The 50 most innovative companies and the habits that distinguish breakthrough innovators

Innovation is difficult, even for companies that have made innovation a key part of their culture for years.

That’s one conclusion from the Boston Consulting Group’s annual report on the world’s most innovative companies. Seventy per cent of executives said their organisations’ innovation capabilities are average, and 13% view them as “weak.”

Apple, for the ninth time in nine Boston Consulting Group surveys, is No. 1 on the list. Google is second, followed by Samsung, Microsoft, and IBM.

Companies identified by Boston Consulting Group as breakthrough innovators – just 7.6% of the report’s sample – separate themselves even from those labelled as strong innovators through three key actions:

• They cast a wider net for ideas. The best innovators are more likely to generate new products or ideas for growth from internal sources, from mining social networks or data, and from suppliers or vendors.
• They use business-model innovation more often. Breakthrough innovators are more likely to move from selling products to selling products embedded in a service. Making that move requires shifting the way an organisation thinks about its business model.
• They have cultures geared toward breakthrough success. Breakthrough innovators have a variety of metrics by which to measure success, but they go beyond that by focusing on finding and keeping the right talent and prioritising ideas for development. That’s in contrast to weaker innovators, who “are concerned with funding ideas and moving them through the process,” the report said.

Talent matters plenty in trying to be more innovative. “The primary factor in maintaining successful business practices is to ensure that you have a good team,” said Simon Henry, FCMA, CGMA, the CFO of Royal Dutch Shell, which ranks 27th on the 2014 list. Shell is also mentioned in the Boston Consulting Group report for GameChanger, an idea portal for employees. The report says 40% of development projects in Shell’s exploration and production business started as GameChanger ideas.

“You don’t need people who can just do the technical processing and interpretation,” said Hubert Glover, CPA, CGMA, a professor at Drexel University in Philadelphia. “You now need people who are equipped to be able to be critical thinkers, to help translate information into strategic opportunities, to translate information into innovation.”

Samsung, according to one of its innovation leaders, seeks innovative ideas that have two critical traits: They must be “magical” and “genuinely useful.” Samsung has been ranked in all nine Boston Consulting reports and has been in the top five three consecutive years.

Other findings in the Boston Consulting Group report:

• Car manufacturers reported a decline in innovation focus compared with 2013, and that priority shift was reflected in the 2014 list. Whereas last year automakers had nine companies in the top 20, just four were in the top 20 in 2014.
• Companies in some developing nations are aggressively pursuing innovation. A majority of strong innovators from the BRIC countries (Brazil, Russia, India, and China) generates more than 20% of sales from products and services created in the past three years.
• Three-fourths of respondents said their companies were not targeting Big Data in their innovation programmes, and one-third of respondents project Big Data and mobile technology would have a significant impact on their industries in the next three to five years. Software is the only industry in which a majority (53%) predicts Big Data will have a significant impact on innovation in the near future.

The companies are chosen by a survey of 1,500 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%).

Related CGMA Magazine content:

“Examine Clichés in Approach to Innovation”: To find business areas ripe for disruption, examine assumptions about your processes, your prices, or your products, says innovation expert Luke Williams.

“CEOs Rank Technology as Most ‘Transformative’ Trend”: Technological advances provide big opportunities for business transformation, according to a global survey of CEOs from earlier this year. Evaluating Big Data risks and using innovation strategies can help businesses capitalise on these opportunities.

—Neil Amato (namato@aicpa.org) is a CGMA Magazine senior editor.