30 October, 2012 Making Ideas Work The 2012 Global Innovation 1000 Study
Introduction R&D Spending Trends Analysis Front-End Innovation Survey Findings Summary 1
For the past eight years, has examined innovation spending and linkages to corporate performance Previous Global Innovation 1000 Studies 2012: Making Ideas Work 2005: Money Isn't Everything 2006: Smart Spenders 2007: The Customer Connection 2008: Innovation Beyond Borders 2009: Profits Down, Spending Steady 2010: How Top Innovators Keep Winning 2011: Why Culture is Key Our 8 th annual study of the world s 1000 largest corporate R&D spenders focuses on the front end of the innovation process the tools, mechanisms and networks companies use to generate ideas and convert them into projects for commercialization. 2
The Innovation 1000 study continues to be well recognized as an important contributor to the study of R&D and innovation Selected Media Coverage Highlights Furthering the Innovation Dialogue Covered by ABCNews and MSNBC television Featured on NPR radio in US and BBC Radio in UK Cited in over 170 publications across 27 countries Called The most comprehensive assessment of the relationship between R&D investment and corporate performance by The Economist Representative Publications 2005 Initiated study to better understand how organizations can maximize their return on innovation investment Found no statistical relationship between R&D spending and key measures of corporate success 2006 Confirmed lack of relationship between R&D after adding additional data (e.g., patent records) and analyzing using more complex methods Defined High Leverage Innovators who produced better results per R&D dollar than industry peers Awarded 2006 Special Achievement Award for Advancing Innovation by Innovate Forum 2007 Examined the connection between performance and the elements of innovation strategy, including customer focus and alignment of corporate and innovation strategies 2008 Identified characteristics of global innovation networks (i.e. R&D footprint) that correlated with higher performance Awarded Best of Visions award from PDMA Awarded Silver Award for Editorial Excellence: Original Research and National Bronze Award for Graphics Excellence by American Society of Business Publication Editors 2009 Reported impact of 2008-09 global recession on worldwide R&D spend 2010 Identified the critical capabilities required for successful innovation and their relationship to corporate performance 2011 Examined the links between business strategy, innovation strategy and culture 3
In addition to our annual R&D spending trends analysis, the theme of this year s study is the front end of the innovation process 2012 Innovation 1000 Making Ideas Work Annual R&D Spending Trends Analysis Survey: The Front End of the Innovation Process Annual R&D spend growth across the 1000 largest spenders on R&D (publicly-traded firms) R&D spend by region and industry (absolute spending, growth and proportion of total) Spend as percent of revenue (R&D intensity ) Top 20 R&D spenders Top 10 Most Innovative Companies and financial performance comparisons to Top 10 spenders 1. Idea Generation Generating good ideas and/or decisions on platform refresh 2. Idea Conversion Converting good ideas into actionable projects for execution 4
Introduction R&D Spending Trends Analysis Front-End Innovation Survey Findings Summary 5
R&D spend grew 9.6% in 2011, continuing 2010 s strong growth after the 2009 decline Innovation 1000 R&D Spend 2001 2011; $Bn $603 $353 $355 $369 $391 $417 11-year CAGR 5.50% = 6% $450 $495 $521 $503 $550 3-year CAGR =9.5% 3-year CAGR =3.5% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Annual Growth 0.6% 3.7% 6.2% 6.5% 7.9% 10.0% 5.4% -3.5% 9.3% 9.6% Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis 6
The top 3 industries continue to be Computing and Electronics, Health, and Automotive 2011 R&D Spend by Industry ($603Bn) Telecom Other Consumer Aerospace and Defense 2% 3% 4% 2% Software and Internet 7% Computing and Electronics 28% Chemicals and Energy 7% Industrials 10% Automotive 16% 21% Health 7
Two-thirds of the $53Bn spending increase came from the Computing and Electronics, Automotive, and Industrials sectors Change in R&D Spend (Million USD) 55,000 50,000 45,000 40,000 35,000 While Health is the third largest spender, Industrials experienced the third largest absolute spend increase Change in 2010-2011 R&D Spend by Industry 6,229 6,037 3,607 1,718 1,655 352 Decreases Increases 1,487 52,632 30,000 7,867 25,000 20,000 15,000 13,214 Represents 66% of total R&D spend increase 10,000 5,000 13,440 0 Computing and Electronics Automotive Industrials Software/Internet Health Chemicals and Energy Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis Other Consumer Telecom Aerospace and Defense Total 8
India/China-based firms continue to increase their R&D spending at a higher proportionate rate than those in more mature regions 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 27.2% India/China Change (%) in R&D Spend by Region R&D Spend by Region 2010 2011 1) 12.2% ROW 38% rate in last year s report 9.7% North America 5.4% Europe 2.4% Japan Average 9.6% 2010-11 Increase 1) Innovation 2012 yearly R&D spend comparison for the 918 companies for which R&D spend available for both 2011 and 2010 Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis 45% 40% 35% 30% 15% 10% 5% 0% -5% -5% Size of bubbles are proportionate to the R&D spending 2006-11 Japan 0% 2006-2011 5% 2006-11 CAGR North America Europe India/China 10% ROW 50% 9
India and China have been steadily gaining share in R&D spending but are gaining revenue share at an even faster rate 1.0% 4.9% 24.4% Innovation 1000 Company R&D Spend and Revenue by Region: 2008-2011 4.3% 9.5% 21.3% 1.5% 5.3% 22.6% 4.2% 9.6% 21.7% 2.3% 6.1% 23.3% 7.3% 11.7% 21.1% 2.7% 6.1% 23.3% 8.5% 10.5% 20.1% 31.1% 35.0% 32.1% 34.5% 30.1% 32.4% 29.9% 33.6% India/China ROW Japan Europe 38.6% 29.9% 38.5% 30.0% 38.3% 27.4% 37.9% 27.3% North America # Companies in Innovation 1000 R&D 2008 Revenue 2008 R&D 2009 Revenue 2009 R&D 2010 Revenue 2010 R&D 2011 Revenue 2011 China HQ 15 23 40 47 India HQ 4 6 10 9 Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis 10
R&D spending and sales increased for a second year in a row while R&D intensity returned to historical levels R&D Spend and Revenue CAGR 1) R&D Intensity 2006-2011 2006-2011 Intensity (%) CAGR (%) 3.80 3.73% 20 3.70 15% 15 3.60 10% 10% 10 10% 3.52% 9% 8% 8% 7% 3.50 6% 5% 3.42% 3.42% 5 3.40% 3.40 3.43% 0 3.30-5 -10-15 Revenue CAGR R&D CAGR 2005-06 06-07 07-08 -11% -4% 08-09 09-10 10-11 3.20 3.10 3.00 2006 2007 2008 2009 2010 2011 1) Innovation yearly R&D spend and Revenue comparison for companies for which R&D spend and Revenue available for both years Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis 11
Overall R&D spending continued to rise with sales, though R&D intensity declined slightly in 2011 Indexed to 1997 3.0 2.8 2.6 2.4 2.2 2.0 1.8 R&D Spending, Sales, and R&D Intensity Indexed to 1997 R&D Spending Sales 1.6 1.4 1.2 1.0 1.00 1.05 1.35 1.20 1.23 1.24 1.23 1.21 1.15 1.13 1.14 1.14 1.24 1.17 1.14 R&D as % of Sales 0.8 0.6 0.4 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: Bloomberg data; Innovation 1000 articles in strategy + business; analysis 12
Daimler (#19) is a new entrant to the Top 20 R&D spenders this year 2011 Top 20 R&D Spend Ranking (2010 data) 2012 Top 20 R&D Spend Ranking (2011 data) 2011 Rank Company Geography Industry 2010 R&D Exp. $Bn 2012 Rank Company Geography Industry 2011 R&D Exp. $Bn 1 Roche Holding AG Europe Health 9.6 2 Pfizer Inc North America Health 9.4 3 Novartis AG Europe Health 9.1 4 Microsoft Corp North America Software & Internet 8.7 5 Merck & Co Inc North America Health 8.6 6 Toyota Motor Corp Japan Automotive 8.5 7 Samsung ROW Computing & Electronics 7.9 8 Nokia OYJ Europe Computing & Electronics 7.8 9 General Motors Co North America Automotive 7.0 10 Johnson & Johnson North America Health 6.8 11 Intel Corp North America Computing & Electronics 6.6 12 Panasonic Corp Japan Computing & Electronics 6.2 13 GlaxoSmithKline PLC Europe Health 6.1 14 Volkswagen AG Europe Automotive 6.1 15 IBM North America Computing & Electronics 6.0 16 Sanofi Europe Health 5.8 17 Honda Motor Co Japan Automotive 5.7 18 AstraZeneca PLC Europe Health 5.3 19 Cisco Systems Inc North America Computing & Electronics 5.3 20 Siemens AG Europe Industrials 5.2 Total $141.8 1 Toyota Motor Corp Japan Automotive 9.9 2 Novartis AG Europe Health 9.6 3 Roche Holding AG Europe Health 9.4 4 Pfizer Inc North America Health 9.1 5 Microsoft Corp North America Software & Internet 9.0 6 Samsung ROW Computing & Electronics 9.0 7 Merck & Co Inc North America Health 8.5 8 Intel Corp North America Computing & Electronics 8.4 9 General Motors Co North America Automotive 8.1 10 Nokia OYJ Europe Computing & Electronics 7.8 11 Volkswagen AG Europe Automotive 7.7 12 Johnson & Johnson North America Health 7.5 13 Sanofi Europe Health 6.7 14 Panasonic Corp Japan Computing & Electronics 6.6 15 Honda Motor Co Japan Automotive 6.6 16 GlaxoSmithKline Europe Health 6.3 17 IBM North America Computing & Electronics 6.3 18 Cisco Systems Inc North America Computing & Electronics 5.8 19 Daimler AG NEW Europe Automotive 5.8 20 AstraZeneca PLC Europe Health 5.5 Siemens moved to #22 Total $153.6 Increase or decrease within Top 20 ranking compared to 2011 13
Amazon bumped Facebook as a new entrant in the Top 10 Most Innovative ranking; Samsung rose in rank for 3 rd straight year 2012 Top 10 Most Innovative Companies 2012 Rank % of Respondents Company 2011 R&D Spend ($M) Overall Spend Rank Industry Spend Rank 2011 Revenue ($M) R&D Spend as % of Sales (Intensity) 1 79.8% Apple $ 2,429 53 16 $ 108,249 2.2% 2 43.1% Google $ 5,162 26 2 $ 37,905 13.6% 3 15.2% 3M $ 1,570 86 7 $ 29,611 5.3% 4 14.9% Samsung $ 9,017 6 1 $ 149,080 6.0% 5 11.4% General Electric $ 4,601 30 2 $ 142,237 3.2% 6 10.7% Microsoft $ 9,043 5 1 $ 69,943 12.9% 7 9.3% Toyota $ 9,881 1 1 $ 235,482 4.2% 8 - Tie 7.7% IBM $ 6,258 17 5 $ 106,916 5.9% 8 -Tie 7.7% Procter & Gamble $ 2,001 72 1 $ 82,559 2.4% 10 6.3% Amazon.com $ 2,909 48 4 $ 48,077 6.1% 14
Looking at movement across the past three years shows Samsung s rise and others continued success Change in the Top 10 Most Innovative Companies 2010-2012 2010 2011 2012 3-yr. R&D Spend CAGR 2010-2012 1 st Apple 35% 2 nd Google 35% 3 rd 3M 10% 4 th 5 th Samsung General Electric 16% 18% 6 th Microsoft 0% 7 th Toyota 4% 8 th 9 th Tie P&G IBM 4% 4% 10 th Amazon 53% 15
Once again, there are significant differences between the Top 10 Most Innovative Companies vs. the top R&D spenders 2012 Top 10 Most Innovative Companies (2011 Data) 2012 Top 10 R&D Spend Ranking (2011 data) Company Apple Google Industry Computing & Electronics Software & Internet 2011 R&D Spend ($Bn) 2011 Sales ($Bn) Spend as % of Sales (Intensity) $ 2.4 $ 108.2 2.2% $ 5.2 $ 37.9 13.6% Company Industry 2011 R&D Spend ($Bn) 2011 Sales ($Bn) Spend as % of Sales (Intensity) Toyota Automotive $9.9 $ 235.5 4.2% Novartis Health $9.6 $ 58.6 16.4% 3M Industrials $ 1.6 $ 29.6 5.3% Samsung General Electric Microsoft Computing & Electronics $ 9.0 $ 149.1 6.0% Industrials $ 4.6 $ 142.2 3.2% Software & Internet $ 9.0 $ 69.9 12.9% Toyota Automotive $ 9.9 $ 235.5 4.2% Procter & Gamble IBM Amazon.com Consumer $ 2.0 $ 82.6 2.4% Computing & Electronics Software & Internet $ 6.3 $ 106.9 5.9% $ 2.9 $ 48.1 6.1% Roche Health $9.4 $ 48.1 19.5% Pfizer Health $9.1 $ 67.4 13.5% Microsoft Samsung Software & Internet Computing & Electronics $9.0 $ 69.9 12.9% $9.0 $ 149.1 6.0% Merck & Co Health $8.5 $ 48.0 17.7% Intel Computing & Electronics $8.4 $ 54.0 15.6% General Motors Automotive $8.1 $ 150.3 5.4% Nokia Computing & Electronics $7.8 $ 53.8 14.5% Companies appearing on both lists 16
In line with last year s findings, the Top 10 Most Innovative outperform the Top 10 spenders across three financial metrics Top 10 Most Innovative Companies vs. Top R&D Spenders Highest Possible Score: 100% Top 10 Most Innovative Top 10 R&D Spenders Observations The Top 10 R&D spenders lag their industry peers on revenue and market cap growth Normalized Performance of Industry 50% Peers 1) : 54% 40% 68% 65% 62% 45% On the Most Innovative Companies list, only Apple, Google, and Samsung outperform their industries across all 3 metrics Intel still outperforms across all 3 metrics, but is no longer a Top 10 Innovator Lowest Possible Score: 0% Revenue Growth (5-yr. CAGR) EBITDA as a % of Revnue (5-yr. AVG.) Market Cap Growth (5- yr. CAGR) and remains among the Top 10 highest R&D spenders (moved from #10 to #8 in 2011) 1) Financial metrics were normalized in each industry sector among the Innovation 1000 companies to control for industry performance fluctuations and to set performance values to a 100-point scale. A score of 50% is the normalized performance across industries for each financial metric. 17
Executive Summary R&D Demographics After growing 9%+ for the second consecutive year in 2011, R&D spend is back on its 10-year historical growth trend after its one-year decline in 2009 The top three industries by R&D spend continue to be Computing and Electronics, Health, and Automotive Industrials, Automotive and Health accounted for 66% of the overall growth North America grew at an above-average rate of 9.7%; Europe and Japan grew at below-average rates of 5.4% and 2.4%, respectively while India and China-based firms increased R&D spend at a phenomenal rate (27%) albeit from a small spend base The Top 20 R&D spenders averaged 5% R&D growth, compared with a 9.6% increase overall The Top 10 Most Innovative Companies outperformed the Top 10 R&D spenders across key financial metrics revenue growth, EBITDA as a percentage of revenue, and market cap growth 18
Introduction R&D Spending Trends Analysis Front-End Innovation Survey Findings Summary 19
Nearly half of the respondents felt that their organizations were only marginally effective at generating ideas and converting them to projects Idea Conversion Idea Conversion (1) vs. Idea Generation (2) ALL RESPONDENTS (N = 685) Highly Effective 1 2 3 4 5 ~11% ~25% ~46% ~18% Marginally Effective 1 2 3 4 5 Respondent ranked idea generation effectiveness as 1,2 or 3 Idea Generation Respondent ranked idea generation effectiveness as 4 or 5 Highly Effective Note: (1) How effective do you feel your organization is at converting ideas into projects for execution? Please rank your company s level of effectiveness in idea conversion. With 1 =Marginal Effective and 5 = Strongly Effective. (2) How effective do you feel your organization is at generating new ideas? Please rank your company s level of effectiveness in idea generation. With 1 =Marginal Effective and 5 = Strongly Effective. 20
Companies that are highly effective at idea generation and conversion outperform their peers on average Highest Possible 100 Score: Financial Comparison of Idea Generation Performance 1 Strongly Effective Marginally Effective N = 60 N = 53 Financial Comparison of Idea Conversion Performance 1 Strongly Effective N = 47 N = 66 Marginally Effective Normalized Performance of Industry 50 Peers 2 : 46% 45% 65% 50% 52% 54% 50% 42% 60% 56% 58% 49% Lowest Possible Score: 0 Revenue Growth (5-yr. CAGR) EBITDA as a % of Revenue (5-yr. AVG.) Market Cap Growth (5- yr. CAGR) Revenue Growth (5-yr. CAGR) EBITDA as a % of Revenue (5-yr. AVG.) Market Cap Growth (5- yr. CAGR) Note: (1) Data derived from survey Question 8: A. How effective do you feel your organization is at generating ideas? B. How effective do you feel your organization is at converting ideas into projects for execution? With 1 =Marginal Effective and 5 = Strongly Effective. (2) For all companies for which financial performance data was available, financial metrics were normalized in each industry sector to control for industry performance fluctuations and to set performance values to a 100-point scale. A score of 50% is the normalized performance across industries for each financial metric. 21
Recoded Mean Companies reported that the majority of new ideas are still generated from traditional sources 45% 40% 42% Top 5 Ranking for Which of the following tools and mechanisms, if any, does your organization use to generate new ideas? (1) ALL RESPONDENTS (N = 685) 35% 30% 31% 25% 20% 15% 22% 19% 18% 15% 10% 5% 0% Direct Customer Observation Traditional Market Research Feedback from Sales and Customer Support Idea Work- Out Sessions Technology Road Mapping All other categories (<15% each) Note: (1) Please force-rank up to five of the following tools in order to influence by ranking the most influential mechanism 1 st, the next most influential mechanism 2 nd and so on. Responses above reflect the recoded means, that is, responses of 1 or 2 = 1, all others = 0 22
and internally-focused mechanisms are the most useful tools for converting those ideas to products Which of the following mechanisms or processes are the most effective in evaluating and converting an idea to a promising product or service concept for commercialization? (1) ALL Responses (N = 685) 0% 5% 10% 15% 20% 25% 30% Rapid / virtual prototyping (proof of concept) Rapid / virtual prototyping (preference testing) 29% 29% Advanced development review teams Lead customer surveys Business case competitions Seed-funded due diligence and concept design 22% 22% 21% 21% Internally-focused Third party partners (e.g., for rapid assessment) Focus groups 17% 18% Externally-focused Third party partners (e.g., for concept development) Learning launches 11% 13% Note: (1) All mechanisms assume adequate customer/consumer research and insights are available. Please force-rank up to five of the following tools in order to influence by ranking the most influential mechanism 1 st, the next most influential mechanism 2 nd and so on. Responses above reflect the recoded means, that is, responses of 1 or 2 = 1, all others = 0. 23
In 2007 we defined three distinct innovation strategies which we further explored in this year s study Three Innovation Strategies Example Companies Need Seekers Consistently strive to be first movers; Proactively engage customers to determine needs and shape new innovations; Determine new innovations market back from market need identification Market Readers Adopt a 2 nd mover strategy; Focus on driving value through incremental change; New innovations determined market back; although not as proactively as Need Seekers Technology Drivers Drive innovation via technological achievement; Leverage technology for both incremental and breakthrough change. The least proactive of the three strategies in directly contacting customers 24
Similar to our findings on capabilities and culture in past studies, each Innovation Model has a distinct front-end innovation profile Market Readers Top Ranked Front-End Mechanisms Sales & Customer Support Feedback Traditional Market Research Top Ranked Internal Network Structures Communities of Practice Organized Conferences w/ Technical staff Need Seekers Top Ranked Front-End Mechanisms Idea Work-out Sessions End-user focus groups Top Ranked Internal Network Structure Focused Technical Innovation Networks across the business All Three Top Ranked Front-End Mechanism Direct Customer Observation Top Ranked Internal Network Structures Innovation Champions Cross-unit Staffing (non-rotational) Top Ranked External Network Structures Customers Channel Partners & Suppliers No distinct difference in External networks by strategy model Tech Drivers Top Ranked Front-End Mechanisms Technology Road-mapping Meetings w/ External Technical Community Top Ranked Internal Network Structures IT Collaboration Tools Facilities Layout Sources: Bloomberg data; 2010 Innovation 1000 survey; 2011 Innovation 1000 survey 25
On an indexed basis, the innovation models use idea generation tools and mechanisms at the front end that support their innovation strategy Which of the following tools and mechanisms, if any, does your organization use to generate new ideas? (1) Indexed average value across all survey respondents End-User Insight Tools Idea Work-Out End Sessions User Insight Tools Social Network Data Mining End User / Customer Focus Groups Direct Customer Observation 0.92 0.96 1.17 Need Seekers over-index on tools/mechanisms that provide deep end-user insights Market Insight Tools Market Insight Tools Feedback from Sales & Customer Sppt Traditional Market Research Seed Funding for Exploratory Research 0.91 0.91 1.16 Market Readers over-index on tools/mechanisms that provide market insights and demand leads Technology Foresight Tools Periodic Meetings of Technical Community Technology Foresight Tools Technology Road Mapping External Technology & Idea Scouting Cross B.U. Communities of Practice 0.85 (1) Responses reflect the indexed value of the likelihood that respondents are choosing a value higher or lower compared to the average across all responses. An index value of 1 represents the indexed average of responses 0.90 Need Seeker (N = 182) 1.21 Market Reader (N = 255) Technology Drivers over-index on tools/ mechanisms that guide where/ how they can push the tech frontier Technology Driver (N = 248) 26
While priorities differ slightly, the Strategies agree that much-hyped tools like Social Networks and Seed Funding are least important Top 5 Ranking for Which of the following tools and mechanisms, if any, does your organization use to generate new ideas? (1) Need Seekers Market Readers Technology Drivers Direct Customer Observation 43% 42% 40% Traditional Market Research 26% 34% 31% Idea Work-Out Sessions 24% 16% 19% Feedback from Sales and Cust. Support 21% 29% 16% End User / Customer Focus Groups 18% 15% 13% Technology Road Mapping 15% 15% 22% External Technology and Idea Scouting 11% Periodic Meetings of Tech Community 10% Social Network Data Mining 10% Cross B.U. Communities / Sharing 9% 12% 10% 7% 11% 14% 17% 9% 12% Seed Funding for Exploratory Research 8% (N=182) (N=255) (N=248) Note: (1) Respondents were asked to rank their top 5 tools and mechanisms from a list of 11 choices. Total responses reflect the recoded means: responses of 1 or 2 ranking were counted as 100%, all others (3-5) were counted as 0 for statistical separation and significance. 27 9% Least Important 8%
Social Networks are the least influential idea generation mechanisms for engineered products industries like Automotive, Industrials and A&D Avg. Recoded Mean 15 15% Industry breakout of respondents ranking Social Networks within the Top 2 most used tools for generating ideas (1) 11% 10 10% 7% 6% 5 3% 3% 2% 0 Software and Internet Health Chemicals and Energy Computing and Electronics Consumer 28 0% Auto Industrials Telecom Aerospace and Defense Note: (1) Respondents were asked to rank their top 5 tools and mechanisms from a list of 11 choices. Total responses reflect the recoded means: responses of 1 or 2 ranking were counted as 100%, all others (3-5) were counted as 0 for statistical separation and significance.
Customers and Channel Partners are the most prevalent external groups while governments and open networks are used the least in ideation Which of the following external network groups are most often used by your organization during idea generation? (1) Need Seekers Market Readers Technology Drivers Customers 4.0 4.1 3.8 3.7 3.6 3.6 Channel Partners 3.2 3.3 3.0 3.0 3.0 2.9 Suppliers 3.0 3.0 2.8 2.8 2.7 2.7 Universities 3.0 2.9 2.3 2.4 2.7 2.7 Government Agencies 2.5 2.5 2.1 2.1 2.3 2.3 Open Networks 2.5 2.6 2.0 2.1 2.0 2.2 ( N = 182) (N = 255) (N = 248) Note: (1) Average of total responses for prevalence and effectiveness (score scale 1-5 with 5 being highest) for an External Network group category ) Prevalence Effectiveness 29
Executive Summary Survey Findings Nearly half of the respondents felt that their organizations were average or below average at both generating ideas and converting them to projects which has implications on financial performance companies that are highly effective at idea generation and conversion outperform their peers in revenue, market cap, and EBITDA growth The majority of new ideas still come from traditional sources and rigorous process management going against popular innovation concepts in mainstream media (e.g., crowdsoucing ) External networks that are part of the ecosystem are used by companies to generate ideas (e.g., customers, suppliers) but those outside of the ecosystem (e.g., government and universities) are not considered primary sources of ideas Consistent with our definitions, the innovation strategy models have a distinct set of front-end innovation mechanisms and use different networks for generating ideas: Need Seekers focus on discovering unarticulated customer needs through direct customer observation, end-user focus groups and idea work-out sessions Market Readers cherry pick from existing ideas by mining traditional market research and feedback from their sales and customer support channels Technology Drivers focus on developing technology-based breakthrough products 30
For the complete study and additional information on the annual Global Innovation 1000 Study Please Visit: www.booz.com/innovation1000 For media or other inquiries, please contact Siobhan Ford +1-212-551-6234 +1-978-314-6382 31