What’s Driving Consolidation in the Innovation Software Arena — and What It Means

By Alex Slawsby and Scott Kirsner, InnoLead |  February 29, 2024

In recent years, we’ve been tracking consolidation among the providers of innovation management software. Most recently, HYPE Innovation of Germany announced its acquisition of Planbox, based in Canada. Wellspring’s acquisition of Sopheon just closed in February. In 2020, Wazoku acquired the crowdsourcing platform InnoCentive; Planbox acquired Imaginatik in 2019; and in 2018, Planview bought Spigit.

Here are five observations about what’s driving consolidation — and what it means for both software providers and software users. This leverages some of our latest data, collected as part of our Innovation Software 2024 initiative.

1. New innovation teams are not being created at the same rate they were a decade ago. That limits the growth of the innovation management software category — the home of firms like HYPE, Qmarkets, Sopheon, and Wazoku — forcing existing providers to compete even more intensely for each customer.

2. As we’ve written a number of times, if you’re a player in this space, you’re always competing with free: trying to convince leaders to pay for new software when their innovation teams are already using mainstream productivity platforms like Office 365 or Google Suite for many tasks. You’re also trying to overcome switching costs — perceived and real — to get leaders to shift from these mainstream platforms (or from a homegrown or competitive innovation platform) to yours.

Data from Q1 2024 survey of 96 respondents working in large organizations.

Data from Q1 2024 survey of 96 respondents working in large organizations.

3. Those forces are leading providers to rely on M&A to fuel their growth, bringing together complementary or competing platforms to create end-to-end solutions — or simply to buy customers. Fewer large providers of innovation management software will have more resources to devote to making the case to switch to their solutions. This makes life even harder for smaller innovation software companies and new entrants who already have to address skepticism like, “Why shouldn’t we just go with the analyst upper-right quadrant / biggest market share solution?” More M&A activity is likely on the horizon.

Data from Q1 2024 survey of 96 respondents working in large organizations.

4. Now to the impact of generative AI. Generative AI tools — both free and paid like ChatGPT, Claude, Copilot, Google Gemini, and Perplexity — are already being used by roughly half of innovation teams as part of their work, and our survey data reveals that many leaders expect such tools will impact their use of innovation management software. That could mean supplementing it — or supplanting it. Mainstream productivity software suites and applications are also now incorporating generative AI, positioning them as potential pieces of the innovation puzzle as well.

5. New standalone generative AI-based innovation platforms (like those from FifthRow / U+ and Shift AI / Mach49) are also emerging. These platforms are designed to operate more autonomously — users provide some simple inputs, and then the platforms work through innovation pipeline steps in the background. Example activities include performing market scans; identifying priority areas to focus on; creating and interviewing “synthetic users”; and even building landing pages to validate top ideas. This is a newly-emerging category to be sure, but the existence of these solutions raises important questions for the future of innovation management software — as well as innovation consultancies, venture studios, and even corporate innovation teams and processes.

So, to the path forward…

What does this mean for corporate leaders?

  • The range of tools that you can use is expanding and diversifying every day, and it can be unclear how much any given tool will help; whether they will be around for long; and whether they will deliver value beyond the “initial cool demo” phase.
  • As a result, you must “practice what you preach.” Experiment with new generative AI capabilities in your mainstream software applications. Play with new standalone generative AI tools. Engage with innovation management software companies to understand how they’re leveraging and integrating generative AI features.
  • One result of consolidation can be shifting sands under your feet: do important features or entire platforms get sunsetted? Do client support team members vanish? Do pricing packages change? That’s another argument for being aware of alternatives; experimenting with some; and having a “Plan B.”
  • Ultimately, as it’s currently difficult to secure budget for software, proving ROI over short time periods will only become more important. While “free” or low-cost may be the answer in some cases, innovation management software companies able to help you win over internal skeptics and deliver tangible outcomes will be the answer in others.

What does this mean for innovation software companies?

  • For the foreseeable future, there will be a “traditional” innovation management software market consisting of a few large companies and several smaller ones.
  • The external pressures on this market will only grow, however, as leaders take advantage of an expanding array of (frequently cheaper) generative AI-enabled mainstream software packages and generative AI-centric new entrants to support their innovation activities.
  • As a consolidator, you will need to allay client fears and anxiey about changes to your team, service levels, and your product. For competitors not involved in consolidation, that anxiety and those changes can create an open door for new sales.
  • Proving ROI and highlighting their track records of client successes will therefore only become more important. To contend, innovation management software companies should ensure they are not competing on features and functionality, but on friendly ground; namely, how their intimate understanding of the daily highs-and-lows of corporate innovation leaders and teams — and their past delivery of client outcomes — makes their higher price a bargain.

(Featured image by Lance Grandahl on Unsplash.)