The World’s Most Innovative Companies

"Tracking innovation results is hard. You can't reduce it to a single number."

--Business Week

Business Week and the Boston Consulting Group are out with their annual list of the 100 most innovative companies. Over 1,070 executives from the largest 1,500 global corporations (capitalization in US dollars) returned surveys asking 19 general questions on innovation and an optional eight questions on metrics. To avoid vote stuffing, executives were asked to identify the most innovative company outside their own industry.

Companies were ranked on process, product and business model innovation and the chart also showed companies’ 10-year margin growth and stock return.

Here are some of my thoughts about the report:

Innovation vs. perception. First, the survey does not really show which companies are the most innovative. It shows which companies the surveyed executives perceived to be the most innovative. Few, for example, will argue that Apple (number 1 on the list) is not a great innovator. But it is also a great marketer. By marketing innovation as a product in its own right, Apple gets a much bigger bang for its innovation buck. One could also question whether Microsoft deserves to be number 5 on the list. The company makes most of its money on ideas copied from others. It has not released a new version of Windows in five years and its Google strategy is still a work in progress. I suspect that there is some cognitive dissonance going on. How can a company be this successful and not be a great innovator? Good question.

Time of innovation. Many of the companies on the list haven’t come up with anything really big lately. Wall-Mart’s biggest ideas for 2005 were testing an up-market store in Texas, launching a PR offensive, and moving into urban areas (so, where else is left?). Or what about Dell? Yes, they dropped to 14 from number 6 on the list. But what big innovation has Dell come up with in the last several years? The really big innovators for 2006 may be the ones we hear about in 2008, or later.

Clarity of innovation. One of the things the survey makes clear (and the reason for the eight optional survey questions) is that innovation is very hard to measure. Financial results (again, Apple is a good example) are not a reliable indicator — and they are very much a lagging indicator at best. If you can’t quantify innovation, how do you quantify a return on innovation? Things get even murkier if you try to draw a fine line between innovations that are “just more of the same only much better” and innovations that make previous solutions obsolete.