The consulting company Booz & Company has released their latest Global Innovation 1000 (see also the article in Strategy+Business). No big surprises in the list – with Apple as #1 followed by Goggle and 3M. Facebook made it into the top 10. Consistent with previous reports, the study found that those who spend the most on R&D aren’t necessarily the most innovative:
There is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues.
Rather, it is the intangibles that matter:
The elements that make up a truly innovative company are many: a focused innovation strategy, a winning overall business strategy, deep customer insight, great talent, and the right set of capabilities to achieve successful execution. More important than any of the individual elements, however, is the role played by corporate culture — the organization’s self-sustaining patterns of behaving, feeling, thinking, and believing — in tying them all together.
Strikingly, the report highlighted the failure of many companies to understand this:
As noted, almost half of the companies reported inadequate strategic alignment and poor cultural support for their innovation strategies. Possibly even more surprising, nearly 20 percent of companies said they didn’t have a well-defined innovation strategy at all.
To my mind, this problem is indicative of a larger failure of the standard mindset of the innovation blackbox — R&D spending it; “innovation” out. Apparently, a fair number of companies don’t know how dig any deeper to recognize or utilize their intangibles assets. And public policy doesn’t know how to foster anything but the flawed linear model of innovation as represented in the blackbox approach.
The innovative companies get this. Apple is a case example of a company that fully exploits its intangible assets — from great design to a strong customer experience. By the way, a strong orientation to customer experience was the top most innovative cultural attribute named in the report.
So — where is the public policy to help companies understand and utilize their intangibles?