The most innovative companies 2020

The most innovative companies 2020

In innovation—as in life—drive, size, and skill are a powerful combination.

In innovation—as in life—drive, size, and skill are a powerful combination. Drive to set an ambitious agenda and fund promising opportunities. Size to transform these opportunities into real sources of new revenue. And the skill, as embodied in a welltuned innovation system, to be able to do it over and over again.

And the world’s most innovative companies have been getting bigger. The revenue of a typical “small” company on BCG’s 2020 list of the 50 most innovative companies is $30 billion—up more than 170% from $11 billion (in constant dollars) in our first survey in 2005.

But drive and size mean little if your innovation system can’t build on them for serial success. And here our research offers a more sobering assessment. Serial innovation is hard. Of the 162 companies that have been on our top 50 list over the past 14 years, nearly 30% appeared just once—and 57% appeared three times or fewer. Only 8 companies have made the list every year: Alphabet, Amazon, Apple, HP, IBM, Microsoft, Samsung, and Toyota.

When we began the research for this 14th edition of BCG’s Most Innovative Companies report, COVID-19 had not yet emerged. As we explored the data and interacted with clients, however, it became clear that this year’s core findings—about the advantages of scale and the imperative for serial innovation—may be even more relevant today as innovation leaders need to adapt to rapidly shifting patterns of supply, demand, consumer behavior, and ways of doing business.

Moreover, our research has shown that companies doubling down on innovation during downturns—using the opportunity to invest and position for the recovery—outperform over the long term. But doing that successfully requires developing a clear innovation strategy and supporting it with appropriate investment, leveraging the advantages of scale, and ensuring that your innovation system is nimble enough to spot and seize the best opportunities quickly and decisively. As we explore these themes, we draw on our global innovation performance database of more than 1,000 firms to detail the practices that make the best stand out from the rest.

Committing to innovation

Innovation is a top-three management priority for almost two-thirds of companies. This is the lowest level since the financial crisis in 2009 and 2010—perhaps reflecting the uncertain economic outlook amid geopolitical tensions even before the outbreak of COVID-19.

We can disaggregate our findings further. “Committed innovators” (45% of the total) say that innovation is a top priority, and they support that commitment with significant investment. “Skeptical innovators” (30% of the total) are the reverse, seeing innovation as neither a strategic priority nor a significant target of funding. And “confused innovators” (25% of the total) are in between, with a mismatch between the stated strategic importance of innovation and their level of funding for it. We find the highest proportion of committed innovators in the financial and pharmaceutical sectors (both 56%)—and the lowest in industrial goods (37%) and wholesale and retail (32%).

Committed innovators are winning. Almost 60% of them report generating a rising proportion of sales from products and services launched in the past three years, compared with only 30% of the skeptics and 47% of the confused. The skeptics may or may not be making wise strategic decisions—it is sometimes neither strategically sound nor feasible to pursue innovation leadership—but at least they are consistent. The confused are a puzzling lot with a worrying disconnect between strategy and innovation spending.

And winners are more likely to be committed innovators, further evidence of the divide between the best and the rest that we have discussed in the past few innovation reports. In 2019, for example, we found a wide gulf between strong and weak innovators with respect to their use of artificial intelligence (AI). We also discovered that strong innovators were making increasing use of external innovation channels such as incubators and partnerships with academic institutions. Our 2018 research showed that almost 80% of strong innovators have properly digitized innovation processes compared with less than 30% of weak innovators. The relationship between commitment and results is the latest evidence of the strong getting stronger—across a spectrum of innovation-related criteria.

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