Forbes and FastCompany (Fast) have released their lists of most innovative companies this month. It is always an interesting read. Like a beauty contest of sorts. Each using their own approach to identify innovative companies. And of course they are not the only ones. Boston Consulting Group (BCG) has released their latest list earlier this year.
So what can we learn from these lists? Why would they be interesting beside the fact that people love to read ranking lists?
Because innovation matters and we might learn something from the leading companies.
It is no question that innovation has become a universal requirement for companies big and small. We see industry disruption becoming almost the norm, so basically no company can ignore the need for more innovation. This can be product and services innovation, or new business models. All in order to drive (business) value. This is key. Innovation has to have an impact. It is not inventions or the number of patents alone which make a company an innovation leader. If you look at Sqoop’s latest list of the most inventive companies based on Patent Activities you will find Samsung (including all its subsidiaries) and IBM on top of the list. Neither of them is in the top 5 of Forbes, Fast or BGC.
The one company that is on all lists in the TOP 5 is Amazon.
And if you look at the patent list you will find that Amazon was the biggest mover in the top 40 last year, ascending from 26 to 14. Amazon is a really interesting success story to look at from an innovation perspective. They are disrupting industries, are one of the leaders in digital transformation and it seems they are always one step ahead of competition (at least).
So how do they do this?
Amazon has succeeded in creating an environment with very high throughput of inventive ideas. They always put the Customer at the center. This is also true for the approach to innovation. Amazon has established a clear standard process how each employee can create new innovations. This include easy to produce documents like a press release, FAQ and Customer experience which will be used in every meeting discussion new ideas. It is easy to understand what you have to do to present an ideas to fellow colleague. Even more important I believe is the culture of walking into a meeting trying to find a way to say yes to a new idea. Managers can disagree but still commit to fund new project (give the idea a chance to be tested). Many companies struggle not with the absence of new ideas (employees have always good ideas) but with the internal decision processes to fund a project. And even if projects get funding it might be just another task on top of the daily job. Not so at Amazon. If they agree to a project they will also assign “Single threaded leader” who has no other tasks beside the new project. And If the project fails to deliver, no harm is done for involved people. It will be used as a learning for the future. (For more detail see How does Amazon innovate)
Amazon has a clear process for innovation as part of the company culture, fast decisions, always focused on customer impact. And obviously Amazon is also using the customer data they have to drive this process.
Which leads to another interesting observation in the lists of innovative companies: the rise of China.
Take the Fast list: Ranks 11-16 are Chinese companies. For many years China was the production facility for the (western) world. Not anymore. Chinese companies are bringing more and more innovative products and services to market. Often much faster than their (western) competitors. One reason for this is what BCG calls the customer-to-business (C2B) innovation model. Companies from China are closely following customer trends via e-commerce platforms, social media, and current events, allowing them to design new products that better reflect customers’ needs. These products are then quickly produced and distributed through a few select channels. Winning products are rapidly scaled up, those that do not catch on are quickly withdrawn, and the company regroups to focus on a new opportunity. China’s C2B approach to innovation requires companies to capture customer insights from online and offline sources and to deliver a superlative, seamless experience to customers in both channels.
In both cases, Amazon and the Chinese customer-to-business model, the customer is in the center, the process is fast and allows for quick failure, customer insight is a key success factor. And if an innovation is a winner, it will be scaled very quickly.
No wonder that Design Thinking and Open Innovation are becoming more and more popular with companies. The PwC innovation benchmark shows that companies are more and more using these collaborative models for the innovation processes. But as said in the beginning, innovation needs to have impact. 54% of innovating companies in the PwC study struggle to bridge the gap between innovation strategy and business strategy. This is a critical challenge. Amazon seems to be one of the success stories how to address this challenge. Jeff Bezos likes to talk about how to keep a company inventing new solutions for customers.
May be it is worth to listen.