Strategy. Innovation. Brand.
The Most Innovative Companies of 2014
I can see clearly now.
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:
- They cast a wide net for ideas – this corresponds nicely to the “W” in the Heath brothers WRAP process: widen your options. BCG investigated a dozen different sources for innovative idea. Breakthrough innovators lead other companies in using ten of the twelve.
- They use business model innovation more – when we speak of innovation, we’re often talking about products. The breakthrough companies also innovate the way they do business. It’s a new wine if old bottles concept; it’s hard to take something radically new and sell it the same old way. It appears that breakthrough companies are also more likely to use ambidextrous organization models.
- They have cultures geared to breakthrough success — as Rosabeth Moss Kanter points out, it’s hard to measure the impact of a radical innovation with old tools like ROI and NPV. Breakthrough innovators use different metrics, like proportion of sales derived from recent products. They also pay more attention to hiring the right people and less to move product through the pipeline.
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.
Are Green Companies More Innovative?
Mashing up green and innovation.
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:
- 26 companies – the “greenovators” — appeared on both lists; that’s 35.1% of the 74 unique companies. (These companies are listed in alphabetical order below).
- 24 companies (32.4%) appear on the innovation list but not the green list.
- 24 companies (32.4%) appear on the green list but not the innovation list.
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:
- Innovative companies are forward thinking and, thus, also interested in being green.
- Green companies need to innovate in a number of ways to reduce their environmental footprint. The innovation spills into other areas as well.
- The two lists are actually measuring the same thing.
- Some third factor is causing many companies to be both green and innovative.
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.
Which Companies Are The Most Innovative?
Change Is Coming
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:
- Top management is committed to – and fosters a culture of – innovation as a competitive advantage. Like Samsung, the leaders of the leading companies push hard for innovation.
- They leverage their intellectual property. They understand the rules of the IP game and they manage – sometimes buying, sometimes selling – complex portfolios of patents and other intellectual property.
- They manage a portfolio of innovative projects. They generally guide multiple projects simultaneously. Some are world changers; others are incremental enhancements. Management understands the project process and has a good sense of when to fish and when to cut bait.
- They have a strong customer focus. They continually ask the question, “What’s good for the customer?”
- They develop “strong processes, which lead to strong performance”. They often have standardized processes that require inter-disciplinary leaders to make conscious decisions about where to invest (and where not to).
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