FBlog

Innovation success depends more on culture and strategic alignment than R&D investment according to a recent report by Booz & Company (http://www.booz.com/global/home/what_we_think/featured_content/innovation_1000_2011). Its analysis, which compares the top ten companies by annual R&D spend with a top ten ranking of the ‘most innovative’ companies by global innovation executives, argues that volume of spend does not guarantee a strong reputation for innovation. In fact, not only are the top ten by reputation among the lowest spenders, but they also have better revenue growth, EBITDA and market capitalization growth than their high-spending counterparts. The report authors attribute success to less tangible assets like culture and argue that half of the top ten by reputation can be defined as ‘Need Seeker’ cultures – that “actively and directly engage both current and potential customers to help shape new products and services…these companies often address unarticulated needs and then work to be first to market”.

In other words, they are genuinely customer-centric and make an effort to organize their business and their products and services around what people need – even before they know they need it. And this focus means they spend less, have stronger growth and profit and have a more powerful reputation as innovators. So it’s no surprise to see Apple at the top of the list, closely followed by Google, 3M, GE, Microsoft, IBM, Samsung, P&G, Toyota and Facebook. Critically, they talk about Need Seeker cultures depending on openness to ideas from outside sources – something that we have written about extensively in relation to open innovation and co-creation as drivers of breakthrough growth.

But the most important insight here relates to the power of perception. The ‘most innovative’ ranking is based on innovation executives’ view of the companies in question – how innovative they perceive them to be. And this, we would argue, is a function of corporate brand reputation. Interestingly, the top ten companies have another feature in common that is worth highlighting – a compelling corporate vision and positioning that translates business strategy into behaviours, products and services. Avoiding the temptation to talk (once again) about Apple, it is arguably GE’s ‘imagination at work’, IBM’s ‘solutions for a smarter planet’ and Toyota’s vision to ‘lead the way to the future of mobility’ that demonstrate these leading corporations’ commitment to aiming for something bigger. Something that is a reflection of their DNA and a call to action to employees, customers and partners to continually improve, perform and reach for their potential. These businesses make a virtue of their vision and purpose in their recruitment and retention strategies through their employer brands. 3M people understand that they get up in the morning to develop innovative technologies for a changing world, P&G don’t just make consumer goods, they strive to improve the lives of the world’s consumers. And everything they do, every success they have, is expressed as a step towards achieving that vision.

Properly articulated, a corporate brand vision both reflects and shapes business culture. It drives and supports the powerful reputation that builds positive perceptions of innovation and success, and a high position in rankings of all kinds.

So whilst culture might provide the conditions for innovation, a powerful vision is the reason to innovate in the first place.