THINKING AHEAD: Google founder Larry Page is among those who keep pushing the boundaries of innovation

For estate agents, the mantra is simple: location, location, location. For chief executives, the mantra of the moment sounds similar — innovation, innovation, innovation — but sadly it’s much harder to pin down.

According to a survey of 765 chief executives from all around the world carried out by IBM, 65 per cent are convinced that they will have to make fundamental changes to their businesses over the next two years, and that means innovation.

And, where innovation might once have meant changing the colour of your packaging or getting your Indian telesales staff to adopt English names, most CEOs today think these changes can’t be limited to their products and services but must involve shifts in their underlying business models.

The pace of change across all markets and sectors is expected to continue but will probably increase over the next few years. The CEOs appear to believe that any company that is not prepared to re-examine and adjust its most fundamental processes would be wise not to plan much corporate hospitality for the London Olympics.

For those actually in charge of planning things for the next couple of years, that’s a daunting thought. The changes will clearly be different in different industries and markets, but there’s an underlying understanding that “innovate or die” is no longer simply a useful marketing phrase used by management consultants but is a very real directive for any serious business operator.

For different companies it means different things, but the principles are the same. Patrick Macdonald, chief executive of John Menzies, says his company knows it has to innovate because its traditional mainstay, printed publications, is far from being a growth area.

“We recognise the need to apply our logistic skills to doing something new, and we’ve done that by building up a new division which does aviation services, everything from passenger check-in to air cargo handling to pushing back planes on the ramp,” he says. “You have to give it a go, recognise what you haven’t got right, change it again, try again, change it again. Most of the enduring rock bands of the Seventies didn’t get it right until about the third album, and it’s the same sort of thing.

“It’s going really well now, and is undoubtedly a business for the future. But a few years ago we were in second-album syndrome.”

In the financial services industry, the great spur to innovation, beside dramatic technological changes and increased sophistication among customers, is regulation. Working out how to deal with the challenges posed by regulatory changes around the world has been occupying the industry’s sharpest minds for some time.

Brendon Hopkins, CEO for UK and Europe for Standard Chartered Bank, says changes in regulation will set the parameters for how his organisation does business. “I don’t see regulation plateauing,” he says. “We have a UK head office, but we’re primarily located in Asia, Africa and the Middle East, so I think we’re going to see a lot of regional developments as regulatory functions in the OECD markets gradually migrate into our core markets.

“A lot of our investment spend has to be deployed in dealing with regulation. So the challenge is doing that. If we do it in a smart way and make it cost-efficient and make it work well from a process perspective within the organisation, then we can have better risk management, we can have better management of capital and we can gain some competitive advantage around that. That’s our focus.”

At IBM, the experience of some very dark years has made innovation an organisational obsession. Steve Wood, the company’s global M&A leader, describes IBM as being on a journey of transformation.

“It’s moving from whatever vision of it people had some time ago to being a much more service-oriented business,” he says. “We still have a lot of the components that built that up, but if you look at what we actually do rather than just thinking of us as a technology business you get a very different view.

“We’re working on traffic management, on health care, on anthropological research mapping DNA. We’re working with organisations that include not just companies but charities, benevolent organisations and governments across the whole spectrum of activities. When you look at a lot of those things you wouldn’t imagine that we’d be there, or that we’d have the skill set to be there, or even see that we are there. We’re changing society.”

Doug Mitchell, managing director of 3M UK, says his company has also made innovation part of its everyday existence. “It’s probably different for different companies, but for our company innovation is incredibly important,” he says. “For a company that has something like 55,000 products and is bringing out dozens of new products every year, our growth is fuelled by innovation.

“It’s always very high on the agenda. We spend a lot of time and energy keeping the culture of innovation alive in our company.”

He says researchers within 3M can spend 15 per cent of their time on projects that do not have to be corporately approved, an approach that some companies might think frighteningly radical. “It’s one of those things that’s embedded in the culture,” he says. “People work on stuff on their own, and sometimes they come up with great ideas that can be developed into projects, and sometimes they emerge with projects that you thought you’d killed, but they’ve got some new ideas or applied a new technology to it.

“It’s about having a storytelling culture. There are inventors who are famous inside the company, and a driving force for people to bring ideas and drive them through to finished products is to be one of those guys, to be talked about all the time. It’s a really big deal. We all know the stories of how masking tape or Post-it notes were invented and it’s told and re-told.”

Simon Guild, president and chief executive of MTV Networks Europe, says that although innovation is essential, changes to the business model must be undertaken with great care. “Our business change was to roll out a huge number of channels and then build a bunch of organisations in every country that could then do more products. We’ve created something that I think will be the building block for the next stage.

“But I wouldn’t recommend changing your business model every year, because it’s incredibly painful for the organisation. You have to give people a sense of what it’s all about and a sense that it’s not going to change tomorrow.”

For Australian Trevor Matthews, CEO of Standard Life Assurance, companies in the UK could learn a lot from his native country about how to innovate. “In Australia you can say ‘Jeez, I’ve found a good idea, let’s do it’. And the people around the table will say ‘Yeah, let’s do it’. Sometimes it works, sometimes it doesn’t, but you can change as a result. Over here it’s analyse, analyse, analyse, report, report, report.

“I say to the people who report to me I don’t expect them to dream up new ideas themselves because there aren’t that many new ideas in financial services, but I really do hold them accountable for scanning the world and seeing what’s going on.”

BT is another company at the front line of the innovation battle, because failure to innovate in the telecom market can mean a swift and brutal demise. Matt Bross, BT’s chief technology officer, says the company is engaged in a constant process of generating new ideas, all aimed at one objective. “The innovations in BT that I hope will be the most meaningful over the next couple of years are those that enable us to enhance the quality of people’s lives or the success of businesses that choose to do business with us. If you manage that then you develop stickier relationships with your customers.”

And there’s the rub. You can innovate as hard as you like, but in the end success comes down to what the customer wants. And that’s as mercurial as ever.

“There’s not a crystal ball on what customers want,” says Bross. “Often customers don’t know what they want. But they will always know good when they see it.”