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Why are some companies better innovators? 20 December, 2006

Posted by Jay Ball in theory.

In their strategy+business emag this time, Booz, Allen, Hamilton has a report: “Smart Spenders: The Global Innovation 1000.” Ostensibly this is a report on why some companies (about 10% in the study) get exponentially better returns on lower levels of R&D investment. Strategy+business is usually a pretty good source of insight so admittedly my hopes were high.

There are some interesting facts in the piece. The top 1000 R&D spenders account for some 85% of R&D spending as a whole. The authors point to the fact that there is virtually no correlation between performance and R&D budgets (the only one being gross margin – yet the financial value of this is seldom captured). Many companies waste too much time reinventing the wheel and see ideas get mired down in organisational quicksand. And many simply don’t understand what their customers want or how to communicate with them.

All interesting stuff. But how about information that companies can use to do something about it?

The recommendations appear to boil down to:

  • Get good at all parts of innovation ‘value chain’
  • Go for flat structures
  • Think about customer needs
  • Be quick

Beyond that… well… everyone does it differently really.

This has the feel of a scenario where some very expensive research has been commissioned, but which hasn’t answered the key questions. So you get lots of information but precious little insight beyond a kind of innovation 101.

I would want to know about the corporate cultures that breed innovation. I’d want to know who they recruit, how they get the right mix of people and how they incentivise them (outside of offering loads of cash). And I’d want to know about how these companies move beyond what their customers say they want now to creating breakthrough products they will want in future. The report doesn’t answer any of these.




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