The current state of corporate innovation — 2019.

The 3 Buckets of Corporate Innovators

Dan Toma
Dan Toma
May 5, 2019 · 5 min read

If one is to segregate enterprises on their approach to innovation, one would most likely end up with three buckets.

This first one — and probably the largest — would be made up of companies that talk about the importance of innovation for their companies’ growth. Talk!

A second group would be made up of companies pretending they are doing innovation. But the only thing they can show for is just the theatrics and a massive R&D expenditure. However there’s also a 3rd group, actually doing innovation and getting results from it.

To support my belief that the first and second group sadly make up the vast majority of companies — hence depicting the current state of corporate innovation in 2019 — I digged up 2 interesting tops.

Enter the BCG top 50 most innovative companies of 2018. I don’t believe there any surprises in the top 10:

1. Alphabet (Google)
2. Amazon
3. Apple
4. Microsoft
5. Samsung
6. Netflix
7. IBM
8. Facebook
9. Tesla
10. Adidas

The second top I want to share with you is one by Statista, on the companies with the highest spending on research and development in 2018:

1. Amazon
2. Alphabet
3. Volkswagen
4. Samsung
5. Intel
6. Microsoft
7. Apple
8. Roche
9. Johnsons & Johnson
10. Merck

The two tops, put side by side, tell an interesting story on the current state of corporate innovation: most companies fall in the category of either ‘talking about innovation’ or ‘doing innovation theater on massive R&D budgets’.

The failure to understand that innovation is not R&D is seen in companies like Volkswagen being number 3 on the spenders list and number 38 on the innovation list.

Companies understanding that R&D is the process of converting capital into ideas and that innovation is the process of converting ideas back into capital are the ones having an equal or higher position in the innovation top than the position they hold in the R&D spending top.

These are the companies that place equal emphasis on R&D as they do on innovation. These are the companies that are constantly tuning their innovation engine for efficiency and effectiveness.

Take for example Apple, 3rd on the innovation top and 7th in the R&D spending top. Or Adidas, 10th on the innovation top and an undisclosed potions, greater than 20th, on the R&D spending top.

I was recently fortunate enough to give the opening keynote at the Innov8rs conference in Paris. I used this opportunity to learn from the audience what are the biggest blockers for corporate innovation they are experiencing in their respective companies. To do that we played a bingo game I created.

On innovation strategy most participants mentioned that innovation in their companies is hindered by:

– the company is investing mainly in optimizing the core business
— the lack of a clear innovation strategy
— a lack of transparency of the company’s portfolio

When it comes to innovation management, most participants acknowledged that innovation in their company would be better if only:

– the decision making process would require customer validation/insight, not just Excel business cases
— in the early stages of the development of an idea, middle managers would place more emphasis on exploration & validation than on execution
— the criteria for investing in ideas would be more transparent

On innovation practice the attendees of Innov8rs Paris consider that innovation in their respective companies is stifled by:

– the outdated technology infrastructure which is making rapid live experimenting difficult
— the fact that a clear development plan is required before ideas are even being considered for investment
— the fact the working on innovation only happens in the employees free time unless they work in the company’s innovation lab or accelerator program

Note that results above are from a sample size of about 250 people and that they are industry agnostic.

As disappointing as this may sound there is no proverbial silver bullet or magical weight loss table that companies can take to become more innovative. Unsurprisingly, organizations with an integrated strategy, that have all their processes in-sync and have supportive strong leadership and an embedded culture of innovation are the ones which are likely to thrive.

Furthermore a recent CB Insight study done on 677 companies world wide found that:

  • Customers and employees are the 2 top drivers for innovation. This, however, is a double edged sword: on the one hand, this explains why most of the innovation happening in large organizations is incremental, and on the other hand if the company has no system of distinguishing between noise and valuable insight good ideas will never surface.
  • High performing companies are first movers. High-performing companies are 3x more likely to strive for first-mover advantage. Meanwhile, the majority of low performers describe their innovation philosophy as “ad hoc,” or not having an innovation philosophy or plan
  • High-performing companies invest in disruptive projects. On average, the study found that, companies invest 78% of their innovation budget in continuous improvements to existing processes and products. However, high-performing companies tend to invest more in disruptive innovation.
  • This propensity for high-performing companies to place bigger bets on uncertain projects is consistent with other findings in this study: high performers have a greater appetite for risk.
  • Innovation-driven financial performance requires a high appetite for risk from the leadership team. When asked to describe their company’s appetite for risk, respondents from high-performing companies were twice as likely to answer either “risk-seeking” or “very risk-seeking” compared to low-performers
  • High-performing companies build cultures of innovation across functions.
  • High-performing CEOs do not delegate innovation strategy. When asked, respondents from high performing companies were far more likely to respond that innovation was centralized in upper management — particularly with the CEO

As our collective understanding of corporate innovation management matures, we are going to see less and less discrepancies between the top innovation companies and top R&D spenders. And as a result, at least I’d hope, our third bucket would be less empty.

This article was initially published as a guest post on the Innov8rs’ blog section

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