McKinsey & Company recently reported that most leaders are cutting or freezing innovation budgets, yet the data is clear that companies that keep investing consistently outperform their peers.
This rings true from what I’m seeing across the insurance sector. Leaders are under pressure to do more with less, boutique consultants are closing their doors and returning to client-side roles, and even major consultancies are reporting declining revenues for a second year.
So where should leaders focus their energy? McKinsey’s latest insights highlight three points that matter right now:
1. AI as a force multiplier
AI can unlock significant R&D value by generating, testing, and refining ideas faster. Over the past 18 months we’ve been experimenting with AI in our own work, particularly to accelerate research synthesis. Our results highlight that when used deliberately, AI can save clients significant time and money, helping innovation leaders move with speed and confidence without sacrificing quality.
2. The real barriers are human, not financial
McKinsey points to fear of criticism, uncertainty, and career risk as the biggest blockers. Our own research confirms this with only 1 in 10 people feeling it’s always safe to share half-baked ideas. That fear is crippling progress. Leaders who create environments of psychological safety and reward experimentation will see outsized returns, even without big budget increases.
3. Breakthroughs are strategic, not cosmetic
The most powerful innovations go beyond products — they reshape business models, care pathways, and entire ecosystems. Results from our Get S#!t Done Scorecard show 0% of leaders say their innovation team always links work to strategy, and half admit it rarely or never does. Poking around the edges won’t drive long-term success; systemic change will.
Enter Innovation COMPASS™
This is exactly why we built Innovation COMPASS™ — a practical framework that helps leaders in complex organisations see where their real capability gaps lie.
Innovation COMPASS™ helps leaders navigate uncertainty with seven essential links that create momentum, protect progress, and keep strategy connected to delivery. It is a practical framework for leaders who need progress in real systems, not a theory for perfect conditions. Like a compass, it provides direction when paths are uncertain. The links keep your work aligned to strategy, protected from business-as-usual pressure, and moving through visible wins.
For modern leaders, the takeaway is simple: you don’t need bigger budgets. You need smarter capability.