Tom Stewart is Booz & Company’s Chief Marketing & Knowledge Officer. In a recent email update, he asks several intriguing questions: Are there CEOs anywhere in the world who want their companies to become less innovative? Is anyone calling on employees to do a better job of thinking inside the box? No—everyone’s in favor of innovation and creativity.
He goes on to note that ink and oratory aren’t enough. Nor is throwing money around. Booz & Company’s annual study of companies that invest the most in innovation reveals a surprising fact: Fewer than half say that their business strategy, innovation strategy, and corporate culture are aligned. Furthermore, the data reveals that the strategy-culture connection has a powerful multiplier effect, dramatically increasing the effectiveness of R&D spending. (Apple, named first for innovativeness by executives, ranks just 70th in R&D spending.)
As Stewart explains, The Innovation 1000 study, now in its seventh year, is recognized as the premier analysis of R&D investment globally. This year’s report shows what’s happened to spending levels, which companies and industries are investing the most, who’s investing most effectively—and why it is that some companies consistently get more from their R&D than others.
That theme—value for money—is much on the minds of executives everywhere. Please take a look at the three other articles I’ve listed below. One examines value-creation strategies honed by private equity firms that apply well to public and other private companies. The second, which we developed with Buddy Media, has brand-new findings about where social media marketing is adding value (and where it’s just making noise). The third looks at one of the knottiest problems in business and public policy: how to focus the healthcare industry on value, not just cost.
Here is an excerpt. To download a pdf of The Global Innovation 1000 (2011): Why Culture is Key, please click here.
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Year after year, certain companies succeed in producing innovative new products and services, and in so doing generate superior financial results. As our annual Global Innovation 1000 study, now in its seventh year, has consistently demonstrated, the success of these companies is not a matter of how much these companies spend on research and development, but rather how they spend it. This year, we took under consideration two particular qualities — strategic alignment and a culture that supports innovation — that truly innovative companies have put in place that allow them to outperform the competition.
Every company among the Innovation 1000 follows one of three innovation strategies — need seeker, market reader, or technology driver. While no one or another of these strategies offers superior results, companies within each strategic category perform at very different levels. And, no matter a firm’s innovation strategy — culture is key to innovation success, and its impact on performance is measurable. Specifically, the 44 percent of companies who reported that their innovation strategies are clearly aligned with their business goals —and that their cultures strongly support those innovation goals — delivered 33 percent higher enterprise value growth and 17 percent higher profit growth on five-year measures than those lacking such tight alignment.
Booz & Company also asked innovation leaders participating in the survey to name the companies they considered to be the most innovative in the world. For the second year in a row, Apple led the top 10, followed by Google and 3M. This year, Facebook was named one of the world’s most innovative companies, entering the list at number 10. In a comparison of the firms voted the 10 most innovative versus the top 10 global R&D spenders, Booz & Company found that the most innovative firms outperformed the top 10 R&D spenders across three key financial metrics over a 5-year period – revenue growth, EBITDA as a percentage of revenue and market cap growth.
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To download a pdf of The Global Innovation 1000 (2011): Why Culture is Key, please click here.
Thomas A. Stewart is the Chief Marketing and Knowledge Officer of Booz & Company, a global management consulting firm. Prior to joining Booz & Company, he was the editor and managing director of Harvard Business Review (HBR) from 2002-2008. Prior to joining HBR, he was editorial director of Business 2.0 and a member of the Board of Editors of Fortune magazine. In a series of Fortune articles, he pioneered the field of intellectual capital, which led to his 1997 book, Intellectual Capital: The New Wealth of Organizations. His second book, Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization, reveals how today’s companies are applying the concept of intellectual capital in their operations to increase success in the marketplace.