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The Most Innovative Companies 2020 The Serial Innovation Imperative
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact. To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.
The Most Innovative Companies 2020
THE SERIAL INNOVATION
IMPERATIVE
MICHAEL RINGEL
RAMON BAEZA
FLORIAN GRASSL
RAHOOL PANANDIKER
JOHANN HARNOSS
June 2020 | Boston Consulting GroupCONTENTS
3 SUCCESSFUL INNOVATORS WALK THE TALK
Committing to Innovation
How Committed Innovators Are Placing Their Bets
Innovation and Disruption
7 IN INNOVATION, BIG IS BACK
The Big Engines That Can
More Bang for the Buck
Overcoming Barriers
Designing a Winning Innovation System
12 WHEN IT COMES TO INNOVATION, ONCE IS NOT ENOUGH
Systematizing Innovation Success
Getting Started
16 APPENDIX
18 NOTE TO THE READER
2 | The Serial Innovation ImperativeSUCCESSFUL INNOVATORS
WALK THE TALK
I n innovation—as in life—drive, size,
and skill are a powerful combination. Drive
to set an ambitious agenda and fund promis-
even more relevant today as innovation lead-
ers need to adapt to rapidly shifting patterns
of supply, demand, consumer behavior, and
ing opportunities. Size to transform these ways of doing business.
opportunities into real sources of new reve-
nue. And the skill, as embodied in a well- Moreover, our research has shown that com-
tuned innovation system, to be able to do it panies doubling down on innovation during
over and over again. downturns—using the opportunity to invest
and position for the recovery—outperform
And the world’s most innovative companies over the long term. But doing that successful-
have been getting bigger. The revenue of a ly requires developing a clear innovation
typical “small” company on BCG’s 2020 list strategy and supporting it with appropriate
of the 50 most innovative companies is $30 bil- investment, leveraging the advantages of
lion—up more than 170% from $11 billion (in scale, and ensuring that your innovation sys-
constant dollars) in our first survey in 2005. tem is nimble enough to spot and seize the
best opportunities quickly and decisively. As
But drive and size mean little if your innova- we explore these themes, we draw on our
tion system can’t build on them for serial suc- global innovation performance database of
cess. And here our research offers a more so- more than 1,000 firms to detail the practices
bering assessment. Serial innovation is hard. that make the best stand out from the rest.
Of the 162 companies that have been on our
top 50 list over the past 14 years, nearly 30%
appeared just once—and 57% appeared three Committing to Innovation
times or fewer. Only 8 companies have made Innovation is a top-three management priori-
the list every year: Alphabet, Amazon, Apple, ty for almost two-thirds of companies. This is
HP, IBM, Microsoft, Samsung, and Toyota. the lowest level since the financial crisis in
2009 and 2010—perhaps reflecting the uncer-
When we began the research for this 14th tain economic outlook amid geopolitical ten-
edition of BCG’s Most Innovative Companies sions even before the outbreak of COVID-19.
report, COVID-19 had not yet emerged. As we
explored the data and interacted with clients, We can disaggregate our findings further.
however, it became clear that this year’s core “Committed innovators” (45% of the total)
findings—about the advantages of scale and say that innovation is a top priority, and they
the imperative for serial innovation—may be support that commitment with significant
Boston Consulting Group | 3investment. “Skeptical innovators” (30% of were making increasing use of external inno-
the total) are the reverse, seeing innovation vation channels such as incubators and part-
as neither a strategic priority nor a significant nerships with academic institutions. Our 2018
target of funding. And “confused innovators” research showed that almost 80% of strong
(25% of the total) are in between, with a mis- innovators have properly digitized innovation
match between the stated strategic impor- processes compared with less than 30% of
tance of innovation and their level of funding weak innovators. The relationship between
for it. (See Exhibit 1.) We find the highest commitment and results is the latest evidence
proportion of committed innovators in the of the strong getting stronger—across a spec-
financial and pharmaceutical sectors (both trum of innovation-related criteria.
56%)—and the lowest in industrial goods
(37%) and wholesale and retail (32%).
How Committed Innovators Are
Committed innovators are winning. Almost Placing Their Bets
60% of them report generating a rising pro- While many companies struggle to address
portion of sales from products and services multiple innovation challenges at once, com-
launched in the past three years, compared mitted innovators prioritize a handful and as
with only 30% of the skeptics and 47% of the a result address them more effectively. They
confused. The skeptics may or may not be focus on advanced analytics, digital design,
making wise strategic decisions—it is some- and technology platforms. (See Exhibit 2.)
times neither strategically sound nor feasible Companies may embrace these enablers for
to pursue innovation leadership—but at least different reasons. Advanced analytics, for ex-
they are consistent. The confused are a puz- ample, are a top priority for industrial goods
zling lot with a worrying disconnect between companies that are seeking to develop new
strategy and innovation spending. analytics-driven value propositions, such as
agricultural equipment manufacturers mov-
And winners are more likely to be committed ing into precision farming enabled by the
innovators, further evidence of the divide be- Internet of Things (IoT).
tween the best and the rest that we have dis-
cussed in the past few innovation reports. In Even among committed innovators, only 60%
2019, for example, we found a wide gulf be- report success in solving the challenges they
tween strong and weak innovators with re- prioritize. All companies have plenty of room
spect to their use of artificial intelligence (AI). to improve but doing so may be hampered by
We also discovered that strong innovators the “AI paradox” we pointed to last year—the
Exhibit 1 | One-Quarter of Companies Are Not Walking the Talk on Innovation
% of firms
7 45% COMMITTED
Innovation is a strategic priority
and they invest accordingly
6 10
4 11 7
6 9 9 1 25% CONFUSED
Commitment and resource investment
h
ig
13 6 0 are indifferent or inconsistent
yh
1
p
r
To
Ve
s)
le
h
10 0
sa
3
ig
2–
H
(%
p
1
St
To
30% SKEPTICAL
ng
ra
di
te
1
w
en
10
Lo
icg
4–
sp
Innovation is clearly not a strategic
pr
p
n
To
io
tio
ow
or investment priority
ri
+
va
yl
ty
11
r
no
(ra
Ve
p
In
To
nk
)
Source: BCG Global Innovation Survey.
Note: n = 1,014 (most innovative companies sample).
1
Innovation spending includes cost and amortized investments, on the basis of industry-specific analyses.
4 | The Serial Innovation ImperativeExhibit 2 | The Top Innovation Priorities for Committed Innovators by Industry
INNOVATION TYPE
Insurance Chemicals Durables Wholesale
New product Medtech Pharma Industrial goods and retail
Public sector
New service Telco
Transportation Finance
Travel and Consumer
Go-to-market tourism goods
Media
Internal process Materials Software Technology
Business model Automotive Energy
INNOVATION Advanced Technology Digital Mobile
ENABLER analytics platforms design capabilities
Source: BCG Global Innovation Survey.
Note: n = 1,014 (most innovative companies sample).
ease of achieving powerful results with AI noted a new and surprising pattern: com-
pilots and the difficulty of replicating those pared with 2015, significantly more respon-
results at scale. Another issue is the challenge dents named companies traditionally associ-
of making success repeatable, establishing a ated with a different industry as a leading
successful serial innovation machine. innovator in their own industry. Think
Amazon in health care or Alibaba in finan-
Consider the example of Target. The compa- cial services.
ny is making a major push to innovate in its
core store-based retail business and achieve In a world where every industry is becoming
synergies between offline and online com- a technology industry to some degree, this
merce. Target doubled capital expenditures kind of boundary-busting innovation is an in-
from 2016 to 2018. The intent is to attract creasingly important innovation capability.
foot traffic by making stores more interactive We have therefore added a new scoring di-
—for example, customers can better imag- mension to our most innovative companies
ine how products fit their homes by using ranking methodology that captures each com-
augmented-reality point-of-sale displays. The pany’s variety and intensity of boundary
company also wants to create omnichannel breaking. Granted, some companies have al-
customer journeys so that shoppers can ways been boundary busting. For example,
seamlessly move among channels, ordering 3M has innovated in multiple industries over
at home and picking up in stores, for in- the years, including consumer goods, chemi-
stance. Target’s online sales growth outpaced cals, manufacturing, and medtech. Yet today,
its competitors in 2019, and in a sector that we already see significantly more such activi-
has been under sustained disruptive attack, ty compared with 2016—an increase of 20%.
it generated 25% annualized TSR for the past New players that are active across industry
three years. borders and exemplify this trend include
firms such as Sony, Nike, Xiaomi, and JD.com.
Innovation and Disruption Looking at the data on the industry level,
Since 2015, we have asked executives to software and services companies are the ones
name not only the three companies they re- most frequently cited as entering other
gard as the top innovators across all indus- sectors—further confirmation (if any is
tries but also the three most innovative com- needed) of venture capitalist Marc
panies in their own industry. This year, we Andreessen’s 2011 observation that “software
Boston Consulting Group | 5is eating the world”—but tech is far from the new types of solutions. The data suggests that
only cross-industry disruptive innovation successful self-disruptors earned an annual
force. (See Exhibit 3.) Automakers, chemical TSR premium of 2.7 percentage points from
companies, retailers, and industrial manu- 2016 to 2019 over companies that focused
facturers are also playing more and more solely on defending their own turf.
often in other companies’ sandboxes as they
see opportunities for new technology-enabled
business models and revenue streams outside
their own core businesses. A clear innovation ambition, appropriate
resourcing, and the ability to break in-
dustry boundaries are not the only prerequi-
These disruptors are often orchestrating eco- sites for innovation success. As we examine in
systems that bring together the capabilities of the other chapters of this report, winners find
multiple participants in a new platform or a number of ways to differentiate themselves.
service offering. The auto industry’s shift to- And large companies are increasingly using
ward autonomous driving and a mobility size to flex their innovation muscles and may
model is one prominent example, as demon- be even more advantaged now than before
strated by Sony, Alphabet, and Apple, as the crisis.
well as automotive companies such as Tesla,
Volkswagen, and Bosch.
The IoT and other technologies create oppor-
tunities for traditional companies, such as
manufacturers, to transform themselves into
data-enabled software or service businesses.
These companies often play offense and de-
fense simultaneously. Think of the ongoing
transformations in the automotive, aircraft,
and farm equipment industries, where com-
panies are moving from manufacturing
equipment to combining equipment, data,
software, and connectivity to provide entirely
Exhibit 3 | Most Boundary Breakers Come from Software, Automotive, Industrial Goods, and Chemicals
Outbound disruption:
% of players in industry that are also innovating in other industries
60
Software and services
40
Industrial goods and manufacturing
Chemicals Technology hardware and equipment
Automotive
20 Wholesale and retail
Pharmaceuticals Medtech
Travel and tourism Materials Energy
Telco Consumer goods Durable goods
Insurance
Media and entertainment
Transportation Financial institutions
0
0 10 20 30 40 50 60
Sleep zone Inbound disruption:
Relatively isolated industries % of players from other industries that are also innovating in these industries
Sources: BCG Global Innovation Survey; BCG i2i team.
Note: The percentages are based on an analysis of the share of votes for players in each industry that are either “inbound” (votes in industry
going to players primarily outside own industry) or “outbound” (votes going to players primarily in own industry, received from other industries).
Companies playing offense tend to see significantly higher TSR (three-year horizon).
6 | The Serial Innovation ImperativeIN INNOVATION,
BIG IS BACK
C onventional wisdom suggests that
when it comes to innovation, small
companies have the edge. They are quick and
The Big Engines That Can
Large companies face a few common
obstacles. The top two issues cited by all
nimble. They have no legacy organizations, large firms in our 2020 innovation survey
technology, or infrastructure to hold them are a lack of discipline in resource allocation,
back. Because they are often privately owned, including insufficient rigor in cutting ques-
they can play for the longer term. Big compa- tionable projects while putting muscle
nies, by contrast, are weighed down by behind those with promise (31%), and the
internal bureaucracy, bound by out-of-date difficulty of uniting the organization behind
systems and ways of working, and if publicly the innovation strategy (27%).
traded, too focused on the next quarter’s
earnings to think about the longer term. But not all large companies are alike. More
than 40% of the big companies (defined as
But even before the crisis, the data suggested $1 billion or more in revenue) in our 2020
a more nuanced picture. While smaller com- sample overcome these two key obstacles.
panies’ scale makes coordination easier— They fall into the innovation leaders catego-
and helps ensure that they stay closer to ry—that is, they generate a larger percentage
customers—our research found that the in- of sales from products or services launched
novation success rates of smaller companies within the past three years than their indus-
were not higher in any statistically signifi- try median. This compares with on average
cant way than those of larger ones. And to- 50% of the smaller firms surveyed. (See Ex-
day, given the greater ability of larger com- hibit 4.) So, smaller companies are more like-
panies to fund investments from their own ly to outperform the large firms, but the dif-
cash flows, some of them may actually have ference is small in magnitude and not
an edge. statistically significant.
Of course, if size is not an impediment to in-
novation, it stops being an excuse for under- More Bang for the Buck
performance. After all, as we show in another Innovation leaders appear to be remarkably
chapter of this year’s report, the most innova- alike, regardless of size. Smaller leaders make
tive companies in BCG’s annual listing have investments in innovation as a percentage of
been getting larger. So what distinguishes the sales at a similar level as bigger companies.
large companies that are innovation winners They are equivalent in speed to market and
from the rest? achieve comparable returns. The real distinc-
Boston Consulting Group | 7Exhibit 4 | More Than 40% of Large Companies Are Innovation Leaders
Small firms Large firms
96 377 296 171 277
LEADER 44% 42% 42%
> median 56% 48%
% of sales from
new products
and services
LAGGARD 56% 58% 58%
< median 52%
44%
REVENUE $10–99 $100–999 $1–4.9 $5–10 > $10 billion
million million billion billion
Sources: BCG Global Innovation Survey; BCG i2i team.
Note: n = 1,217 (most innovative companies and i2i samples); innovation leaders are defined as generating more output in terms of percentage of
sales from products launched within the past three years than the industry peer median.
tions emerge when we look at what distin- opment skills, gaining leadership support, and
guishes large leaders from other large firms. establishing strategic clarity on the direction
of innovation efforts. Leaders seem to have
Large innovators that outperform their the luxury to address higher-order issues,
big-company peers put more money behind however, such as filling gaps in product-
their innovation programs—1.4 times more market fit and building a stable of scalable
as a percentage of sales—and they get far external partners. Leaders are also about 15%
greater payoffs: four times as much as a per- more likely to prioritize business model inno-
centage of sales. (See Exhibit 5.) Surprisingly, vation although not uniformly across indus-
they also take time to get things right, with tries. (See Exhibit 7.) Innovation at the busi-
large leaders reporting average times to mar- ness model level—to defend existing profit
ket for innovation outside their core that are engines, to imagine entirely new offerings in
up to five months longer than the times for response to emerging customer needs, or to
others. adapt current business models to ongoing
shifts in the business environment—can pro-
vide an important edge, particularly in turbu-
Overcoming Barriers lent environments.
So among the larger innovators, what are the
key differences between the leaders and the These differences do not suggest that some
laggards? To our surprise, culture does not strategic choices are better than others. They
appear to be one of them. In fact, the cul- do spotlight the importance of having an
tures of large companies, both leaders and internally consistent systematic approach to
laggards, look very similar. (See Exhibit 6.) innovation.
Granted, an innovation culture is notoriously
hard to describe or assess. Still, the data sug-
gests culture may not be a precondition for, Designing a Winning Innovation
but rather have a correlation with—or even System
be an outcome of—innovation success. Deeper analysis of the differences between
leaders and laggards in the same industry
Leading large innovators pursue different pri- (as well as BCG’s client experience) points to
orities and more carefully design their inno- leaders expanding their advantage in five
vation systems for impact. Laggards must first aspects of their innovation systems. These are
put a lot of attention into fixing the basics: talent, ambition, governance, funnel manage-
building new and critical incubation or devel- ment, and project management.
8 | The Serial Innovation ImperativeExhibit 5 | Leaders Invest 1.4x More and Take More Time but Deliver About Four Times the Output
COMMITMENT INNOVATION INPUT TIME TO MARKET INNOVATION OUTPUT
% top three priority 1
in % of sales noncore, in months in % of sales
5 months
longer ~4x
66
61
1.4x 20 27
15
18
13
7
3x return
Companies with sales of ≥$1 billion Laggard: ≤ median output Leader: > median output
Sources: BCG Global Innovation Survey; BCG i2i team.
Note: n = 744 (most innovative companies and i2i samples; large firms only).
1
Proportion of firms that rank innovation among the top three strategic priorities.
Exhibit 6 | Large Company Leaders and Laggards Have Similar Cultural Characteristics
Rigid Freedom to act
Slow Fast
Cautious Risk permitting
Critical of ideas Builds on ideas
Deliberate Playful
Individualistic Collaborative
Low prestige High prestige
Companies with sales of ≥$1 billion Laggard: ≤ median output Leader: > median output
Sources: BCG Global Innovation Survey; BCG i2i team.
Boston Consulting Group | 9Exhibit 7 | Many Leaders Are Pursuing Business Model Innovation
INNOVATION LEADERS PRIORITIZE …WHILE THE STATE OF ADOPTION DIFFERS ACROSS INDUSTRIES
BUSINESS MODEL INNOVATION… Leaders naming business model innovation a top 3 priority (%)
33
30 30 29
27 27 26 26
~15% 25 25 23
22 22 20
more likely than 17 16
laggards to make 14 13
it a top 3
innovation
priority 5
Auto
Finance
Insurance
Materials
Consumer goods
Public sector
Medtech
Transportation
Software
Chemicals
Energy
Durable goods
Wholesale and retail
Telco
Travel
Technology
Industrials
Pharma
Media
Source: BCG Global Innovation Survey 2020.
Note: n = 1,014 (MIC sample). Innovation leaders = higher innovation output in percentage of sales than industry peer median.
Our benchmarking database reveals that nance practices and regularly adjusting them
achieving just one level of improvement on as needs change. For example, most large
our five-point maturity scale in any one of companies now have a varied set of
these five aspects can result in an increase in ecosystem partners and vehicles—including
innovation output (the percentage of sales internal incubators, venture funds, and
from products, services, or business models accelerators—to accelerate innovation by
introduced in the past three years) of 0.5 to complementing their in-house development
0.8 percentage points. A one-level improve- efforts. In practice, these vehicles often
ment in all five dimensions raises innovation overlap in scope, undermining their effec-
output by 3.4 points—a big yet very much tiveness. We observed this dynamic at a
achievable number for any large company. global manufacturing company that had
various vehicles with overlapping mandates,
Inspiring Ambition. Leaders align their innova- creating competitive tensions and leading to
tion ambition with corporate strategy and disconnects with the core business. The
communicate the connection. The organization company corrected these overlaps by setting
has a clear, shared understanding of what it up a coherent steering system with specific
means by “innovation.” Leaders also back their roles and success metrics for each vehicle.
ambition with resource commitments of
capital, operating budgets, and staff, as well as Talent First. Leaders work toward making
top management support. We recently helped their innovation teams go-to destinations for
a large energy company set its innovation internal and external talent. They devote
ambition in an iterative process that took into resources to attracting, training, and retain-
account organic growth expectations and the ing the best people they can find—often
projected shrinking size of the running busi- prioritizing those with entrepreneurial
ness. On that basis, we derived the target experience. Yet what really drives perfor-
growth from innovation and then validated mance, in our view, is their ability to allocate
this target with bottom-up growth potentials their best internal talent to innovation
from different market segments. We then teams. One medtech company elevated the
further assessed the resulting ambition against role of head of R&D to chief technology
the availability of funds and talent. officer (a board-level position), trained
technical managers in business so that they
One Steering System. Leaders increase their could become product owners capable of
odds of success by establishing good-gover- leading cross-functional teams, and now
10 | The Serial Innovation Imperativedelivers more new digitally enabled solutions delivery against expected outputs, while
than ever. leaders reward high-quality outcomes. A
high-quality outcome could be a resounding
Portfolio Mindset. Leaders pay close atten- in-market success but also the early demise
tion to the shape and quality of their innova- of an initially promising but ultimately
tion funnel—and the processes to manage it. doomed idea.
Not surprisingly, leaders tend to have broader
funnels: they have the capacity to generate
more potentially valuable ideas and convert
their best ideas into scalable products or
Ultimately, the innovation
services. Funnel management ultimately success of a company lives
comes down to the quality of decision mak-
ing in a few critical go or no-go decisions, as
and dies with the quality of
well as the ability to take both a project and its innovation teams.
a portfolio perspective at the same time.
Winners create the context for better deci-
sion making by establishing a focused set of We recently assisted a large automotive com-
tools and criteria for making the right call, pany in improving the elements of its innova-
ensuring the ideal balance between hands-off tion system. Early idea generation at the com-
and hands-on involvement, and setting the pany now starts by pairing deep technology
right incentives, such as not penalizing and regulatory foresight with customer cen-
innovation teams for flagging issues or even tricity. In cross-functional ideation sessions
recommending a late project pivot. focused on anticipated future market oppor-
tunities, teams iteratively refine their ideas
What’s more, leaders consistently run post- by drawing up a mockup product-launch
mortem analyses to make sure that they learn press release. These teams address technical,
from mistakes. The best innovators do this market, and business risks by running an
not only for failed projects but also for fund- open backlog of implicit, to-be-validated be-
ing decisions that, with the benefit of hind- liefs. Through such methodical testing, the
sight, look like false positives or false nega- biggest innovation risks are addressed first,
tives, to ensure better-quality decision greatly improving the odds of an ultimate
making going forward. in-market success. Senior managers set an in-
spiring yet achievable ambition. They make
Empowered Teams. Ultimately, the innova- decisions on the portfolio and funnel of proj-
tion success of a company lives and dies with ects every two months, ensuring thoughtful
the quality of its innovation teams. Good and timely decisions well informed by their
teams are small (they adhere to Jeff Bezos’s proximity to the action.
two-pizza rule) yet functionally diverse—that
is, they are staffed with a mix of product man-
agers, engineers, and designers. They typical-
ly combine data-driven (patent scanning, for
example) and human-centric (such as ethno-
B eing a great innovator is not just about
embracing best practices such as the ones
detailed above, although doing that is table
graphic) methods to find solutions to prob- stakes. It’s also about spotting changes in the
lems that add value for customers. technology or regulatory environment, in
markets, and in social norms, and then un-
These teams need a healthy degree of auton- derstanding which doors these changes open
omy, embedded in a supportive governance and which they shut. In many ways, the most
framework. Ideally, they are led by a strong successful companies see innovation as a
product owner whose top task is to maximize learning journey in which the destination
the desirability and viability of the innova- shifts in response to changing travel condi-
tion while keeping it technically feasible to tions. As it turns out, the real innovation chal-
deliver in an acceptable time and at an ac- lenge for large companies isn’t achieving one
ceptable cost. Incentives matter. Less success- great success—it’s doing it over and over
ful companies tend to manage teams on again.
Boston Consulting Group | 11WHEN IT COMES TO
INNOVATION, ONCE IS
NOT ENOUGH
R emember the Macarena? The song
shot to the top of 15 global music charts
in 1996 and was certified platinum in seven
portant than the product is “the machine that
makes the machine.” He has a point. Serial
innovators succeed not because of the quali-
countries. It was also a one-hit wonder. The ties of any individual offering. Rather, they
band that created it, Los del Rio, did just draw on the strength of their underlying in-
fine—but they never topped the charts again. novation systems, which integrate strategy,
ecosystems, portfolio management, gover-
Startups have it relatively easy. They’re ex- nance, development, performance manage-
pected to get it right only once. If they do, ment, and more into one seamless and mutu-
and are acquired by a larger company, it’s a ally supportive whole. So what does it take to
big victory. Larger companies are held to a get it right again and again?
higher standard. Their valuations depend on
the market’s belief that they will be able to
innovate successfully into the future. If they Systematizing Innovation Success
don’t, they’re punished by the market. Successful innovation pays. An investment of
$100 made in the MSCI World Index in 2005
As we mentioned elsewhere, of the 162 com- would have been worth $251 at the end of
panies that have made BCG’s annual ranking 2019. The same $100 invested in BCG’s 50
of the 50 most innovative companies since most innovative companies (assuming annual
2005, only eight made the list every year— reweighting) would have grown to $327—30%
and only 12% ranked in the top 50 ten or more. Over the 14 years that we have pro-
more times. (See Exhibit 8.) Serial innovation duced this report, the top innovators have
is hard. But in the current rapidly shifting outperformed the companies in the MSCI in-
customer and competitive environment, it is dex by more than 1 percentage point a year
essential. on sales growth and by 2 percentage points
annually on total shareholder return (TSR).
The 20 companies that made the list more
than ten times come from a diverse set of in- Everyone knows the parable of the blind men
dustries—tech of course but also retail, auto- and the elephant: each man can feel and de-
motive, industrial goods, and consumer prod- scribe a part of the animal, but none of them
ucts. (For a look at the 50 companies that can get a sense of the whole. Elephants are
ranked in 2020, see the appendix.) Elon Musk big; innovation systems are complicated and
of Tesla (which has made the list seven multifaceted. They involve people and teams
times) famously argued that even more im- from multiple functions. They can have lots of
12 | The Serial Innovation ImperativeExhibit 8 | Only 20 Companies (12%) Have Made the Top 50 List More Than Ten Times
48
Daimler 3M BMW Alphabet
Dell GE Cisco Amazon
Facebook Intel Apple
Siemens Nike HP
Walmart Procter & IBM
26 Gamble
Microsoft
Samsung
19
Toyota
13
10 9 9 8
6 5 5
1 1 2
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Frequency of appearance on the BCG MIC50 list
Source: BCG Global Innovation Survey.
Note: Does not include inorganic transactions.
moving organizational parts: R&D, ecosystem models introduced in the past three years).
partners, incubators, accelerators, and corpo-
rate venture funds, for example. They include In our experience, the most successful large
decision-making systems, processes to guide innovators take a page from the instruction
activities, as well as many less tangible factors manual of serial acquirers and systematize
such as embedded tools, capabilities, and cul- the success factors. Serial acquirers integrate
tural norms of behavior. In recent years, we the discipline of effective M&A (from target
have examined specific aspects of such sys- identification and analysis to price setting
tems: how successful innovators source ideas, and negotiation to rigorous post-merger inte-
how they collaborate, how they organize to gration) into their management systems. Seri-
support innovation, and how they incorporate al innovators also understand that success de-
new technologies into their programs. pends on all facets of innovation working
together toward a common goal of generating
Companies with strong innovation systems do a continuing series of new products or ser-
all these things well. But that’s often not vices that make an impact where it counts—
enough. Innovation systems are dynamic. in the marketplace.
They need to be designed and regularly re-
worked to deliver the desired level of organic
profitable growth—but they always need to Getting Started
be seen as a whole. On the basis of our re- It’s difficult for leaders, even those with 20-20
search and experience, we assess innovation vision into their organizations, to get their
systems on ten elements. Seven relate to the arms around the entire machine and identify
innovation platforms and organization that what’s working and what isn’t. In most large
set ambition, define innovation domains, de- organizations, the CEO is the only leader who
limit roles, shape portfolios, and measure and is in a position of authority to drive an inno-
reward performance. And three are associat- vation system. All other leaders are left with
ed with the actual practice of moving a port- partial or functional mandates. For them to
folio of projects to impact. (See Exhibit 9.) drive change, they need to build exceptional
stakeholder orchestration skills in order to
The data from BCG’s innovation benchmarking cut through silos and build coalitions across
database shows that companies with better sys- the organization.
tems achieve an increase of 5 to 20 percentage
points in their innovation output (the percent- An effective innovation journey starts with
age of sales from products, services, or business doing the careful work of establishing a com-
Boston Consulting Group | 13Exhibit 9 | Leaders Set Up Their Innovation Systems for Impact
Innovation platforms
Guide, protect, and nurture
Innovat
vation i
Inno ance domainon
ce govern s In
an ent amnova
rm em bi tio
rfo ag tio
n
n
s m Pe
n
a
sys ion
tem
and nizat
Orga
Talent and
culture
a-to t
Ide rket fi Impact
-
ma
Projects
Funnel
Portfolio
Innovation practices
Invent, market-fit, and scale
Sources: BCG analysis; BCG i2i team.
mon language on innovation, building a fact invent better ways to serve customers and
base for framing the challenge, and getting society?
CEO buy-in. Only then can leaders decide
which issues to attack first. What is working •• Innovation Domains. Is our innovation
well? What are their companies’ most press- strategy grounded in deep customer
ing weaknesses? What should they scrutinize insight and foresight that help us decide
first—strategy, governance, process, talent, what to do—and not do—and enable us
incentives, culture, or something else? to nimbly adjust to shifting opportunities?
Do we focus on a limited number of
We have found that a series of pointed ques- innovation domains where we have a
tions, each of which focuses on one of the ten right to win?
essential elements of the company’s innova-
tion system, provide a good way to start. We •• Innovation Governance. Do we ensure
derived these questions from BCG’s experi- that people and budgets are aligned with
ence working in innovation and validated our shared innovation priorities—and
them against our benchmarking database con- promptly realigned when priorities
taining data on the innovation performance shift—even when multiple stakeholders
and organization of more than 1,000 firms. have a voice?
The questions for innovators in a post-
COVID-19 world reflect the typical gaps we see •• Performance Management. Do our
between leading innovators (benchmark com- metrics and incentives reward both
panies) and those aiming to join their ranks: predictable, incremental progress and
successful step-change innovation? Do we
•• Innovation Ambition. Do we have a recognize leaders who are not only able to
shared innovation purpose? Have we push new ideas but also recognize failures
established an aspirational goal aligned early in the process?
with corporate strategy and value creation
targets that rallies our best talent to •• Organization and Ecosystems. Do we
14 | The Serial Innovation Imperativehave clear roles for all the disparate successful innovation. But in the late 1990s
elements of our broader innovation the company was in trouble, losing out to the
ecosystem—for example, R&D units, Wintel platform. After Steve Jobs’s return in
venturing vehicles, digital units, and 1997, he set about recalibrating the compa-
external partners—to ensure that we ny’s innovation system for success. He broad-
collaborate seamlessly and realize our ened the ecosystem by engaging Microsoft
targets? as a partner, strengthened governance by
focusing development on the projects most
•• Talent and Culture. Do we have true likely to drive value such as the iMac, and
business builders, and do we allocate our increased ambition by defining new domains
very best talent to our most ambitious for innovation (iPod in 2001, iTunes Music
innovation challenges? Store in 2003). These moves generated the
resources and attracted the talent that fueled
•• Idea-to-Market Fit. What’s the last truly Apple’s serial innovation machine, which
novel idea we developed that solved a now—against the odds—outlives its original
“hair on fire” problem for customers? founder.
•• Project Management. Do we have a clear
view of our unfair advantage relative to
our competition, and do we actually
manage to wield it?
A n effective innovation system takes
time and experience to build. Practice, as
well as learning from both successes and fail-
ures, is essential. Our list of ten questions
•• Funnel Management. Is our funnel of does not replace the need for a more system-
potentially valuable projects actually atic assessment. From time to time, a compa-
funnel-shaped or is it a cylinder? Do we ny needs to reassess and revalidate all the
learn from past mistakes? elements of its innovation system—the “ma-
chine that makes the machine”—to ensure
•• Portfolio Management. Do we manage that it is delivering maximum value. Still, in
our portfolio strategically, for example, to our experience, these questions provide a
ensure balance between core and non- starting point for innovation leaders to build
core, or among new products, services, a case for change, rally other stakeholders,
and business models? Do we take non- and point to a first set of points for action.
consensus bets that promise outsize Successful serial innovators are made, not
rewards? Have we reassessed and rebal- born.
anced our priorities and our portfolio
through the COVID-19 lens?
Consider the well-known history of Apple.
Ranked #1 in our top 50 list for all but one
year since 2005, Apple is a poster child of
Boston Consulting Group | 15APPENDIX
THE 50 MOST INNOVATIVE COMPANIES FOR 2020
The BCG most innovative companies ranking late the overall ranking. This year, as noted in
is based in large part on a survey of 2,500 the text, we added a new scoring dimension
global innovation executives (63% C level, that captures each company’s variety and in-
37% senior vice-president or vice-president tensity of boundary breaking, by assessing its
level) who were polled from August 2019 ability to breach established industry entry
through October 2019. We assess companies’ barriers and play in an array of markets out-
performance on four dimensions and then side its own. These four dimensions are:
take an average of normalized scores to calcu-
The 50 Most Innovative Companies of 2020
Apple Tesla Siemens JD.com Toyota
1 11 21 31 41
(+2) (–2) (–5) (new) (–4)
Alphabet Cisco Target Volkswagen Nestlé
2 12 22 32 42
(–1) (+5) (return) (+6) (return)
Amazon Walmart Philips Bosch ABB
3 13 23 33 43
(–1) (+29) (+6) (new) (new)
Microsoft Tencent Xiaomi Airbus 3M
4 14 24 34 44
(+0) (return) (return) (return) (–5)
Samsung HP Oracle Salesforce Unilever
5 15 25 35 45
(+0) (+29) (return) (–2) (–13)
Huawei Nike Johnson & Johnson JPMorgan Chase FCA
6 16 26 36 46
(+42) (return) (–12) (–16) (new)
Alibaba Netflix SAP Uber Novartis
7 17 27 37 47
(+16) (–11) (+1) (return) (new)
IBM LG Electronics Adidas Bayer Coca-Cola
8 18 28 38 48
(–1) (+0) (–18) (–14) (return)
Sony Intel Hitachi Procter & Gamble Volvo
9 19 29 39 49
(return) (return) (return) (return) (new)
Facebook Dell Costco Royal Dutch Shell McDonald’s
10 20 30 40 50
(–2) (+21) (return) (–10) (–29)
Source: BCG Global Innovation Survey.
Note: Returnees have appeared on the ranking before but not in the prior year. Values in parentheses show change in ranking from 2019.
16 | The Serial Innovation Imperative•• Global “Mindshare.” The number of •• Industry Disruption. The Diversity Index
votes received from all global innovation (Herfindahl-Hirschman) of votes across
executives. industries.
•• Industry Peer View. The number of votes •• Value Creation. The TSR including share
received from executives in a company’s buybacks from January 2017 through
own industry. December 2019 (three years).
Boston Consulting Group | 17NOTE TO THE READER
About the Authors Acknowledgments For Further Contact
Michael Ringel is a managing The authors thank Jon Campos, Michael Ringel
director and senior partner in the Anne Vos, and Gabriel Wang for su- Managing Director and Senior Partner
Boston office of the Boston Consult- perb data analysis for this year’s BCG Boston
ing Group and the global lead for report—and to Erin Fackler for lay- +1 617 973 1200
growth and innovation analytics. ing the foundations during prior ringel.michael@bcg.com
Ramón Baeza is a managing direc- years. They are grateful to Matthew
tor and senior partner in the firm’s Clark for his thought partnership Ramón Baeza
Madrid office and the global innova- over many years, David Duffy for Managing Director and Senior Partner
tion lead. Florian Grassl was a his writing assistance, Matthias BCG Madrid
managing director and partner in Schmidt for his operational over- +34 91 520 61 00
BCG’s Munich office. Rahool sight of the broader innovation top- baeza.ramon@bcg.com
Panandiker is a managing director ic, and Christopher Pommerenke
and partner in the firm’s Mumbai for insights and robustness checks Rahool Panandiker
office and the Asia-Pacific lead for related to COVID-19. In addition, Managing Director and Partner
innovation. Johann Harnoss is an they thank Ann-Kathrin Trommer BCG Mumbai
associate director in BCG’s Berlin and Tamara Zacke for their diligent +91 22 6749 7000
office focused on innovation. assistance in helping plan the re- panandiker.rahool@bcg.com
port launch. They are also grateful
to Katherine Andrews, Devin Di- Johann Harnoss
Giovanni, Siobhan Donovan, Jarrett Associate Director, Innovation
Etheridge, Kim Friedman, Abby BCG Berlin
Garland, Frank Müller-Pierstorff, +49 30 28 87 10
Shannon Nardi, and Nidhi Sinha harnoss.johann@bcg.com
for their support in the editing, de-
sign, and production of the report.
In addition, they thank research
partners GLG for its assistance in
the collection of benchmark data
and Grail for a multiyear partner-
ship in fielding the survey.
18 | The Serial Innovation Imperative© Boston Consulting Group 2020. All rights reserved. For information or permission to reprint, please contact BCG at permissions@bcg.com. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and Twitter. 6/20
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