For the ninth year in a row, Boston Consulting Group (BCG) has published its ranking of the 50 most innovative companies in the world. In 2012, the big news was that companies were recovering from the recession and starting to invest in innovation again.
Last year, the big news was that automotive companies were moving onto and up the list. Nine of the top 20 were automotive companies as were three of the top ten – Toyota, Ford, and BMW. Alas, the automotive innovation trend seems to have been short lived. The number of automakers on the list dropped from 14 in 2013 to nine in 2014. Of these nine, only two had moved up from the previous year: Tesla and Fiat. We learned from Rita Gunther McGrath that you can’t just turn on the innovation engine when you need it and turn it off when you don’t – but that seems to be exactly what the automakers are doing.
Software, computer, and social media companies continue to dominate the top end of the list. The top three remain Apple, Google, and Samsung though the order has changed slightly. Apple remains number one but Google has leapfrogged Samsung into the second slot.
What can we learn from this year’s list? First, the importance of culture. Second, an appreciation for three specific behaviors that promote innovation and coincide nicely with academic research on innovation.
Creating a culture of innovation requires consistency, discipline, investment, and leadership. As we learned last year, Samsung’s cultural mantra seems to be, “Change everything but your spouse and your children.” That’s a commitment that few companies are willing to make. As BCG points out, even the “breakthrough” companies that lead the innovation wave assess themselves as being little better than average.
Creating an innovation culture also requires some tolerance for failure. Not every good idea is going to pan out. Strong innovative cultures typically have the willpower to pull the plug quickly and learn from their mistakes. When failures happen, most companies will investigate the immediate problem. Innovative companies will also investigate the process that led to the problem.
Innovative cultures also tend to have a strong customer focus. They understand how customers behave and why. As BCG points out, they release “…products that customers will embrace rather than pushing new technologies simply because they are novel.”
On three points, breakthrough innovators differ significantly from strong (but not breakthrough) innovators:
So what can we learn? Innovation requires tenacity and consistent commitment. Professional athletes used to go fishing during the offseason. Now they work out relentlessly to stay in shape. So do innovative companies.
By now, you probably know that I like to mash things up in the pursuit of innovation. Mashup thinking is also a good way to do research and discover interesting correlations.
With that thought in mind, I decided to mash up Boston Consulting Group’s compilation of the world’s most innovative companies with Interbrand’s list of the Best Global Green Brands. Both studies identify 50 companies in rank order. Both tables are compiled annually; I used the 2013 list.
I first merged the lists and found that 74 unique companies occupy the 100 total slots. I divided these companies into three lists. Here’s how they break down:
The degree of overlap increases as you go up the scale. Looking at the top ten companies on each list reveals a much higher degree of correlation than is found throughout the rest of the list. On the innovation list, eight of the top ten companies also appear on the green list (not necessarily in the top ten). Similarly, on the green list, seven of the top ten companies also appear on the innovation list.
So, there’s a high degree of correlation between being green and being innovative. There are at least four plausible explanations here:
We clearly don’t have enough evidence to reach a conclusion as to cause-and-effect. However, the second hypothesis seems the most logical to me. To be green, a company needs to change its business processes. In other words, it needs to innovate. It seems logical that stimulating innovation in one area of a business would have ripple effects on other areas.
Additional findings are also intriguing:
Car companies dominate the greenovator group – of the 26 companies that appear on both lists, nine are car manufacturers (34.6%). It’s the single largest industrial segment in the list. Why would car companies lead the way? It could be that green is a good marketing tool. It could be that car companies learned their lesson in the 2008 meltdown. It could be that government mandates for higher gas mileage lead to green innovation.
Some non-green companies disappoint me – three of my favorite companies are Amazon, Apple, and Google. Only Apple makes the greenovator list. Similarly, UPS makes the green list but FedEx doesn’t. Why wouldn’t these companies want to be seen as green? That’s disappointing.
These are great brands – I recognize all of the 74 unique companies. Indeed, I’m fairly familiar with most of them. These are valuable brands and I’m sure that being seen as leader in innovation or green or both only burnishes their reputation. In fact, I think my next mashup may be a three-way: brand value mashed up with innovation mashed up with green.
In the meantime, if you can help me sort out whether green causes innovation or vice-versa, I’m all ears.
Greenovators: Apple, BMW, Cisco, Coca-Cola, Daimler/Mercedes, Dell, Ford, GE, Honda, HP, Hyundai, IBM, Intel, KIA, Microsoft, Nestlé, Nike, Nissan, Nokia, Philips, Samsung, Shell, Siemens, Sony, Toyota, VW
Innovative, Not Green: Amazon, Audi, BASF, Bayer, Boeing, BP, Dow, Exxon Mobil, Facebook, Fast Retailing, Fiat, GM, Google, Lenovo, LG Electronics, P&G, Renault, Softbank, Target, Tencent, Tesla, Unilever, Virgin, Wal-Mart.
Green, Not Innovative: 3M, Adidas, Allianz, Avon, AXA, Canon, Caterpillar, Citi, Colgate, Danone, H&M, IKEA, J&J, Kelloggs, L’Oreal, McDonald’s, Panasonic, Pepsi, Santander, SAP, Starbucks, UPS, Xerox, Zara.
Last week, I wrote about which countries are the most innovative. (Hint: Switzerland and Sweden topped the list). This week, let’s discuss which companies are the most innovative.
Boston Consulting Group (BCG) just published their eighth annual compilation of the most innovative companies in the world. BCG collected data from 1,500 executives and rated and ranked the 50 companies that are deemed the most innovative.
Innovation continues to be a very high profile objective. Over three-fourths (77%) of the respondents noted that innovation was among the top three strategic imperatives for their respective companies. This is a steady upward trend since a low point of 64% in 2009, when companies presumably had other things on their mind. This trend seems to match a similar “return to innovation” trend at the national level.
So which companies are the most innovative? Apple continues to claim the top spot but Samsung has leapfrogged over Google to stake a strong number two position. Samsung has built an innovation culture around the slogan, “Change everything but your spouse and your children.” As BCG reports, building a culture that emphasizes and accepts change is one of the keys to success.
High tech companies take six of the top ten positions. In addition to Apple, Samsung, and Google in the top three slots, Microsoft is fourth, IBM is sixth, and Amazon is seventh.
The presence of top tech companies is not a big surprise. The bigger surprise for me was that three car companies vaulted into the top 10: Toyota is fifth, Ford is eighth, and BMW is ninth. Perhaps even more impressive is that car companies accounted for nine of the top 20 slots. GM is 13th, VW is 14th, and Hyundai, Honda, Audi, and Daimler take positions 17 through 20.
BCG suggests that three major factors are pushing the car companies towards greater innovation. First, “…manufacturers are racing to meet higher fuel-efficiency standards”. Second, many companies are investigating and experimenting with electric vehicles. Third, “…safety standards continue to rise”.
What causes companies to be innovative? Based on this year’s crop of leaders, BCG notes that there are five critical factors. I’ll write more about these in the future but here’s a first take:
The Boston Consulting Group (BCG) just published a new study that compares 16 industries in their ability to deliver digital satisfaction to American consumers. What’s the worst industry? The telco/cable industry is at the bottom of the heap. What’s the best industry? Surprise … it’s personal banking.
BCG surveyed 3,135 consumers in March 2013 and measured satisfaction with 17 different digital “interactions”. These were grouped into four broad categories:
The researchers asked consumers to rate each interaction in two ways: 1) how important is it?; 2) how satisfied are you with it? With these data, we can compare expectations and how well those expectations are met.
The researchers crunched all the data and compiled the 16 industries into four categories:
Leaders – consumers had high expectations of leaders and, by and large, their expectations were met. In general, the leaders scored well across all four interaction categories, from beginning to end. (Actually, the process never really ends). The four leading industries are (in order) personal banking, online merchants, media retail, and electronics retail. Personal banking leads by a wide margin, with a total satisfaction score of 15.2, compared to 11.8 for online merchants, the second ranking industry.
Aspirants – these industries do well on the research interactions but lag on the transaction and post-transaction categories. In other words, they get off to a good start but don’t follow through well. Consumers are not displeased with aspirant performance but think it could be improved. Industries in this category are: apparel retail, airlines, investments, and hotels.
Sleepers – consumers have low (digital) expectations of sleeper industries … and those expectations were fulfilled. Sleeper industries are: supermarkets, automobiles, and real estate.
Laggards – consumers have higher expectations of laggards (than of sleepers) but low satisfaction. Laggards fall behind in all interaction categories, from research to post-transaction. Laggards include: utilities, government services, health care providers, insurance, and (worst of the worst) telco and cable
Consumers want the digital experience to offer more than the physical experience. Digital might offer more options, more information, better prices, or more convenience. It might even be fun. Generally, consumers “expect the digital experience to be local (recognizing where they are), personal (tailored to their individual needs and preferences), social (shared with their friends) – and always on.”
The study also points to the growing importance of mobile access. Roughly half of Millennials (born 1980 – 2000) use mobile devices while shopping. For older consumers, the rate is approximately one-fifth. Mobile access enables two key trends:
Showrooming – check out the merchandise in a brick-and-mortar retail outlet, then compare prices and buy online.
Omnichannel – use the entire array of online, mobile, virtual, social, and real world channels to make a buying decision.
As the authors point out, the purchasing process is no longer linear; it’s now fluid and dynamic. To succeed, companies will need to enhance satisfaction through the entire range of interactions and do it through all channels. It’s a daunting challenge. The reward, however, is a slice of the $450 billion e-commerce market that BCG projects by 2016.
Boston Consulting Group just published its annual (since 2004) ranking of the 50 most innovative companies in the world. BCG polled 1,500 executives and asked them to rank companies by innovation. More importantly (from my perspective), BCG asked the executives about their company’s plans, strategies, and tactics regarding innovation. You can find the entire report here. I’ll summarize some of the key findings below.
Perhaps the most important finding is that investment in innovation has recovered from the turmoil of the recession. Seventy-six percent of executives said that innovation is a “top three” priority — the highest level in the survey’s history. And they’re putting their money where their mouth is — 69% said they plan to increase spending on innovation in 2013, the highest level in six years. Further, companies that emphasize innovation tend to generate superior total shareholder returns (TSR). The most innovative companies of 2012 generated TSR premiums (compared to less innovative companies in the same sector) of 6.3% over three years and 3.5% over ten years.
How did these companies become so innovative? BCG identifies six key factors:
Get customers involved early — innovative companies get customers involved to generate new ideas and to separate the wheat from the chaff. One of the key reasons to involve customers is to ensure that weaker projects “fail fast and fail cheap”.
Use data to drive tough decision making — it’s hard to make tradeoffs among promising projects. Which ones will succeed? Which ones will simply be distractions? The most innovative companies allow executives to make firm decisions for “the right reasons on the basis of the right data”.
Think strategically about tradeoffs — “Best practice companies do not make [tradeoff] decisions in reference to last year’s budget but rather on the basis of the size of future opportunities.”
Ensure senior leadership commitment — “The most commonly cited force driving innovation was the CEO.” I don’t mean to brag but this is exactly what I found in my dissertation, a study of innovation in colleges and universities in 1984. It’s the person at the top who sets the innovation culture.
Envision innovation as a holistic system — don’t just try to optimize one piece of the puzzle. Create a strong vision for the need for innovation throughout the company and then build the enablers, including culture, processes, and organization.
Optimize intellectual property to create value — lots of companies have bright people. The most innovative companies also have collaborative processes and decision rules to create and capitalize on intellectual property.