEs).

"If these SMEs miss the time for the necessary structural change to become more innovative, they and their employees can quickly become victims of changed market conditions," warns Armando García Schmidt of the Bertelsmann Foundation.

For the study, more than 1,000 industrial companies and industry-related service providers were surveyed on factors such as newly introduced product or process innovations, their networking with academia, their competitive position or the organization of research and development. From the survey results, the researchers subsequently developed seven different innovation milieus to which the individual companies can be assigned.

Chemistry and Pharma are technology leaders

Six percent of companies can therefore call themselves technology leaders. They continue to push the technological barrier further outward, which is reflected, among other things, in a large number of patent applications and a strong networking with science. The technology leaders are primarily found in the chemical and pharmaceutical, plastics and metal and electrical sectors.

Almost one-fifth of companies count the study authors as "disruptive innovators". This milieu is characterized by a high willingness to take risks and the courage to undertake radical innovation projects, which are often developed with the involvement of all employees apart from traditional hierarchies. Accordingly, many start-ups can be found here. Almost a quarter of the companies in this group were founded only in the past ten years.

At the other end of the scale, the leading group faces 46 percent of companies that are not very innovative at all. While the majority are open to new technologies, there is no clear strategy. In the best case, innovations succeed to a certain extent at random. Or the companies are well connected with their customers and benefit from their suggestions to develop and improve their products and services.

Thus, innovations are not actively promoted here, but rather taken up passively. In particular, companies from the construction, logistics and wholesale sectors as well as many industry-related service providers show little innovation in their own right – and almost all of them are medium-sized companies with annual sales of less than 50 million euros.

Every ninth company, even here almost exclusively small businesses, does not consider innovations to be relevant to competition or is unable to implement them. "The result is a cycle of non-innovation-willing and non-innovating skills, which continues to be continuous," says the study. These companies are most likely to be forced out of the market.

Because innovation success depends directly on economic success. For example, the net return on sales, that is, the share of profit in sales, is 33 percent higher among the surveyed "disruptive innovators" than the average of all milieus. Employment has also risen twice as fast among the innovation leaders identified as it has in the case of non-innovation companies.

Slow broadband expansion slows down innovations

The fact that especially small and medium-sized enterprises fall behind in the development of new technologies, lead the study authors back to the fact that the degree of digital maturity is still very low for them – also because they often do not have their headquarters in broadband-supplied metropolises or too put little money in digital technologies. While the "disruptive innovators" invest an average of 5.8 percent of their turnover in the digitization of processes and business models, across all milieus there are only 3.4 percent.

The policy must "invest primarily in the classic and the digital infrastructure, so that the large number of SMEs and companies in rural areas do not lose the connection," advises Bertelsmann expert García.

However, the companies themselves can do more for their innovation success, the study authors are convinced. For example, in networks or clusters, projects could be jointly managed that a single company would not be confident about.

On the other hand, the researchers do not consider the federal government's tax incentives to be effective. The planned funds of a good five billion euros for the years 2021 to 2024 are too low and would also "distributed by the watering can principle".

Better would be targeted support instruments that support the catching-up process of SMEs, set the right framework conditions for technologically savvy start-ups and strengthen basic research, says the study.

More: The US facility Darpa is a role model of the new "Agency for Jump Innovations". Her boss explains how he looks for German technology pioneers.

. (TagsToTranslate) Innovation (t) digitizing (t) companies (t) Competition (t) SME (t) Technology (t) Research (t) Investments (t) study (t) Economic policy (t) corporate governance (t) Bertelsmann ( t) IW Cologne

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