The Progress Economy

Are you happy with your innovation results or are you like 94% of executives McKinsey found that are not? Here’s what causes this innovation problem.

Note: this content will be a rewrite of this article: https://solvinnov.com/innovation-problem/

The innovation problem

As an executive, or innovation lead, you’re trying hard with innovation initiatives. You’ve sponsored hackathons, ran ideation sessions, invested in idea management tools, tested the waters with getting customers to help through open innovation, and likely more.

But, if you’re honest, have these initiatives moved the needle? Are you one of the 6% of executives that McKinsey found were happy with their innovation activities. Or are you in the wider company of the 94% that are unhappy?

We believe Innovation is key to growth. 89% of the same executives McKinsey surveyed agree with that. And it has recently been supported by the award of the 2025 “Nobel prize” in economics to researchers “for having explained innovation-driven economic growth”.

Yet, despite exponential growth over the last few centuries, looking at the recent decades shows a slowdown. So much so, that the IMF chair recently warned that we were heading for the “tepid 20s” – a period of low growth.

This is our innovation problem.

Is a survey from 2008 still relevant? Let’s take a deeper look at some more recent analysis.

A modern, deeper, dive

Consider the findings from Boston Consulting Group’s 2024 global innovation study entitled “Innovation systems need a reboot“. A record 83 percent of senior leaders rank innovation among their top three priorities. Yet only 3 percent of organisations qualify as “innovation ready” – capable of consistently translating ambition into results. Readiness has declined sharply since 2022, where it was 20%, even as rhetoric has intensified. Innovation is treated as essential. It is rarely treated as executable.

The gap becomes starker in research from NTT DATA’s 2023 Innovation Index. 96% of executives say innovation will be a primary source of growth. Only 21% say they have definitively met their innovation goals. More than half describe their product and service innovation performance as average or worse. Nearly two-thirds say the same about speed to market. In other words, belief is universal. Performance is not.

Leadership anxiety reinforces the point. In the 2025 Global CEO Survey from PwC, nearly 40 percent of CEOs state that their companies may not remain economically viable within a decade if they stay on their current path. That is not incremental concern. It is an admission that existing innovation and adaptation mechanisms are insufficient.

Even the current AI wave – often framed as the great corporate reset – reveals the same pattern. Large-scale deployments remain rare. Many initiatives stall at proof-of-concept. With only a small minority of organisations report enterprise-level impact. Back to BCG’s report: “Although 86% of Organizations Are Experimenting with GenAI for Innovation, Only 8% Are Applying GenAI at Scale”. Or from TechRadar, “only around 36% of organisations have successfully scaled generative AI solutions, and only 13% report significant enterprise-level impact”. The technology is not the constraint. The ability to convert experimentation into scaled progress is.

Taken together, these findings suggest a consistent pattern:

• Organisations prioritise innovation.
• They invest in innovation.
• They announce innovation.
• But they struggle to operationalise innovation in a way that produces sustained, systemic impact.

This is not a creativity problem. It is not a funding problem. It is not even primarily a technology problem. It is a framing and execution problem. Leaders are trying to drive growth using innovation models built for an earlier economic logic. The result is motion without meaningful progress — initiatives launched, portfolios expanded, labs funded, yet viability concerns intensify.

What are the symptoms?

What then is the cause of our disappointment? And what is the solution? let’s start with the first of those two questions.

Writing / Editing below here

The cause

chasing creating/adding value – a concept hard to define and agree upon – is the root cause of the innovation problem

I claim the root cause of our innovation problem is our focus on innovation creating/adding value.

This is problematic

The solution

text copied from elsewhere that might be useful

today

Back in 2013, Edison, bin Ali and Torkar (2013) studied innovation in the software industry and found 41 (!) separate definitions of innovation. Where typical definition includes three aspects. Innovation:

• is a process and an output
• that creates something new/novel (where that something could be products/ goods/ services/ processes)
• that has value

Typically value focusses on value embedded by the maker. Over at Idea2Value.com, they summarise 15 innovation experts’ definitions, finding only 40% noted value to customer.

Even the OECD’s definition focusses only on the supplier/creator.

An innovation is a new product or process (or combination thereof) that differs significantly from the unit’s previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process)

The Oslo Manual (OECD, 2020)

ISO 50009 – Innovation Management – Fundamentals and Vocabulary

Now if we look at the International Standards Organisation definition from 2020, they define innovation as:

3.1.1 Innovation: new or changed entity¹, realizing or redistributing value²

¹anything perceivable or conceivable. Example: product, service, process, model, method, or combination thereof.

²gains from satisfying needs and expectations, in relation to the resources used. Example: revenues, savings, productivity, sustainability, satisfaction, empowerment, experience, engagement, trust.

note: innovation is an outcome. If used referring to activities and processes, some form of qualifier is required, e.g. ”innovation activities”

note: novelty is relative to, and determined by the perception of the organisations and interested parties

ISO 56000 (2020) – Innovation Management – Fundamentals and Vocabulary

So we could perhaps say innovation is “a new or changed service mix and/or series of proposed activities, realising gains in progress in relation to resources used”. But ISO then go on to clarify that:

value can be created, realized, acquired, redistributed, shared, lost, or destroyed…value is relative to, and determined by the perception of the organisations and interested parties

Sadly, we’re back to the old school value-in-exchange thinking.

invention vs innovation

Also missing from many definitions is the difference between inventing and innovation. That’s to say coming up with ideas (invention) and implementing them (innovation). Back to Idea2Value.com, they found only 60% of definitions they looked at include “having or executing the idea”.

roots are in manufacturing

Another finding worth considering is from Gallouj and Weinstein’s “Innovation in Services“. And it is that we base most of today’s innovation theory on technological innovation from within manufacturing companies. Which is exactly what we see in the 2020 ISO definitions around value.

The problem with this is it risks driving us to be short sighted.

When we think in terms of manufacturing, we immediately think in terms of goods and their features. Often in a manner Kottler shows us in his ”Principles of Marketing”.

And so we embark on feature innovation. Convincing ourselves that user needs are found behind them. We’re all familiar with the ”add another razor blade” syndrome. Where shaving technology innovation over the last few years has really been constrained to adding yet another razor blade to the razor head.

Of course we can be disciplined and not let feature innovation lead us. But does innovation in progress propositions (service) work the same as innovation in manufacturing? And does it matter?

service vs manufacturing innovation

From a traditional goods-dominant view of the world we can say that service is eating the world. And in Chesbrough’s “Open Innovation” he nicely captures the perceived shift to a service economy. From predominantly agricultural, through goods and towards today’s predominantly service economy. Which I recreate in the left hand of the slide image below.

Whereas our underlying service-dominant logic informs us that everything is, has, and will be a service. So the shift we see is actually in skills and competence sought. You can compare both these views above.

These shifts can also be seen through the lens of the service-service continuum.

Where on the left we have enabling propositions. Which can be loosely seen as enabling self service. Through to relieving propositions on the right. Which is where the seeker hands all responsibility for progress to a helper.

But why do we see such a shift? the reasons for this shift in skills sought are numerous. I categorise them as: economic, user behaviour, asset and value in data.

Noting that these reasons are sources of innovation to move along the service-service mix from enabling towards more relieving propositions.

But, are there differences between manufacturing and service innovation? This is something Coombs & Miles take up in “Innovation, Measurement and Services: The New Problematique”. They offer three potential views: assimilation, demarcation and synthesis.

assimilation, demarcation or synthesis?

With Coombs & Miles introducing these three views, Witel et al (2016) provide a worth reading and comprehensive literature survey around them in “Defining Service Innovation: A review and Synthesis”.

In the progress economy, we see goods as one equal level component in the service mix. Therefore, we can’t say innovation is different between goods (manufacturing) and service. That leads us, by definition, to reject the demarcation view – where manufacturing and service innovation are seen as different.

That leaves the assimilation and synthesis views. Where the assimilation view tells us innovation is the same for service and manufacturing. However, that causes us a problem, since innovation in manufacturing is seen as driven by value-in-exchange – the basic belief in goods-dominant logic. See table 7 in Witel et al (2016).

And, value-in-exchange is opposite to our underlying service-dominant logic – where we see value-in-use. So the assimilation view can also not be the correct view.

Thus, the synthesis view is appropriate. That is to say:

innovation in the progress economy is essentially similar to, yet has aspects that are not as important, if at all, in manufacturing innovation.

With the caveat that service-dominant logic informs us that goods are transportation mechanisms for service. And therefore also follow value-in-use rather than value-in-exchange.

Why did we look at this? Isn’t it comforting that we can build on existing theories as long as we’re careful?

And actually, the progress economy’s repositioning of value, focus on progress, and the introduction of the service mix as well as the service-service continuum, ha