Companies in the Gulf Cooperation Council (GCC) prioritise innovation more than ever—with 85% of senior executives in the region ranking it among their organisations' top priorities, slightly above the global average.

This strong commitment to innovation reflects the region's ambition to lead the global knowledge economy. A new report released by Boston Consulting Group (BCG) highlights this positive trend while noting opportunities for GCC firms to enhance their innovation readiness.

For its annual innovation study, Innovation Systems Need a Reboot, BCG assessed companies' innovation maturity and surveyed senior innovation executives worldwide, including those in the GCC region.

Innovation systems need reboot

While innovation continues to demonstrate value, the study shows that innovation systems globally need a reboot. Innovation priority remains at an all-time high, with 83% of global companies ranking it as a top-three priority. However, innovation readiness has sharply declined worldwide, from 20% two years ago to 9% last year and just 3% this year globally. This global trend is even more pronounced in the GCC, where firms exhibit even lower innovation readiness than the global average.

The study reveals that while GCC organisations prioritise innovation at a higher level than their global counterparts, they face greater challenges in translating that ambition into readiness. This aligns with global patterns where companies across various regions are struggling to match their innovation priorities with practical readiness, though the gap appears more significant in the GCC.

"We are seeing GCC organisations prioritise innovation, with 85% of executives ranking it highly. However, converting this ambition into readiness remains a challenge," said Faisal Hamady, Managing Director and Partner at BCG. "To close this gap, it is crucial to strengthen the link between innovation and business strategy. Organisations must benchmark processes, align them with strategic goals, and leverage Generative AI while addressing talent constraints and rising capital costs."

Talent challenges in a changing landscape

When GCC business leaders were asked to rank the challenges facing their innovation teams, talent pool constraints emerged as one of the top concerns, alongside the rising cost of capital.

"The GCC is in flux when it comes to attracting top talent," noted Thibault Werle Managing Director and Partner at BCG "While Dubai, Abu Dhabi, and Riyadh have all ranked highly as cities of choice for global talent, the region is still in the nascent stages of building its talent pool. However, as we've seen with many initiatives in the GCC, if you build it, they will come. The rapid development of innovation ecosystems in these cities will likely accelerate talent attraction in the coming years."

The study also highlighted the need for a broader ecosystem approach to innovation in the GCC, recognising the crucial role of public sector leaders and national strategies in driving innovation alongside corporate efforts.

Generative AI adoption on the rise

The study found that 84% of GCC firms are starting to use Generative AI (GenAI) to drive innovation, reflecting the region's embrace of cutting-edge technologies. However, as with global trends, most organisations are still in the early stages of GenAI adoption.

"GenAI presents a significant opportunity for GCC innovators to boost efficiency and bring fresh perspectives to their organisations," said Hamady. "As the region continues to invest in digital transformation and AI capabilities, we expect to see more widespread and sophisticated use of GenAI in innovation processes."

Six key recommendations for linking innovation with business strategy

Practical foresight in strategy is crucial for GCC companies to succeed. Companies can position themselves at the forefront of their industries by being proactive, anticipating future trends, and aligning innovation efforts with strategic goals. To improve innovation readiness and link innovation with business strategy, BCG recommends focusing on six key elements.:

•Executive ownership: Ensure innovation is championed by the CEO or other prominent members of the C-suite.

•Clear sense of purpose: Develop a shared story on the purpose of innovation and how it supports the company's strategy.

•Focus on competitive advantage: Explicitly focus on opportunities where the organisation has an explicit right to win.

•Specified domains: Centre the innovation portfolio on areas that support the overall strategy.

•Target portfolio structure: Create a vision for how resources should be deployed across the innovation portfolio.

•Quantified objectives: Establish a fact-based perspective on how innovation contributes to financial goals.

Looking ahead

As GCC economies diversify towards knowledge-based sectors, strategic innovation becomes crucial. By addressing current challenges and aligning innovation with business strategy, GCC companies can compete globally and drive regional economic growth.

Leveraging emerging technologies like GenAI while maintaining a clear strategic vision will be instrumental. To close the readiness gap, leaders in the GCC need to sharpen the link between innovation and strategy while leveraging AI.

Additionally, putting in an outsized effort to address talent constraints and funding challenges, especially in light of rising capital costs, will be critical. This approach will improve innovation readiness, enhance talent attraction, and accelerate technological advancement, positioning the GCC as a global innovation hub.

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