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Published: October 22, 2013
 / Winter 2013 / Issue 73

 
 

The Global Innovation 1000: Navigating the Digital Future

Caterpillar’s Henricks believes that many of these collaboration tools have significantly improved productivity. Her company uses tools such as telepresence and Web-based communities to maintain interaction among R&D teams, as well as sales, marketing, and other functions around the world. “We truly can do R&D 24/7,” she says. “Now we can take data in our test labs here in North America or in Europe and send the file to India. Overnight, our engineers in India can analyze it [and] reach some conclusions, and the next morning, engineers in North America or Europe analyze those results and plan next steps.”

A Closer Look at Usage

Even as companies overall are making significant use of many digital tools, variations among companies in different industries remain considerable. Overall, software and Internet companies spent the largest portion of their R&D budget on deploying and operating digital tools, at 15 percent, followed by aerospace and defense companies, at 12 percent.

Interestingly, computing and electronics companies invested the smallest percentages of their budget on these tools—less than 6 percent. However, that still adds up to a significant amount, given their high overall R&D spend (see Exhibit 3).

Naturally, companies in different industries tend to use the tools that can help create their unique products and services. The aerospace and defense industry, for example, relies heavily on CAD software, visual simulation, and customer immersion labs. These are not among the most-used digital tools in other industries. With the industry’s high development costs and levels of complexity—building submarines, for instance—it is understandable that aerospace and defense companies would find these tools more useful than, say, social media dashboards. Companies in the software and Internet sector, however, make extensive use of social media, as well as monitoring and location detection of customer behavior and product usage—also no surprise, given that their B2C business models rely on customers who are highly likely to be online and mobile.

We also observed distinct differences in the level of usage (or adoption) of digital enablers by innovation strategy model. Since 2007, we have segmented companies into three distinct strategic groups—Need Seekers, Market Readers, and Technology Drivers. Need Seekers, the most prevalent model in the innovation hub that is Silicon Valley, engage customers directly to generate new ideas, then develop original products and services and get them to market first. Market Readers are fast followers. They typically generate ideas by closely monitoring their markets, customers, and competitors, focusing largely on creating value through incremental innovations to current products. And Technology Drivers depend heavily on their internal technological expertise to develop new products and services, driving both breakthrough innovation and incremental change, in hopes of meeting the known and unknown needs of their customers via new technology.

Over the years, our survey results have consistently shown that Need Seekers excel at several factors that promote innovation success: They do a better job at aligning their innovation strategies with their overall corporate strategies; they understand the importance of developing a focused set of innovation capabilities needed to carry out their strategy; and they turn their corporate culture to their advantage, ensuring that it supports their innovation strategy by maintaining a strong connection to their customers throughout the innovation process. They also have the strongest financial performance relative to their peers.

This year’s results suggest that Need Seekers are gaining yet another advantage, through their use of digital innovation tools. Fully 62 percent of respondents from companies we identified as Need Seekers make significant use of digital enablers, compared with just 48 percent of Technology Drivers and a mere 25 percent of Market Readers (see Exhibit 4). And of those Need Seekers, nearly 60 percent indicated they outperformed their competitors financially. That’s a testament to the power of these tools when they are in the right hands, but also to the fact that Need Seekers, the most active companies in seeking out customer insights in their R&D efforts, understand where the tools’ transformative promise might lie. Market Readers’ much less frequent use of digital enablers—particularly at the front end—reflects their incremental mind-set, which is more focused on process optimization.

 
 
 
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Resources

  1. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: Companies need to align their innovation model to their corporate strategy and listen to their customers.
  2. Barry Jaruzelski and Kevin Dehoff, “The Global Innovation 1000: How the Top Innovators Keep Winning,” s+b, Winter 2010: Highly innovative companies consistently outperform because they are good at the right things, not at everything.
  3. Barry Jaruzelski, John Loehr, and Richard Holman, “The Global Innovation 1000: Making Ideas Work,” s+b, Winter 2012: How successful innovators bring clarity to the early stages of innovation.
  4. Barry Jaruzelski and Matthew Le Merle, “The Culture of Innovation: What Makes San Francisco Bay Area Companies Different?” Booz & Company white paper, Mar. 23, 2012: Booz & Company and the Bay Area Council Economic Institute identify the strategic, cultural, and organizational attributes that have led to the sustained success of the San Francisco region.
  5. Alice Rawsthorn, “Catching Up to 3D Printing,” New York Times, July 21, 2013: The current state of digital manufacturing.
  6. Jeff Schumacher, Simon MacGibbon, and Sean Collins, “Don’t Reengineer. Reimagine.s+b, Summer 2013: How your business can realize its digital potential, from the team at Booz Digital (booz.com/digital/).
  7. Booz & Company’s Global Innovation 1000 study microsite.
  8. Booz & Company’s online innovation strategy profiler: Evaluate your company’s R&D strategy and the capabilities it requires.
  9. For more thought leadership on this topic, see the s+b website at: strategy-business.com/innovation.