BCG Study Finds That Many Companies Aiming for Radical Innovation Fall Short on the Basics; More Than 40 Percent of Executives from Would-Be Disruptors Rate Their Companies’ Innovation Skills as Average or Worse
Mumbai, INDIA — October 29, 2014: In the 2014 list of most innovative companies released today by The Boston Consulting Group (BCG), technology and telecommunications companies once again lead the pack, holding down all of the top 5 spots in 2014, 7 of the top 10, and 21 of the top 50—the most since 2010. The consumer products industry holds 14 of the top 50 spots, also the most since 2010.
BCG has surveyed more than 1,500 senior executives in a wide range of countries and industries since 2004 to help cast light on the state of innovation in global business. In its new report, The Most Innovative Companies 2014: Breaking Through Is Hard to Do, the firm reveals the 50 companies that international executives ranked as the most innovative. Many of these companies have demonstrated impressive staying power over the years:
- Apple has been number one every year since 2005.
- Samsung and Google switched places again at numbers two and three.
- Microsoft and IBM round out the top five.
- TCS amongst the Indian companies has entered the list
The biggest change in the 2014 top 50 list is the decline in the number of auto companies. Only 9 auto companies are in the top 50 in 2014, and only 4 ranked in the top 20. This compares with 3 automakers in the top 10 places in 2013, as well as 9 in the top 20, and 14 in the top 50 spots. Automakers also reported both a 26 percent decline in innovation priority, with 62 percent assigning it a top-three position, down from 84 percent last year.
In 2014, BCG again asked respondents to name up-and-coming companies—companies that are still relatively young or have yet to reach the scale of the top 50 global giants but are making themselves known for innovation. WhatsApp, Square, Rakuten and Wipro lead this list. There was 50 percent turnover on the up-and-coming list, with only four companies returning from 2013. Last year’s up-and-comers all leveraged mobile platforms in one way or another; this year’s list comprises more varied innovators: consumer products, auto, media, and big-data companies.
The 2014 report examines the factors that separate breakthrough innovators from other companies. It found that breakthrough innovators are strong innovators first—they excel at the fundamentals that define successful innovation programs. But they stand out from strong innovators in three ways: they cast a wider net for ideas, they use business model innovation more, and they have cultures geared toward breakthrough success. Almost half of breakthrough innovators reported generating more than 30 percent of sales from innovations over the past three years, more than twice the average for all companies.
“Innovation isn’t getting any easier. Too many companies want to shoot for the moon while their innovation programs are barely airborne,” said Neeraj Aggarwal, a BCG Senior Partner & Director. “It is no longer enough to be good at incremental innovation. Breakthrough innovators are especially effective at bringing together the pieces required for radical innovation such as management, governance, and organizational design that can have a major impact on any company’s innovation program. Breakthrough innovators corral them all.”
The 2014 survey found that only 13 percent of respondents have a significant ambition to deliver radical innovation. More than 40 percent of these would-be disruptors indicated that their companies’ innovation capabilities are average at best. Executives from companies with strong innovation capabilities—and disruptive ambitions—represent just 7.6 percent of the sample.
While technology companies lead the list of those seen as most innovative, respondents in multiple sectors said that there will be limited impact from digital technologies in their own industries in the next three to five years. Less than half of the respondents in the telecommunications, financial services, pharmaceuticals, consumer products, retail, energy, and manufacturing sectors, among others, said that big data and mobile will have a big impact. Less than a third in each sector said that their companies are targeting big data and mobile in the innovation programs.
“Given digital technology’s demonstrated ability to disrupt, one can ask whether those companies that are targeting digital platforms and big data in their innovation programs are opening a lead that those moving more slowly may have a hard time closing,” said Hadi Zablit, a BCG partner and report coauthor.
Two-thirds of all breakthrough innovators stated that all innovation and product development is controlled and driven by a centralized organization, at least in its initial stages. More than 70 percent have a different organizational entity for managing radical innovation.
Long-term advantage and current competitive advantage continue to be the primary goals for innovation investment, with three-quarters or more of respondents focused on these objectives. Approximately half of all respondents said that innovation in new products and technology platforms will have the biggest impact on their industries over the next three to five years, but the percentage targeting these two areas showed declines from 2013: 41 percent, down from 47 percent for new products; and 34 percent, down from 45 percent for technology platforms.
A copy of the report can be downloaded at www.bcgperspectives.com.
