I’m a sucker for top ten lists – world’s busiest airports, tallest buildings, largest bankruptcies, habits of effective social media marketers (ok, the last was just a shameless plug). Yet there’s one list each year that always piques my interest – BCG’s Most Innovative Companies, and this year’s survey results were a bit of a head-scratcher.
Not because of the leading companies on the list – the old standbys of Apple, Google, Microsoft, and IBM still head the class. What was more startling was that 11 companies had declining revenues and 17 companies had declining margins across the 2006-2009 survey period. You can play devil’s advocate with the recession all you’d like, but in a top 50 list of innovators, more than 20% falling shy of growth raises an eyebrow.
What moves these results from head-scratching to startling to flat-out frightening is the methodology BCG uses to calculate the ranking. A survey sent to 2,000+ senior executives around the globe accounts for 80% of the final ranking. My conclusion: leading executives are awarding innovation points to companies that are fundamentally missing the goal of innovation – to better satisfy customer needs in a manner that grows the business. Declining revenues aren’t quite the signal an executive should look for when judging innovation.
Caveat time: I don’t know the precise questions BCG asked or whether revenue performance would have been worse without the identified innovative spirit. Yet throughout the article, the word ‘customer’ is notably absent. For those familiar with MLC’s jobs and outcomes framework, the goal of innovation properly defined is to devise ways to help customers get their jobs done better. Certainly companies can sink millions into research and development, streamlining supply chains, or building new distribution channels, and those may be the right moves to cut costs or expand footprints. But unless those innovation dollars are spent in the service of better meeting customer needs, they are innovations without purpose.
Renowned consultant Peter Drucker once quipped that, “There is only one valid definition of business purpose: to create a customer. Therefore, any business enterprise has two – and only two – basic functions: marketing and innovation.” As innovation budgets open up, marketing executives should own the innovation engine, working back from customer needs to produce products and services that boost acquisition and loyalty. Without innovation, those revenue numbers will continue to fall – and we’ll be stuck with a 2011 list that looks less innovative and more sclerotic.
MLC members, be on the lookout for an upcoming diagnostic designed to help you benchmark your innovation capabilities. We’ll also be kicking off a breakfast meeting series on (revenue-generating) innovation in cities across the country beginning in May – stay tuned!
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on 21 April 10
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“the goal of innovation – to better satisfy customer needs in a manner that grows the business.”
While of course I too understand and sympathize with Dougs general point, personally I’d argue that a far more profound goal of innovation (and in fact of business in general) should be ‘to make this a better world for all of us to live in’.
This would remove the greed / growth driver as the supposed sole motivator and measure of success; we have seen how much havoc the greed-singlemindedness has wrecked upon far too many people over the past year(s)…
Of course we then need a new set of metrics,which is not so easy or simplistic to define / agree / apply / monitor!
(I obviously expect a lot of critique on my suggestion, as it includes a kind of moral and subjective criteria and many practical issues