Apparently, no company is too old to innovate. That’s one theme of the Boston Consulting Group’s annual list of the world’s most innovative companies.
For the first time, more automobile manufacturers than technology companies are in the top 20, and several carmakers moved rapidly up the list.
Apple, for the ninth consecutive year, maintained the top spot on the list, which has been compiled all but one year since 2005. Samsung nudged out Google, last year’s No. 2, for second place in 2013.
Toyota, a company founded in the 1930s, leads the automotive surge at No. 5. Ford and BMW are also in the top ten and among nine car companies in the top 20. Volkswagen moved up 31 spots from last year’s list to No. 14 this year.
The report cites several factors for the presence of more automakers on the list. Companies in an industry regarded by some as staid are trying to meet increased fuel-efficiency standards, doing so by developing improved hybrid and electric models, more efficient internal components and lighter car bodies, the report says. They’re also striving to make vehicles safer with such innovations as self-braking and vehicle-to-vehicle communication.
Perhaps the biggest changes are occurring in in-car entertainment and communication systems, where consoles aren’t just for the speedometer any more. Increasingly, consumers expect their cars to be computers on wheels, where music and video players, mapping software and even wireless internet connectivity are available and the cars can “talk” with their personal mobile devices.
GM, which ranks No. 13 on the BCG list, up 16 spots from 2012, has a chief infotainment officer in charge of just that type of innovation.
Doug Roosa, CPA, CGMA, GM’s director of internal controls, said finance is positioned to advocate for innovation but also to track progress.
“The intersection of finance with innovation risk is encouraging the organisation to give consideration to innovation,” Roosa said during an interview at the American Institute of CPAs Global Manufacturing Conference in October. “Not to stand in the way of it, but to be an advocate for that, and helping find metrics that can measure the success of that innovation … and helping hold people accountable for driving results that ultimately come from that innovation.”
The companies are picked by a survey of more than 1,500 senior executives in more than 20 countries and also by several financial measures. Respondents’ votes count for 80% of the ranking, followed by three-year total shareholder return (10%), three-year revenue growth (5%) and three-year margin growth (5%).
BCG has identified five attributes that separate strong innovators from less successful ones:
- Their top management is committed to innovation as a competitive advantage: Nine of ten strong innovators say leadership is committed to innovation, compared with less than half that at weak innovators.
- They leverage their intellectual property: Instead of viewing the protection of IP rights as a defensive strategy, top innovators see it as a way to establish a competitive advantage.
- They manage a portfolio of innovative initiatives: Strong innovators define their project goals clearly, and they “have processes in place to stop projects when their promise wanes,” the report says.
- They have a strong customer focus: More than 70% of strong innovators say that the views of key customers play a role in choosing which ideas to develop, compared with 42% of weak innovators.
- They insist on strong processes, which lead to strong performance: Top innovators are far more likely to have standardised processes to review projects and make decisions. As a result more of the top innovators’ projects are finished on time.
Related CGMA Magazine content:
“Innovation: Five Key Questions Organisations Should Ask Themselves”: Visionary leadership and a culture that supports innovation are the two most important ingredients for successful innovation at a company, according to a PwC survey of CEOs.
“How Finance and Accounting Can Boost Innovation”: Find out if finance is contributing enough to innovation, and see tips for boosting strategic input from finance and accounting.
“One-to-One: How a Failure to Innovate Breeds Risks”: CIMA Chief Executive Charles Tilley visited with Infosys board member V. Balakrishnan, who offered insight on the value of people, the evolution of corporate reporting, and balancing risk and innovation.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.