Successful innovation requires 3 things: Make innovation a priority in the company, allocate investment and talent to meet objectives and be able to transform investment into results.
Have you ever wondered how you can innovate in your company?
Boston Consulting Group (BCG) recently released an annual survey of the World's Most Innovative Companies 2021. This year, for the third time in a row, BCG has named Apple the World's Most Innovative Company. The other 4 most innovative companies are Alphabet, Amazon, Microsoft and Tesla.
Image from Boston Consulting Groups report on the most innovative companies of 2021
To create the ranking of the 50 most innovative companies, BCG used these four variables:
- Global Mindshare: The number of votes of all innovation executives.
- Industry Peer Review - The number of votes of executives in a company's industry.
- Industry Disruption - A diversity index to measure votes across all industries.
- Value creation - Total return on shares.
There is a huge gap between a company that is ready to innovate and one that is not. BCG uses various metrics to measure a company's "readiness for innovation", such as the strength of its talent and culture, its organization's ecosystems, and its ability to track performance. According to BCG's analysis, only 20% of the companies surveyed were ready to scale in innovation.
Photo from Visual Capitalist
Business innovation is critical for companies to survive, but not all do, so what is stopping companies from innovating? According to the Boston Consulting Group (BCG) the biggest hurdle seems to be in so-called innovation practices: things like project management or the ability to execute an idea that is both efficient and consistent with an overall strategy.
To overcome this hurdle, BCG says companies must foster a “single team mindset” to increase interdepartmental collaboration and align team incentives so that everyone works toward the same goal. These are the most important points when preparing your company for innovation are the following:
- Set a clear ambition: Set aspirational goals aligned with corporate strategy, along with specific value-creation goals that inspire teams to invent better ways to serve customers and society.
- Set the right environment: The best innovators have a deep understanding of changing customer priorities and explicitly focus on a limited number of innovation domains where they have the right to win.
- Prioritizing performance management: Savvy innovators complement clarity about medium-term ambition and playing fields with clear KPIs tied to incentives that reward both predictable and incremental progress and successful step-change innovation.
- Support project management: Empowered, multidisciplinary teams accelerate innovation by bringing together external knowledge, a clear vision of the company's strategic advantage, and technical knowledge to realize compelling new value propositions.
- Developing talent and culture: Leaders foster a culture in which innovation roles have prestige and thoughtful challenges to the status quo are welcomed, ensuring that the best talent is tackling the most ambitious innovation challenges.
The five key readiness elements highlighted above can be summarized into 2 general themes: leadership and teamwork.
It would be impossible to prepare your company for innovation without a strong link (or rather, a virtuous circle of collaboration) between product development and strategy execution. Establishing this cycle and keeping it active are ongoing challenges in the company. In fact, global innovation executives interviewed in the report cited it as the main obstacle to achieving higher returns on investment in innovation.
Innovation brings its rewards, having a company ready to innovate drives value creation and resilience. Take BCG's annual list of the world's 50 most innovative companies for example. The 50 Most Innovative Companies of 2007, just before the Great Financial Crisis, had total returns for shareholders between 2007 and 2012 that were 4 percentage points higher per year than the market.
And the situation during this pandemic is similar. On average, this year's 50 most innovative companies outperformed their rate of return by an incredible 17% Even after taking out tech giants like Google, Amazon and Facebook, the performance is still above 13%
At Ancient Technology Group, we specialize in offering global solutions to your digital transformation project. We can help you scale your company with innovation through our software development, IT consulting, Ecommerce or Big Data management services.
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