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Companies 2018
INNOVATORS GO ALL IN ON DIGITAL
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THE MOST INNOVATIVE
COMPANIES 2018
INNOVATORS GO ALL IN ON DIGITAL
MICHAEL RINGEL
HADI ZABLIT
FLORIAN GRASSL
JUSTIN MANLY
CLEMENS MÖLLER
3 INNOVATION IN 2018
The 50 Most Innovative Companies
Digital Innovation Takes Over
A Digital Innovation Divide
Digital Change
2 3 APPENDIX
nies named in BCG’s 2018 ranking of the In this year’s report on the most innovative
most innovative companies—including seven companies, we examine the state of digital in-
of the top ten—are digital natives and thus novation and what it takes for companies to
digital innovators by definition. Most, if not refocus their innovation programs around
all, of the others on the list have built digital this aspect of the digital imperative.
technologies into their innovation programs.
The trend is pervasive across industries,
penetrating what were heretofore the most The 50 Most Innovative
stolid and conservative businesses. Companies
Exhibit 1 ranks the 50 most innovative com-
panies for 2018. The companies at the top of
A shift to digital innovation re- the list changed only slightly from those in
our last report. (See The Most Innovative Com-
quires big changes in strategy, panies 2016: Getting Past “Not Invented Here,”
BCG report, January 2017.) Two digital na-
operations, and organization. tives pushed their way into the top 10 this
year: Alibaba Group, which joined the top 50
for the first time, and Uber. Among the top
Like other aspects of digitally driven change, 20, Tencent is also new to the list, and Airb-
the shift to digital innovation is difficult. It re- nb, SpaceX, Cisco Systems, Orange, and Marri-
quires executing big changes in strategy, oper- ott moved up—some significantly. Overall, 12
ations, and organization, which affect the en- companies either joined the list or returned
tire enterprise. Little surprise, then, that an to it.
innovation digital divide has opened up—
and threatens to widen—between leaders While North America remains the most highly
and laggards. While 79% of strong innovators represented region, with 27 companies, Eu-
reported that they have properly digitized in- rope strengthened its showing substantially
novation processes, only 29% of weak innova- with 16 entrants, up from 10 in 2016. The trav-
tors made the same claim. More than one- el and transportation sector has expanded its
third of survey respondents said that digitized presence as some companies—including Uber,
processes aren’t really doing much for their Airbnb, and SpaceX—demonstrate the disrup-
InterContinental
4 Amazon 14 Tencent 24 Expedia 34 AXA 44 Hotels Group
Johnson &
5 Samsung2 15 Hewlett-Packard 25
Johnson
35 Adidas 45 Disney
JPMorgan
6 Tesla 16 Cisco Systems 26
Chase
36 BMW 46 Huawei
tive potential of digital technologies and digi- priorities. Energy, media and entertainment,
tal business models wielded in combination. financial services, and the public sector all
saw large increases in terms of the number of
companies or organizations pursuing big data
Digital Innovation Takes Over in innovation. Recent BCG research has
Since 2014, only four types of innovation—all shown that companies across all sectors are
related to digital—have grown in importance still struggling with their data analytics capa-
and are being pursued by more companies: bilities, and that one capability in particu-
big data analytics, the fast adoption of new lar—the ability to prioritize—is especially
technologies, mobile products and capabili- concerning, because it is so fundamental to
ties, and digital design. (See Exhibit 2.) success. (See Are You Set Up to Achieve Your Big
Data Vision?, BCG Focus, June 2017.)
Big data analytics has risen from eighth in
importance to third; it is now, along with new The importance of speed in adopting new
products, the most pursued type of innova- technologies has gone from near last place to
tion. More than half of respondents said that fourth. Speed also used to be last in terms of
their companies use data analytics for a vari- the number of companies pursuing it as an
ety of purposes connected with innovation, innovation strategy; it is now tied for third.
including identifying new areas for explora- The percentage of companies targeting fast
tion, providing input for idea generation, re- adoption increased significantly in manufac-
vealing market trends, informing innovation turing, insurance, metals and mining, and the
investment decisions, and setting portfolio public sector. Strong innovators understand
WHICH OF THE FOLLOWING AREAS OF INNOVATION AND PRODUCT DEVELOPMENT WILL HAVE
THE GREATEST IMPACT IN YOUR INDUSTRY OVER THE NEXT THREE TO FIVE YEARS?
51
48
41 41
40 39 38 37
34 34 33 33
31 31 30 31 30 30 29
28 27
24 25 24 25 24
21 20
20 18
0
New Big data Mobile Operations Extension Extension Marketing
products analytics products and process of existing of existing
capabilities products services
60
44
40 35
33 35
31 32
30 29 30 30 29 30
28 28
26 25 25
24 24 24
22 22 22
19
20 17 18 17
16
0
New Big data Mobile Operations Extension Extension Marketing
products analytics products and process of existing of existing
capabilities products services
2016 2017
14
10
10
0
New Big data Mobile Operations Extension Extension Marketing
products analytics products and process of existing of existing
capabilities products services
Technology Speed of Digital Customer New Business Supporting
platforms adopting design channel service model capabilities
new tech
42 43 42
40 39
40
35 34 35
32
30 29 29
28 28 28
26 27 27
24
22
20
20 18 18 18
15 16 15
14
10
7
0
New Big data Mobile Operations Extension Extension Marketing
products analytics products and process of existing of existing
capabilities products services
Technology Speed of Digital Customer New Business Supporting
platforms adopting design channel service model capabilities
new tech
Software adds value to physical products. But Even the largest organizations find that they
software development often occurs in much can’t do everything themselves; they need
What Are Leaders Doing? They take smart risks. Leaders are willing to
All of the foregoing has major implications make big bets that have a high-risk, high-re-
for how companies approach innovation, ward profile, in part because they understand
from their allocation of resources to their that there is greater risk in doing nothing.
measures of success. Companies and indus- Tesla has accelerated to the top of the auto
84
80 81 82 80
80 78
60
40
23 23
20 20 21
20 16
0
Identifying Providing input Revealing Making portfolio Identifying players Informing
new themes to ideation market trends prioritization with external innovation
decisions innovation potential investment
decisions
Strong innovators Weak innovators
Exhibit 5 | Strong Innovators Have Clear Target Product Profiles, Portfolio Management, and
Digitized Processes
PLEASE RATE THE DEGREE TO WHICH THESE STATEMENTS CHARACTERIZE
YOUR COMPANY'S INNOVATION, R&D, AND PRODUCT DEVELOPMENT ACTIVITIES
87 87
85 84
83
80 79 79
80
60
46
40 37 38 38 37
35
32
29
20
0
Lean R&D Clear target Portfolio Capacity Governance Clear agile Outsourcing Properly
with the right product management management design with stage-gate approach that digitized
steps in the profile with the right that matches the right process maintains the process
right order prioritization demand and stakeholders right capabilities
supply
These figures are significant increases over The second, more far-reaching, impact is digi-
those in the last survey, but given the impact tal’s transformation of the process of innova-
of digital disruption across multiple indus- tion—in other words, R&D itself. Data analyt-
tries, one might ask why the numbers are not ics and other digital capabilities can handle
even higher. Our experience suggests that a tasks that humans cannot, such as processing
big part of the answer lies in the scale of the massive amounts of data from disparate
undertaking. Digitizing processes such as in- sources to find patterns that are otherwise
novation programs requires the ability to ac- hard to discern.
cess large quantities of data from multiple
sources, the technology and skills to analyze For example, medical researchers used data an-
the data and extract insights, and the process alytics to uncover the genetic patterns that un-
acumen to work in nontraditional ways, such derlie certain diseases. That information was
as agile—all of which changes how compa- then used to predict outcomes for drugs target-
nies go about innovation. It’s a daunting chal- ing the proteins associated with the relevant
lenge, and most companies do not yet have genes. This data-backed insight led to the dis-
the requisite capabilities. covery and development of PCSK9 inhibitors, a
class of drugs that lower cholesterol. Or consid-
er a financial services company that wants to
High-Impact Innovation shift from a products-and-process business
The potential impact of data analytics and model to one built on customer journeys. The
digital design on innovation strategy is a big company will need to adjust its products to cre-
deal. But the potential impact on operational ate new digital offerings, such as online auto
processes, including R&D and new-product insurance, and digitize its systems and process-
development, is just as significant. es for effective product and service delivery.
Maturity
Digital is formally established Decentralized Embedded
as a strategic priority (with CoE)
Time
100
80 80 78 80
80
60
43 41
40 35
30
20
0
Teams are staffed with All relevant People are Teams are
people who have the functional groups committed collocated
relevant skills are represented full-time
81 78
75 78 76 78 77 78 76 77 77
80 73 73
60
40 35
29 32 31
25 27 28 25 25
24 23 23 24
20
0
Allow room Differentiate Openly defined Top management Incentives linked Different Different
for iterations between high project target is committed to radical organization for process for
and adjustments and low levels to radical innovations incremental radical
of innovation innovation and radical innovation
projects
Room and Protect radical The project’s Culture of Different KPIs Open structure
time for projects from start does not experimentation for radical for
experimentation strict cost rely on future projects collaboration
control returns
BCG’s annual ranking of the most innovative asked respondents to rank the most innova-
companies is based on a survey of senior ex- tive companies both inside and outside their
ecutives who represent a wide variety of in- industry. To create a better balance of subjec-
dustries in every region worldwide and on an tive and objective measures, respondents’
analysis of select financial metrics. votes for companies within their industry ac-
counted for 30% of the ranking, their votes for
Before 2008, these rankings were based on a companies outside their industry accounted
single criterion—respondents’ picks. That year, for 30%, and—to simplify the financial in-
we expanded the scope and assessed three fi- puts—three-year TSR accounted for 40%.
nancial measures over a three-year period: to-
tal shareholder return (TSR), revenue growth, In 2016, we assigned nonpublic startups a no-
and margin growth. TSR reflected stock price tional three-year TSR for the top-50 analysis
appreciation and dividends. Respondents’ to avoid disadvantaging those with high valu-
votes determined 80% of the ranking, TSR ac- ations that promised strong returns. We de-
counted for 10%, revenue growth determined fined startups as private companies founded
5%, and margin growth accounted for 5%. after 2001. The TSR we used was the average
three-year TSR for companies that had a mar-
In 2015, we revisited our methodology to ket capitalization of more than $1 billion, had
make the results more robust and to reflect an initial public offering between 2010 and
the top innovators across all industries. We 2012, and were founded after 2001.
Justin Manly
Partner and Managing Director
BCG Chicago
+1 312 993 3300
manly.justin@bcg.com
Clemens Möller
Partner and Managing Director
BCG Boston
+1 617 973 1200
moeller.clemens@bcg.com
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