The Rise of AI, Platforms, and Ecosystems - BCG
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The Most Innovative Companies 2019 The Rise of AI, Platforms, and Ecosystems
Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries. For more information, please visit bcg.com.
The Most Innovative Companies 2019
THE RISE OF AI,
PLATFORMS, AND
ECOSYSTEMS
MICHAEL RINGEL
FLORIAN GRASSL
RAMÓN BAEZA
DEREK KENNEDY
MICHAEL SPIRA
JUSTIN MANLY
March 2019 | Boston Consulting GroupCONTENTS
3 INNOVATION IN 2019
Digital Natives Lead, but Others Are in Fast Pursuit
Two New Forces
One Additional Thought
8 AI POWERS A NEW INNOVATION MACHINE
A Strong Correlation
Where to Focus?
AI at Scale
Build Versus Buy
“Alexa, Innovate!”
13 HOW PLATFORMS AND ECOSYSTEMS ARE
CHANGING INNOVATION
It’s an External Game
Some Rules of Ecosystem Engagement
18 NOTE TO THE READER
2 | The Most Innovative Companies 2019INNOVATION IN 2019
U sers of Google’s email software
recently found that Gmail was offering to
finish their sentences for them. This new
extensively use AI and platforms. (See Exhibit
1.) Alphabet/Google, which unseats Apple at
number one after a 13-year reign, is an “AI
Smart Compose feature relies on Google’s first” company, according to its CEO. It has
expertise in artificial intelligence (AI) and long embraced both platforms (think Android)
machine learning (ML), along with billions of and ecosystems (consider how Alphabet has
training examples and the company’s cloud- worked with others to develop Waymo, its
based Tensor Processing technology, to intuit autonomous driving venture). Next in line is
what Gmail users want to say—often faster Amazon, which, besides using AI in its retail
than they can complete their own thoughts. business, has pioneered voice recognition
technology (Alexa) and platform-based ser-
In a world where computers can compose vices (Amazon Web Services). Apple, at num-
notes to your friends, it’s hardly surprising ber three, helped pioneer voice recognition
that the theme of BCG’s 13th annual global software (Siri) and provided a premier virtual
innovation survey and report is the rising im- workplace for app developers with its iOS
portance of AI and of platforms that support platform. Fourth-place Microsoft has also
innovation. This is not an out-of-the-blue de- evolved from a software company into a pro-
velopment. Our last few reports have high- vider of AI and platform-based services.
lighted the crucial role of science and tech-
nology in innovation, the impact of digital All of the ten highest-ranking companies—
technologies on both digital natives and more and many in the top 50—use AI, platforms,
traditional industries, and strong innovators’ and ecosystems to enable themselves and
increasing use of various internal and exter- others to pursue new products, services, and
nal vehicles to uncover new ideas. This year’s ways of working. For example, McDonald’s
survey shows that AI use is rapidly expanding (number 21) uses an AI algorithm to serve
and that many companies are relying more digital menus that continuously change in re-
on platforms and their cousin, ecosystems, to sponse to such factors as time of day, day of
support their innovations efforts. the week, restaurant traffic, and weather.
Philips (number 29) launched an AI platform
in 2018 that helps “scientists, software devel-
Digital Natives Lead, but Others opers, clinicians, and health care providers
Are in Fast Pursuit access advanced analytic capabilities to cu-
The companies on BCG’s most innovative list rate and analyze health care data and offers
for 2019—especially those in the top ten— them tools and technologies to build, main-
Boston Consulting Group | 3Exhibit 1 | 2019 Most Innovative Companies
1 Alphabet/Google 11 Boeing 21 McDonald’s 31 AXA 41 Dell
2 Amazon 12 BASF 22 Marriott 32 Unilever 42 Walmart
3 Apple 13 T-Mobile2 23 Alibaba 33 Salesforce 43 eBay
4 Microsoft 14 Johnson & Johnson 24 Bayer 34 Pfizer 44 HP Inc.
5 Samsung1 15 DowDuPont 25 AT&T 35 Stryker 45 ING
6 Netflix 16 Siemens 26 Allianz 36 NTT Docomo 46 BP
7 IBM 17 Cisco Systems 27 BMW 37 Toyota 47 Daimler4
8 Facebook 18 LG Electronics 28 SAP 38 Volkswagen3 48 Huawei
9 Tesla 19 Vale 29 Philips 39 3M 49 Rio Tinto
10 Adidas 20 JPMorgan Chase 30 Royal Dutch Shell 40 General Motors 50 Hilton
Source: 2018 BCG Global Innovation Survey.
1
Includes only Samsung Electronics.
2
Includes only US T-Mobile, not Deutsche Telekom.
3
Includes Audi and Porsche.
4
Includes Mercedes-Benz.
tain, deploy, and scale AI-based solutions.” Platforms and ecosystems serve multiple
BASF (number 12) is collaborating with AI functions, including facilitating (and some-
software developer Citrine to build models times profiting from) the innovation of oth-
that identify new materials for capturing car- ers, expanding reach and collaboration, and
bon dioxide and other greenhouse gases. enabling new multiparty solutions and offer-
ings. Again, strong innovators are more likely
than weak ones to expect a significant impact
Two New Forces within three to five years and to be actively
Most companies are at least exploring the targeting these areas. (See Exhibit 3.) Strong
use of AI, and strong innovators are seeing innovators also show other signs of being
positive results. Nine out of ten respondents focused on external innovation. For example,
in our current survey say that their compa- 75% report using incubators, 81% leverage
nies are investing in AI, and more than 30% academic partnerships, and 83% partner with
expect AI to have the greatest impact of any other companies. Weak innovators lag consis-
innovation area on their industry over the tently in all of these areas.
next three to five years. (See Exhibit 2.) Four
in ten self-described strong innovators report Platforms are technologies that provide a
receiving more than 15% of their sales from foundation for developing other business
AI-enabled products, compared with less offerings. Numerous industrial goods compa-
than one in ten weak innovators. nies, including Siemens (number 16) and
Boeing (number 11), have built substantial
In the next chapter, “AI Powers a New Inno- platform businesses in predictive mainte-
vation Machine,” we take an in-depth look at nance to complement their traditional engi-
the widening gap in where and how AI is af- neering and manufacturing endeavors. Ama-
fecting innovation. zon, Microsoft, and IBM, among others, offer
4 | The Most Innovative Companies 2019Exhibit 2 | Digital Innovations Are Among the Most Promising and Most Targeted Areas
Which of the following areas of innovation/product development will be most impactful to
your industry over the next 3–5 years?
Percentage of respondents
50
41 41 41 40
40 38 39 39
35 34 34 34 33 32
31 31 30 31 30 30
30 28 28 29
27 27 26
24 25 24
20 18
10
0
Technology Speed of Big data Operations Extension Extension New Supporting
platforms adopting analytics process of existing of existing service capabilities
tech product service
New Digital Mobile AI Customer Business Marketing
products design channel model
Which of the following areas of innovation/product development
are you actively targeting?
Percentage of respondents
50
40
35 35 35
33 32
30 30 30 30 29 29 29
30 28 28
26 27 27
25
27 26 25 26
24 24 23
22 22 22
20
17
10
0
Technology Speed of Big data Operations Extension Extension New Supporting
platforms adopting analytics process of existing of existing service capabilities
new tech product service
New Digital Mobile AI Customer Business Marketing
products design channel model
2017 2018
Sources: 2017 and 2018 BCG Global Innovation Survey.
Note: Areas identified with red labels are digital innovation categories.
Boston Consulting Group | 5Exhibit 3 | Strong Innovators Are Optimistic and Committed on Platforms and AI
Which of the following areas of innovation/product development will be most impactful to
your industry over the next 3–5 years?
Percentage of respondents
50
46
44
42 42 41
–13 40
40 38 37
–16 –12 36 35
33 33 34 34 34 33
–21 –16
30 30
30 28 28 –10
27 26 26
24 25 24
22
21 20
20
13
10
0
Technology Big data New Operations Customer New Extension Marketing
platforms analytics products process channel service of existing
service
Speed of Mobile Digital Supporting Extension AI Business
adopting design capabilities of existing model
tech product
Which of the following areas of innovation/product development
are you actively targeting?
Percentage of respondents
50
42
40 40
40 38 38 39
37 36
35
33 34 33
–15
32 31
–23 –17 29
30
–27 –13 27
24 –17 24 25
23 23
21 22
20
20 18
17 17
16
13 12
10
0
Technology Big data New Operations Customer New Extension Marketing
platforms analytics products process channel service of existing
service
Speed of Mobile Digital Supporting Extension AI Business
adopting design capabilities of existing model
tech product
Strong innovators Weak innovators
Source: 2018 BCG Global Innovation Survey.
Note: Areas identified with red labels are digital innovation categories.
6 | The Most Innovative Companies 2019a range of software and services from their One Additional Thought
cloud platforms. A final observation—one that we have writ-
ten about before—bears repeating, especially
Ecosystems go a step further and leverage a with regard to the four companies in this
range of partners that pull together the un- year’s top ten list that were also in the top
derlying technologies, applications, software ten back in 2005. These companies are serial
platforms, and services needed to produce an reinventors. Google constantly revises its al-
integrated solution. (See “The Emerging Art gorithms and offerings. Amazon continuously
of Ecosystem Management,” BCG article, Jan- invents new categories, services, models, and
uary 2019.) The two main mobile operating ways of engaging its customers. Microsoft has
systems—Google’s Android and Apple’s iOS— successfully transitioned from its longtime re-
have grown into complex ecosystems of tel- liance on the Wintel partnership in PCs to be-
cos, device manufacturers, service providers, come a cloud-based tech company. And IBM
and application developers, among others. has reinvented itself multiple times, from
Rapidly changing technologies and growing mainframes to PCs to services to the cloud,
customer demand for a highly customized AI, and platforms and ecosystems.
user experience further amplify the need for
partnerships. The tools and technologies of innovation
evolve. The basic orientation toward change—
The opportunity to innovate entirely new rev- never being satisfied and always being will-
enue streams, business models, and sources of ing to reinvent oneself—remains part of
continuing advantage is particularly strong for some companies’ lifeblood.
B2B businesses, thanks to the masses of data
that devices connected to the Internet of
Things (IoT) generate. Data ecosystems will
play a critical role in defining the future of
competition in many B2B industries. (See
“How IoT Data Ecosystems Will Transform
B2B Competition,” BCG article, July 2018.)
The challenge is to set up and manage these
ecosystems effectively and use them strategi-
cally to maximize value and gain a competi-
tive edge. (For a look at how leading compa-
nies are building their own collaborative
networks or joining existing ones to drive
competitive advantage, see the third chapter,
“How Platforms and Ecosystems Are Chang-
ing Innovation.”)
Boston Consulting Group | 7AI POWERS A NEW
INNOVATION MACHINE
I nnovation, meet automation. This could
be the beginning of a beautiful friendship.
years. And almost 30% are actively targeting
AI in their innovation programs. Strong inno-
vators are particularly active.
In a few short years, artificial intelligence
(AI) and its subfield, machine learning (ML), The 2018 SMR-BCG report also identified a
have gone from futuristic vision to near- performance gap associated with this critical
mainstream capability at many large compa- new capability, indicating that AI “pioneers”
nies, including in their innovation programs. appear to be “pulling further away” from
A quick scan of BCG’s 50 most innovative their less aggressive peers. We see a similar
companies for 2019 shows that top innovators pattern with respect to AI in innovation,
are also AI leaders (Google, Amazon, Apple, which carries two key implications. First, AI is
Microsoft, Netflix, and IBM, for openers) and not a plug-and-play capability. Second, ML is
that many others—including plenty of com- inductive—that is, machines learn by doing,
panies from traditionally nondigital indus- and they need to be fed large amounts of
tries (Boeing, Siemens, Marriott, BP, and mul- data to get smarter. Tortoises will have a
tiple automakers, for example)—are actively tough time catching up with hares in this
leveraging AI. race. But hares can’t afford to become com-
placent, because AI is truly disruptive and
Like any powerful new technology, AI is the can propel long leaps forward.
subject of lots of hype. But in this case, real
fire lies behind the smoke. The rapid ascent What are the leaders doing?
of AI in business is well chronicled in two re-
ports by BCG and MIT Sloan Management Re-
view (SMR).1 The more recent of these reports A Strong Correlation
found that AI leaders are deepening their Our most recent innovation survey found a
commitment to the technology (as evidenced strong correlation between companies that
by funding) and seeking ways to apply AI at consider themselves strong innovators and
scale. Our current research into AI in innova- those that see themselves as being good at
tion reveals similar trends. Nine out of every AI. (See Exhibit 4.) About 30% of respondents
ten respondents to our innovation survey re- rate themselves as strong innovators, and
ported that their companies are investing in about 25% as being better than average at
AI. More than 30% expect AI to be among the AI. Almost 20% see themselves as both; we
areas of innovation with the highest impact call this group “AI leaders.” Nearly 17% of the
on their business in the next three to five respondents in our survey assess their orga
8 | The Most Innovative Companies 2019Exhibit 4 | Nearly 20% of Companies Rate Themselves as Both Strong Innovators and Above Average at AI
Percentage of respondents identifying their company as:
AI leaders
Better than average
at AI (%)
0.2 6.0 19.2
25.4
Average at AI (%)
1.9 46.6 9.6
58.1
AI laggards
Worse than average
at AI (%)
7.1 8.7 0.7
16.5
Weak innovator (%) Average innovator (%) Strong innovator (%)
9.2 61.3 29.5
Source: 2018 BCG Global Innovation Survey.
nizations as being below average on AI; we Where to Focus?
call this group “AI laggards.” AI leaders are All companies face choices about where to
more likely than laggards to consider AI im- apply resources and where AI might make the
portant to their organizations’ future growth most impact. New examples emerge every
(94% versus 56%), which suggests that more day. BP (number 46 on the 2019 most innova-
than half of laggards will face a widening tive list) is using ML to improve its prediction
competitive disadvantage unless they step up models for oil and gas reservoir recovery.
their AI game. General Motors (number 40) used AI-aided
design to reduce the weight of traditionally
AI leaders tend to see themselves as being designed and manufactured parts by 40%
good at embracing new technologies such as while increasing their strength by 20%. Ex-
AI to enhance customer offerings or stream- perts predict multiple areas of impact for AI
line the development process (89% versus in health care, including improving radiology
24%). AI leaders and laggards allocate their diagnoses, making medtech devices smart,
spending roughly equally among radical inno- and identifying new infection patterns. In fi-
vation; major new products, services, and in- nancial services, Chinese insurer Ping An, a
ternal process changes; and improvement of digital native, developed predictive models
existing products, services, and processes. and leveraged face and voice recognition as
foundations of its business. The vice president
But AI leaders are far more likely than lag- and chief data scientist at Ant Financial, an-
gards to apply big data and advanced analyt- other Chinese digital financial services leader,
ics throughout the innovation process—from told SMR, “AI is being used in almost every
identifying new themes (91% for leaders, 30% corner of Ant’s business. We use it to optimize
for laggards) to informing investment deci- the business and to generate new products.”
sions (92% to 27%). (See Exhibit 5.) In addi-
tion, by margins of 42% to 19%, and 42% to Early AI programs tend to focus on improving
24%, respectively, AI leaders are more likely operational efficiencies, perhaps because
than laggards to be actively pursuing the re- companies can demonstrate success relatively
lated avenues of big data and tech platforms. quickly in these areas. The 2018 SMR-BCG re-
Boston Consulting Group | 9Exhibit 5 | AI Leaders Use Data Throughout the Innovation Process
How would you rate your company’s skill at leveraging big data and advanced analytics to help
with each of the following aspects of innovation?
Percentage of respondents selecting “Strong” or “Very Strong”
–62 –60 –65 –63 –61
100 –53
80
60
94 92 92 92 91 89
40
20
32 32 29 30 36
27
0
Providing Identifying players Informing Revealing Identifying Making portfolio
input to with external innovation market trends new themes prioritization
ideation innovation potential investment decisions
decisions
AI leaders AI laggards
Source: 2018 BCG Global Innovation Survey.
port found that many early AI initiatives were Despite ample evidence of impact, AI still
pilots or tests designed to solve a particular garners its share of skepticism, which is one
problem as companies focused their early at- reason that laggards are falling behind. Re-
tention on gathering low-hanging fruit and search by BCG and Google in the consumer
making moves with near-term impact. Nearly products sector found that by applying AI
two-thirds of the AI leaders in our study re- and advanced analytics at scale, consumer
port that their innovation-related use of AI packaged goods (CPG) companies can gener-
aims to improve internal processes. ate more than 10% of their revenue growth
through multiple means, including more pre-
As significant as the impact of AI will be on dictive demand forecasting, more relevant lo-
business processes, however, its area of cal assortments, personalized consumer ser-
greatest potential lies in developing new vices and experiences, optimized marketing
products and services that can evolve into and promotion ROI, and faster innovation cy-
major revenue streams over time. Most of the cles. (See “Unlocking Growth in CPG with AI
AI pioneers in the SMR-BCG study prioritized and Advanced Analytics,” BCG article, Octo-
revenue-enhancing applications, which is ber 2018.) Yet in our innovation survey, only
where 72% of respondents expect the big AI 23% of CPG respondents said that they be-
gains to originate. In our survey, the AI lieve AI will have the greatest impact on in-
leaders reported much higher percentages of novation and product development in the in-
sales driven by AI-enhanced products or dustry over the next three to five years, and a
services introduced in the past three years: similarly modest percentage are actively tar-
46% of AI leaders say that 16% or more of geting AI in their innovation programs. Both
sales are AI-generated, compared with only figures are about 10 percentage points below
10% of AI laggards). AI leaders also expect a the cross-industry averages.
much greater percentage of sales to come
from the introduction of AI-enhanced
products or services over the next five years AI at Scale
(54% of AI leaders anticipate that 16% or AI forces business executives to deal simul
more of sales will come from these sources, taneously with technology infrastructure and
compared with 22% of AI laggards). more traditional business issues. Typical IT
10 | The Most Innovative Companies 2019systems—which consist of data input, a tool, But because of AI’s heavy reliance on data,
and data output—are relatively easy to mod- companies need to be careful about the
ularize, encapsulate, and scale. But AI systems agreements they construct with their suppli-
are not so simple. AI algorithms learn by in- ers and partners. They must protect their
gesting data, and training data is an integral ownership of internal data, control how ven-
part of both the AI tool and the overall sys- dors use that data, and ensure their own con-
tem. The entanglement is manageable during tinuing access to data from outside sources.
pilots and isolated uses but becomes exponen (See “The Build-or-Buy Dilemma in AI,” BCG
tially more difficult to address as AI systems article, January 2018.)
interact and build on one another. This leads
to what our colleagues have termed the “AI
paradox”—the ease of achieving powerful re-
sults with AI pilots and the difficulty of repli-
Companies need people who
cating those results at scale. (See The Big Leap combine business skills with
Toward AI at Scale, BCG Focus, June 2018.)
an understanding of AI.
Talent is a major issue for most organiza-
tions. Data scientists and software engineers
aren’t the only high-demand personnel. Com- AI leaders often rely on ecosystems. Digital
panies also need people who combine busi- natives, such as those leading our list of most
ness skills with an understanding of AI. Com- innovative companies, grew up in ecosystems.
panies that are moving toward AI-centric Companies such as Amazon, IBM, and Micro-
innovation processes must consider how the soft offer AI capabilities for sale or rent
transformation will affect their staffing in through their cloud-based platforms. Some
terms of skill shortages, job elimination, or industrial companies—automakers and air-
both. In pharma, for example, as AI algo- craft manufacturers, for example—are accus-
rithms learn to identify the types of people tomed to working in broad partnerships of
and conditions that are best suited for clinical multiple companies, with all the collaboration
trials—a major process innovation—the need and technology and data sharing that these
for human involvement in this critical func- arrangements entail. Others have less experi-
tion changes. Banks and other financial ser- ence—but as we explore in the next chapter,
vices companies are already feeling the im- “How Platforms and Ecosystems Are Chang-
pact of voice recognition and credit-scoring ing Innovation,” the fast-rising importance of
systems that use AI technology to automate technologies such as AI will all but force them
customer service. to explore such alliances.
As AI becomes a more critical element of in-
novation, the talent challenge may widen the “Alexa, Innovate!”
gap between strong and weak innovators. Af- A fascinating battle for AI-enabled smart-
ter all, Exhibit 4 indicates that more than 65% home systems is brewing among Amazon
of strong innovators already see themselves (Alexa), Google (Google Assistant), Apple
as above average on AI, versus just 2% of (Siri), Microsoft (Cortana), and others as each
weak innovators. company seeks to capture the biggest share of
end-user households for its voice-recognition
technology. The battle is a critical early-stage
Build Versus Buy skirmish in a much longer conflict to deter-
One talent-related issue with immediate im- mine how and for what purposes these sys-
pact is the question of whether to build or tems will be used. At this point, streaming
buy AI capabilities. In our survey, 55% of AI music is the most widely used application,
leaders extensively use external vendors for but the larger competition may take a genera-
AI projects—36% relying exclusively on them, tion to decide. The plan appears to be for
and 19% relying mostly on them. This ap- each company to open its smart-home plat-
proach may help leaders climb the AI curve form to others, which will innovate actual use
quickly, since expertise is still in short supply. cases for consumer testing. Winners can be
Boston Consulting Group | 11scaled up quickly and losers tossed aside with
equal dispatch. I t’s still the early days in AI. But after years
of development, actual use of the technolo-
gy is catching on fast. Laggards need to get
Consider Alexa and Google Assistant. These into the game, and leaders need to accelerate
classic platforms enable others to innovate in- their efforts. The platforms offered by Ama-
expensively on top of them. By opening their zon, Google, Baidu, and others may well
platforms to others, Amazon and Google can make some kinds of experimentation and
harness others’ innovations—much as Apple testing and learning easier. But the big issues
and Google did with their mobile platforms, of access to data and talent won’t get any less
and as Microsoft did with Windows. The plat- challenging over time; if anything, competi-
forms, provided at little or no cost to app de- tion for these vital assets will only increase.
velopers, take care of the basic plumbing, and Companies that hope to rank among the
the platform owners derive value from having most innovative of the future need to place
a richer set of services available than they their AI bets now.
would have had with their own apps alone. In
this case, the stakes are high, as use of smart-
home systems is expected to increase expo-
nentially as today’s young people grow up
talking to, learning from, and coming to de- Note
pend on these devices. 1. See S. Ransbotham, P. Gerbert, M. Reeves, D. Kiron,
and M. Spira, Artificial Intelligence in Business Gets Real,
MIT Sloan Management Review and Boston Consulting
In China, Baidu uses a similar open-AI plat- Group report, September 2018; and S. Ransbotham, P.
form strategy in the B2B or industrial inter- Gerbert, M. Reeves, and D. Kiron, Reshaping Business
with Artificial Intelligence, MIT Sloan Management Review
net marketplace. Baidu provides access to AI and Boston Consulting Group report, September 2017.
services such as voice and image technology
and natural-language processing, which com-
panies are using in such diverse fields as agri-
culture, manufacturing, and health care, where
these innovations have helped reduce the mis
diagnosis rate for diabetes-related eye disease
to less than 5%. (See “Get Ready for the Chi-
nese Internet’s Next Chapter,” BCG article,
January 2019.) Open platforms such as these
will affect not only how consumers and busi-
nesses access AI applications but also how
companies build their own AI capabilities.
12 | The Most Innovative Companies 2019HOW PLATFORMS
AND ECOSYSTEMS ARE
CHANGING INNOVATION
I n 2016, a group of Finnish medical
researchers won a global competition
whose goal was to accurately predict prostate
an early look at what’s happening in their tar-
geted fields of R&D. (See How the Best Corpo-
rate Venturers Keep Getting Better, BCG Focus,
cancer survival rates. From an innovation August 2018.) It’s a powerful combination—if
perspective, two facts stand out. First, the companies create the organization, processes,
competition was virtual: it was hosted and and incentives needed to bring outside ideas
managed on a cloud-based platform that inside without killing them along the way.
facilitates scientific collaboration. Second,
before entering the contest, the Finnish team
had not been active in cancer research. It’s an External Game
In business life today, companies need to look
beyond their own walls for new ideas. We
More and more frequently, have seen big increases in the use of such
partnership models as corporate venture cap-
innovation today comes from ital, incubators, and accelerators. Our current
innovation survey found that incubator use
outside the company. among self-described strong innovators rose
from 59% in 2015 to 75% in 2018, that tapping
into academic relationships jumped from 60%
As we noted in our 2016 report on the most to 81% during the same period, and that for-
innovative companies, innovation today can mation of company partnerships increased
come from anywhere—and more and more from 65% to 83%. (See Exhibit 6.)
frequently, it comes from outside the compa-
ny. (See The Most Innovative Companies 2016: The increasing use of platforms such as Syn-
Getting Past “Not Invented Here,” BCG report, apse, which hosted the prostate cancer chal-
January 2017.) Technology has helped level lenge, is making innovation more multiparty
the competitive playing field, making it easier and collaborative. There are many types of
for anyone anywhere to gain access to the platforms—such as computing, technology,
hardware, software, and tools they need to service, content, and marketplace—but all of
develop new ideas and business models and them serve a similar purpose. Users access
connect with other people and organizations. platforms because platforms combine aggre-
gated supply or demand with high service
At the same time, companies can use an array levels and reduced friction. They can also fa-
of tools to cast wide innovation nets and get cilitate collaboration and the development of
Boston Consulting Group | 13Exhibit 6 | Strong Innovators Are Increasingly Embracing Ideas from External Sources
Incubators Academic partnerships Company partnerships
Percentage of strong innovators Percentage of strong innovators Percentage of strong innovators
100 100 100
81 83
75
65
59 60
50 50 50
0 0 0
2015 2018 2015 2018 2015 2018
Sources: 2015 and 2018 BCG Global Innovation Survey.
new ideas. For example, many of the longest- Just as multiple types of platforms exist, eco-
tenured companies on our most innovative systems may be formed to serve different
companies list use platforms to gain access to purposes. Here are some of the most com-
different capabilities and sources of data, mon ones that are relevant to innovation.
which they then use to build new business
models or develop new products and services. Building Capabilities. Many ecosystems are
set up to bring in expertise from other
Developers of voice-recognition-based smart industries. BCG research shows that 83% of
home platforms, including Amazon and Goo- digital ecosystems involve partners from four
gle, make it easy for others to create new or more industries and 53% involve partners
consumer services that use their AI-enabled from six or more industries. For instance, a
platforms—and in the process to attract the household electronics manufacturer might
critical mass of applications needed to make partner with sensor and camera manufactur-
their platform a clear leader. ers, an AI software provider, and research
facilities to bring an advanced vacuum robot
Digital technologies enable collaboration plat- to market. In the past, to enter a new market
forms, and collaboration platforms enable eco (such as China), automakers either formed a
systems that bring together a group of organi- joint venture or alliance with an OEM or
zations to build a new capability or product or established contractual relationships with
service offering, or to help a new field of sci- hundreds of suppliers to secure parts. These
ence or technology advance. Some ecosystems traditional partnerships still exist, but today a
represent expansions of traditional ways of typical auto company draws on an ecosystem
organizing and doing business; they tend to of more than 30 partners across five different
have an orchestrator at the center, with which industries and several countries to make their
all the other participants interact, along with cars connected, electric, and autonomous. The
established hierarchies and structures. auto company acts as orchestrator, organizing
and managing the ecosystem, defining the
Other ecosystems—including many that are strategy, and identifying potential participants.
involved in the early research phase of
R&D—tend to be more dynamic, less reliant For example, Caterpillar’s smart-mining eco-
on a central orchestrator, and more depen- system involves four types of collaboration,
dent on multifaceted interactions among par- with a strong focus on flexible deal structures
ticipants. Various types of glue bind ecosys- such as partnerships and minority invest-
tem participants. Money is one type of glue, ments, along with joint ventures and M&A.
of course, but knowledge, data, skills, and Caterpillar has forged partnerships to improve
community can be equally important. its proprietary industrial IoT platform’s tech-
14 | The Most Innovative Companies 2019nology, and it has made minority investments of competition, particularly in many B2B
to expand the platform’s automation, optimi- industries, because they enable companies to
zation, and analytics capabilities. For most build data businesses. Such businesses are
companies, these types of flexible deals re- valuable not only because they generate
quire a different approval process than pre- recurring high-margin revenue streams, but
vails in traditional contracting and M&A—one also because they create competitive advan-
that is faster, leaner, and closer to the busi- tage. New data-driven products and services
ness. (See “The Emerging Art of Ecosystem deliver unique value propositions that extend
Management,” BCG article, January 2019.) beyond a company’s traditional hardware
products, deepening customer relationships
Developing New Products and Services. and raising barriers to entry by others. They
Ecosystems can offer multiple players a also build highly defensible positions rooted
powerful way to build new revenue streams in economies of scale and scope, similar to
from products and services that they could positions based on proprietary intellectual
not develop and bring to market on their own. property (IP) or trade secrets. (See “How IoT
For example, Alibaba’s ecosystem provides a Data Ecosystems Will Transform B2B Compe-
range of services for Alibaba platform users: tition,” BCG article, July 2018.)
travel, entertainment, gaming, finance,
transportation, and e-commerce. It’s an
eclectic mix, and it generates a wide-ranging
array of data that Alibaba collects and
Ecosystems enable players
analyzes centrally. By capturing data from to develop new products and
multiple sources, Alibaba can tailor individu-
alized offers to users—timing them for
services collaboratively.
maximum effectiveness—and provide tools
that help its online sellers enhance their own
businesses. The results, in turn, provide more Gaining Access to IP. Shifts in the IP market-
data for the ecosystem. place are creating new opportunities for
companies that are long on IP to cooperate
In recent years, Alibaba has expanded on this with traditional companies that may be short
model to build Ant Financial Services (origi- on it. Many tech companies, for example,
nally Alipay) into a major force in financial have a surplus of IP, while industrial goods
technology; today, it is the world’s most valu- companies may face a deficit. In the IoT
able fintech company, with more than 520 world, they can work together to expand the
million users. Using machine learning tech- market for sensor-enabled and location-aware
nology and data from the Alibaba ecosystem, goods and services. Classic, exclusionary IP
Ant provides an array of financial services to strategy is not dead, but companies need to
an underbanked market. Alibaba’s data and master a more sophisticated and nuanced
analytics capabilities enable Ant to assign playbook for creating competitive advantage
credit scores to individuals and small busi- through IP. (See “The New IP Strategy: Make
nesses, and the company has ventured from Love Not War,” BCG article, June 2018.)
payments into online wealth management
and consumer and small-business lending. In Merging Physical and Digital Channels. B2B
2017, Ant launched two new initiatives: a pay- and B2C companies are finding new ways to
ment option that uses facial recognition tech- combine the digital world and the physical
nology; and Ant Forest, which uses digital one to provide new services, more seamless
gaming technology to enable users to track customer experiences, and—in some cases—
their carbon footprint. The service has al- new business models. Amazon (with its
ready attracted some 200 million users. (See acquisition of Whole Foods), Siemens (IoT),
“Digital Innovation on the World Stage,” BCG and the auto industry (connected cars and
article, May 2018.) autonomous vehicles) offer examples. Emerg-
ing opportunities at the intersection of the
Collecting and Using Data. Data ecosystems digital and the physical give incumbents the
will play a critical role in defining the future chance to innovate and build valuable eco
Boston Consulting Group | 15systems by defining new niches and new rules. R&D in the past. (See The Dawn of the Deep
(See “Getting Physical: The Rise of Hybrid Tech Ecosystem, BCG report, March 2019.)
Ecosystems,” BCG article, September 2017.)
Advancing New Technologies. Companies Some Rules of Ecosystem
that have a stake in basic scientific advances Engagement
or in the development of new technologies An ecosystem often operates differently from
such as quantum computing or synthetic other types of business partnership, and in
biology may want to explore emerging deep- ways that can be foreign to big companies.
tech ecosystems—groups of entrepreneurs, Because ecosystems are dynamic environ-
startups, investors, corporate and academic ments that tend to contain lots of varied enti-
partners, and others that join forces to ties, they have multiple sources of influence,
research and develop a particular technology. and no one party absolutely controls their
Such technologies differ from others in their direction. They trade in multiple currencies,
expected impact, in the time they take to not all of which are financial. Because they
reach market-ready maturity, and in the exist to create value through collaboration,
significant amount of capital (and investor they are the opposite of zero-sum congrega-
patience) required to bring innovations to tions; when the ecosystem wins, each of the
market. The ecosystems represent a new participants wins as well. And they evolve,
model that is far more fluid and dynamic acquiring new members and missions over
than the methods used to conduct technology time. (See the sidebar.)
NTT DOCOMO’S EVOLVING MOBILE ECOSYSTEM
Today it sounds like something from a players (often industry leaders). Establish-
distant era. In 1999—eight years before ing mobile payment capabilities for rail
the launch of the iPhone—NTT Docomo service helped seal other deals in the
(number 36 on the list of 2019’s most finance, retail, and hospitality sectors,
innovative companies) built the first mobile among others, and helped attract more
internet ecosystem in Japan. than 500,000 merchants to Docomo’s
mobile payment service.
The leading telco developed a vertically
integrated ecosystem based on partner- Since the advent of smartphones, Doco-
ships and acquisitions that provided mo’s ecosystem has undergone major
valuable services and experiences to evolutionary changes a couple of times.
feature phone users. Part of its plan was to The first major change involved creating a
drive “innovation through the convergence mobile content hub through alliances with
of mobile with other industries and publishers, media companies, and other
services, thereby creating new values and content producers. Docomo now offers
markets.” (See Through the Mobile Looking more than 400 magazines online, as well
Glass, BCG Focus, April 2013.) Consumers as Japan’s largest anime library. Its dTV
flocked to new services such as mobile service has a similar number of subscribers
email, contactless payments, and, in time, to Netflix in Japan. As the content business
streaming live video—all part of Docomo’s has become more competitive in recent
“i-mode” ecosystem, which helped propel years, Docomo has moved to the latest
mobile phones to become Japan’s most iteration of its ecosystem, which relies on
widely owned device and spurred tradition- its strengths in payments, user identifica-
al industries to go mobile. Docomo pio- tion, customer loyalty, and other areas to
neered the technological innovation of offer promotional support and services to
mobile payments, leveraged local market an expanding network of third-party
dynamics, and achieved critical mass e-commerce partners.
through partnerships with established
16 | The Most Innovative Companies 2019Companies that are considering orchestrating •• Determine the kinds of relationships that
a new ecosystem or joining an existing one will provide the foundation of the eco
should take a number of steps in advance to system, and decide on the nature of your
prepare themselves: involvement. For example, do you foresee
a series of passive corporate venture-
•• Make sure that you have a sharp, clear capital investments or active investments
innovation strategy that identifies the and collaborations? Is access to data more
innovation domains on which you will be important than financial return?
concentrating.
•• Align and manage your innovation
•• On the basis of your innovation strategy, vehicles (including their geographic
clearly articulate an ecosystem strategy: locations, search patterns, guidance, and
what value you want get out of an eco budgets), according to your answers to the
system, and what you need to achieve in preceding questions.
the ecosystem to support your broader
innovation goals. •• Set clear goals, review achievements
regularly, and don’t be afraid to adjust
•• Identify the types of players with which your ecosystem strategy on the basis of
you will interact. These may extend real-world results.
beyond the obvious choices to companies
in other (unrelated) industries, universi-
ties and research institutions, startups,
and venture investors, among others. T he use of platforms and ecosystems will
undoubtedly expand as more companies
experiment with both types of vehicles and
•• Think about how you will enlarge the develop more successful use cases. The re-
ecosystem pie other than by simply lentless advance of technology will also play
maximizing value for your company a role. The more complex the technology, the
alone. Consider how the ecosystem as a narrower the expertise—and the more likely
whole will create value and how the it will be that companies must look outside
participants will share that value. their own organizations for the skills needed
to use the latest developments. But gaining
•• Note the locations of current innovation access to the latest science is one thing. Bring-
hot spots around the world for the domains ing that science inside and integrating it with
you are targeting. The US and China are existing programs and processes is another.
primary hubs for many fields of new- The latter remains the area where most com-
technology R&D, but many other countries panies will face their biggest challenges.
are active in particular fields and are
developing serious centers of excellence.
(See “A Deep Dive into Deep Tech
Investing,” BCG infographic, forthcoming.)
Boston Consulting Group | 17NOTE TO THE READER
About the Authors Acknowledgments For Further Contact
Michael Ringel is a senior partner The authors thank Erin Fackler for Michael Ringel
and managing director in the Bos- her leadership in driving BCG’s an- Senior Partner and Managing Director
ton office of Boston Consulting nual innovation research—and BCG Boston
Group and the firm’s global lead for Aziz Satarov for his help with the +1 617 973 1200
innovation analytics. Florian Grassl research and preparation of this ringel.michael@bcg.com
is a partner and managing director year’s report. They thank Matthew
in the firm’s Munich office and the Clark for directing the report’s Florian Grassl
firm’s European innovation lead. preparation and David Duffy for his Partner and Managing Director
Ramón Baeza is a senior partner writing assistance. They are also BCG Munich
and managing director in BCG’s grateful to Katherine Andrews, +49 89 231 740
Madrid office and the firm’s global Gary Callahan, Kim Friedman, grassl.florian@bcg.com
innovation lead. Derek Kennedy is Abby Garland, Steven Gray, Sean
a senior partner and managing di- Hourihan, and Shannon Nardi for Ramón Baeza
rector in the firm’s San Francisco the editing, design, and production Senior Partner and Managing Director
office and the firm’s global tech sec- of the report. BCG Madrid
tor lead. Michael Spira is a project +34 91 520 61 00
leader in BCG’s Munich office. Jus- baeza.ramon@bcg.com
tin Manly is a partner and manag-
ing director in the firm’s Chicago of- Derek Kennedy
fice and the firm’s North American Senior Partner and Managing Director
innovation lead. BCG San Francisco
+1 415 732 8000
kennedy.derek@bcg.com
Michael Spira
Project Leader
BCG Munich
+49 89 231 740
spira.michael@bcg.com
Justin Manly
Partner and Managing Director
BCG Chicago
+1 312 993 3300
manly.justin@bcg.com
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