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Published: November 3, 2010
 / Winter 2010 / Issue 61

 
 

The Global Innovation 1000: How the Top Innovators Keep Winning

Booz & Company Global Innovation 1000: Methodology

Booz & Company identified the 1,000 public companies around the world that spent the most on research and development in 2009. To be included, a company’s data on its R&D spending had to be public; all data is based on each company’s most recent fiscal year, as of June 30, 2010. Subsidiaries more than 50 percent owned by a single corporate parent were excluded because their financial results are included in the parent company’s reporting. This is the same core approach we have used in the previous five years of the study.

For each of the top 1,000 companies, we obtained key financial metrics for 2002 through 2009, including sales, gross profit, operating profit, net profit, R&D expenditures, and market capitalization. All foreign currency sales and R&D expenditure figures through 2009 were translated into U.S. dollars at 2009 daily average exchange rates. In addition, total shareholder return was gathered and adjusted for each company’s corresponding local market.

Each company was coded into one of nine industry sectors (or “other”) according to Bloomberg’s standard industry designations, and into one of five regional designations as determined by each company’s reported headquarters location. To enable meaningful comparisons across industries, we indexed the R&D spending levels and financial performance metrics of each company against its industry group’s median values.

This year, to better understand the relationship between innovation strategy and capabilities, we also conducted a Web-based survey of more than 450 senior managers and R&D professionals from more than 400 different companies around the globe. The companies participating represented more than US$150 billion in R&D spending, or 40 percent of the total Global Innovation 1000 R&D spending for 2009. Respondents came from all industry sectors; 52 percent came from North America, 33 percent from Europe, and 15 percent from the rest of the world.

We asked respondents to evaluate the innovation capabilities they believed were most important across the value chain, as well as their performance in each of these capabilities. Responses were analyzed with a variety of statistical methods to allow us to distinguish the capabilities most important in pursuing each of the three innovation strategies we defined in our 2007 study. Although company names and responses were kept confidential (unless permission to use them was explicitly given), a large number of the respondents identified themselves, enabling us to associate their survey answers with their company’s performance. Financial performance was normalized by industry to compare the impact of capability coherence on corporate financial performance both within strategies and across all companies.

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Author Profiles:

  • Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J., and is the global leader of the firm’s innovation practice. He has spent more than 20 years working with high-tech and industrial clients on corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
  • Kevin Dehoff is a partner with Booz & Company in Florham Park, N.J., and is the global leader of the firm’s engineered products and services business. He has spent nearly 20 years helping clients drive growth and improve innovation performance in areas including research and development, technology management, product planning, and new product development.
  • Also contributing to this article were s+b contributing editor Edward H. Baker and Booz & Company Principal Lisa Mitchell.
 
 
 
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Online Innovation Profiler

For a new assessment tool from Booz & Company, designed to help evaluate your company’s R&D strategy and the capabilities required, visit: www.strategyand.pwc.com/innovation-profiler.

Resources

  1. Barry Jaruzelski and Kevin Dehoff, “Profits Down, Spending Steady: The Global Innovation 1000,” s+b, Winter 2009: Last year’s study showed that most companies were sticking with their innovation programs in the early stages of the recession — and many were boosting spending to compete in the upturn.
  2. Barry Jaruzelski and Kevin Dehoff, “Beyond Borders: The Global Innovation 1000,” s+b, Winter 2008: This study revealed for the first time how R&D money is benefiting most parts of the world.
  3. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: This study identified the three distinct innovation strategies: Need Seekers, Market Readers, and Technology Drivers.
  4. Barry Jaruzelski and Richard Holman, “Innovating through the Downturn: A Memo to the Chief Innovation Officer,” Booz & Company white paper, March 2009 (PDF): How companies can tailor their product and technology initiatives to new market realities and refocus their investments on their core R&D and innovation capabilities.
  5. Zia Kahn and Jon Katzenbach, “Are You Killing Enough Ideas?s+b, Autumn 2009: How companies can improve their innovation performance by getting their formal and informal organizations in sync.
  6. Alexander Kandybin, “Which Innovation Efforts Will Pay?MIT Sloan Management Review, October 1, 2009: How companies can use an incisive analytic tool to gauge their overall R&D effectiveness.
  7. Paul Leinwand and Cesare Mainardi, “The Coherence Premium,” Harvard Business Review, June 2010: The power of capabilities-driven strategy.
  8. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/innovation.
 
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