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The Most Innovative Companies 2018 The Most Innovative Companies 2018 INNOVATORS GO ALL IN ON DIGITAL The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries. For more information, please visit bcg.com. THE MOST INNOVATIVE COMPANIES 2018 INNOVATORS GO ALL IN ON DIGITAL MICHAEL RINGEL HADI ZABLIT FLORIAN GRASSL JUSTIN MANLY CLEMENS MÖLLER January 2018 | The Boston Consulting Group CONTENTS 3 INNOVATION IN 2018 The 50 Most Innovative Companies Digital Innovation Takes Over A Digital Innovation Divide Digital Change 8 HOW DIGITAL TRANSFORMS INNOVATION STRATEGY What’s Possible? How Do We Use Data and Software? How Do We Access the Capabilities We Need? What Are the Risks of Not Moving Fast Enough? What Are Leaders Doing? Playing by New Rules 13 A DIGITAL OVERHAUL FOR INNOVATION OPERATIONS High-Impact Innovation A Foundation for Digital Design Models and Laboratories 17 ORGANIZING FOR DIGITAL INNOVATION Digital Organization Design Principles From Principles to Practice A Digital Innovation Unit The Digital Leader A New Approach to Organization Which Road to Take? 23 APPENDIX 24 NOTE TO THE READER 2 | The Most Innovative Companies 2018 INNOVATION IN 2018 t leading innovators, R&D and company—a sign that they haven’t yet found Anew-product development have become a way to embrace the new possibilities. digital endeavors. Eleven of the fifty compa- 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- The Boston Consulting Group | 3 Exhibit 1 | The Most Innovative Companies of 2018 1 Apple 11 Airbnb 21 Siemens 31 Intel 41 3M 2 Google 12 SpaceX 22 Unilever 32 NTT Docomo 42 SAP 3 Microso1 13 Netflix 23 BASF 33 Daimler3 43 DuPont 34 44 InterContinental 4 Amazon 14 Tencent 24 Expedia AXA Hotels Group 5 2 15 25 Johnson & 35 45 Samsung Hewlett-Packard Johnson Adidas Disney 6 16 26 JPMorgan 36 46 Tesla Cisco Systems Chase BMW Huawei 7 17 Toyota 27 Bayer 37 47 Procter & Facebook Nissan Gamble 8 IBM 18 General Electric 28 Dow Chemical 38 Pfizer 48 Verizon 9 Uber 19 Orange 29 AT&T 39 Time Warner 49 Philips 10 Alibaba 20 Marriott 30 Allianz 40 Renault 50 Nestlé Source: 2017 BCG global innovation survey. 1Includes Nokia. 2Includes all Samsung business groups (electronics and heavy industry). 3Includes Mercedes-Benz. 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 4 | The Most Innovative Companies 2018 Exhibit 2 | Digital-Related Innovations Show the Biggest Increases in Expectations and Activity 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? Share of respondents (%) 60 51 48 41 41 39 40 38 37 34 34 33 33 31 31 31 30 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 Technology Speed of Digital Customer New Business Supporting platforms adopting design channel service model capabilities new tech WHICH OF THE FOLLOWING AREAS OF INNOVATION AND PRODUCT DEVELOPMENT ARE YOU ACTIVELY TARGETING? Share of respondents (%) 60 44 40 35 33 35 31 32 30 30 30 30 29 28 29 28 26 25 24 24 24 25 22 22 22 19 20 18 16 17 17 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 2016 2017 Sources: 2016 and 2017 BCG global innovation surveys. The Boston Consulting Group | 5 that successful digital transformation requires Strong innovators are more than twice as like- excelling in three fundamental areas: speed, ly to use outsourcing to access the right capa- scale, and value. (See “Acting on the Digital bilities, something that is frequently neces- Imperative,” BCG article, September 2016.) sary for companies that do not have all the requisite digital skills in-house. They are also About a third of all respondents said that mo- more likely to have properly digitized innova- bile products and capabilities, along with dig- tion processes. And it comes as no surprise ital design, will have a significant impact in that far more strong innovators than weak their industries over the next three to five ones are satisfied with their return on invest- years. About a quarter said that their compa- ment (90% versus 24%). nies are actively targeting these areas. The use of mobile technology is growing signifi- cantly in chemicals, financial services, manu- Digital Change facturing, and health care. Digital design is re- In our work with companies that span the ceiving greater attention in consumer digital innovation continuum, we’ve found products, media and entertainment, manu- that organizations wanting to raise their digi- facturing, insurance, health care, and the pub- tal game often face a variety of functional lic sector. challenges. These businesses need to answer questions in three areas: A Digital Innovation Divide • Strategy. How do we apply technologies There are significant gaps in many areas be- that expand the horizons of the possible tween companies that describe themselves as in terms of new products, services, and strong in innovation and those that think business models? they are weak, but the divide in the digital as- pects of innovation is particularly striking.
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