most innovative companies 2013

8/10/2019 Most Innovative Companies 2013

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T M

IC LESSONS FROM LEADERS


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th cs of cops kts wth cos coboto t vs of th ct

ogzto. Ths ss tht o cts chv sstb copttv vtg, b ocpb ogztos, sc stg sts. Fo 1963, BCG s pvt cop wth

78 ocs 43 cots. Fo o foto, ps vst bcg.co.

The BCG Game-Changing Program

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chgg wo. To, t s c tht th pc of chg s cctg. So, fo ogztos to

ow th ft, th st chg th g. Th c shs th gob coo, g

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G Chgg Pog, ps go to: https://www.bcgpspctvs.co/chgg_th_g.

IMAGE TK


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The MosT InnovaTIve

CoMpanIes 2013LESSONS FROM LEADERS

Sb 2013 | T B C G

Kim WaGner

andreW TaylOr

Hadi ZaBliT

euGene FOO


4/27

2 | T M I C 2013

ConTenTs

INTRODUCTION

InnovatIon In

FIVE SOURCES OF INNOVATION STRENGTH

Leadership Commitment

Leveraging IPManaging the Portfolio

Focusing on the Customer

Strong Processes, Strong Performance

INSTITUTIONALIZING INNOVATION

APPENDIX: SURVEY METHODOLOGY

NOTE TO THE READER


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4 | T M I C 2013

InnovaTIon In 2013

M rkii s p sregic pririy.Mre h hree-qurers f respdes

plced i s eiher umber e r mg he

p hree, ciuig red f he ls

seerl yers. Ee durig he dephs f he

recessi, w-hirds r mre f cmpies

plced ii mg heir ms impr- pririies. (See Exhibi 1.) Mre h 80

perce f respdes wh pu heir cmp-

ies i he p quiile f irs ssiged

ii p-pririy rkig fr heir

rgizis, while ly 63 perce f hse

i he bm quiile did s.

these iudes re bcked up by iesme,

which hs bee risig sigificly i receyers. I 2013, 85 perce f srg irs

0

20

40

60

80

Respondents (%)

Top priority Top-three priority

20132012201020092008200720062005

+5%

Where do innovation and product development rank amongyour companys top strategic priorities?

777672

646666

72

66

19

40

23 23 25 26 24 24

47

32

43 43 3945 52

53

Sources:20052012 BCG/BusinessweekSo exctv iovto Sv; 2013 BCG Gob iovtos Sv; BCGss.

Exb 1 |The Importance of Innovation Continues to Increase


7/27

T B C G | 5

sid hey expec sped mre ii

d ew-prduc deelpme h hey did

ls yer, cmpred wih ly 39 perce f

wek irs. oerll, 64 perce sid hey

pl icrese spedig, 4 percege

pi declie frm ls yer. We beliee hisdrp is prly due cmpies icresed f-

cus d smrer spedig. Sigificly fewer

respdes repred prjecs chgig direc-

i ce hey sred. (See Exhibi 2.) Re-

spdes ls sid h h heir cmpies

re dig beer h hey did ls yer he

rius cmpes f ii d ew-

prduc deelpme. they sid h hey

he he pieces f he ii puzzle, frm

ifrsrucure peple IP, msly i plce.

(See Exhibi 3.)

My f he cmpiesespecilly he ech-

lgy cmpiesh he lg ccupied

he p sls he lis f he 50 ms i-

ie cmpies ciue d s. (See Exhib-

i 4.) Despie is rece sck-mrke rils,

apple reis he umber-e rkig fr he

ih csecuie yer. Smsug pushed ps

Ggle fr he umber-w psii, d Mi-

crsf remis umber fur. Jiig ty-

i he p e re w ddiil umk-ersFrd d BMW. the u idusry

mkes exceedigly srg shwig er-

ll3 cmpies i he p 10 d 9 i he

p 20. Fur cr mkers re ew he lis,

d vlkswge d Geerl Mrs re w

f he bigges giers, mig up 31 d 16

plces, respeciely. Fr he firs ime sicewe beg his surey, here re mre u

cmpies h csumer cmpies i he

p 50 d mre umkers h echlgy

cmpies i he p 20. (Fr he full rk-

igs frm 2005 2013, see he iercie

mic.bcgpersepcies.cm.)

For the first time, there are

more automakers than techcompanies in the top 20.

Cmpies i he umie d echlgy

secrs led hse i her idusries i hw

impr hey perceie ii d i-

esme be. alms 85 perce f resp-

des i bh secrs red ii s

p pririy. (See Exhibi 5.) oe-qurer f

respdes u cmpies red heircmpies s srg irs, cmpred

0

20

40

60

80

Other groupsare regularly

updatedon project

status

Respondents who agree or strongly agree (%)

Prioritieschange

frequently

A standardprocessexists to

stopprojects

Budgetschange

frequently

Projectspecifications

changefrequently

Timelineschange

frequently

How are innovation and product development projectsmanaged once they have started?

20132012

There issufficient

communicationamong team

members

A standardprocess exists

to reviewthe progressof projects

565558

6359

636567

474950

566061

6365

Source:20122013 BCG Gob iovtos svs.

Exb 2 |Companies Are Staying Closer to Original Project Plans Than They Did in 2012


8/27

6 | T M I C 2013

wih erge f e-fifh erll. apprxi-

mely 70 perce f respdes frm u

d ech cmpies sid hey pl i-

crese iesme i ii i he cm-

ig yer.

the icresig ckwledgme f i-

i i he u idusry ciues prmi-

e red frm ls yer. Seerl fcrs re

behid he curre we f umie d-

ceme. Mufcurers re rcig mee

higher fuel-efficiecy sdrds, which m-

de erge fuel ecmy f 54.5 miles

per gll (mpg) i he U.S. fr he 2025 md-

el yer. (the EU is rgeig 64.8 mpg d

Chi 50.1 mpg by 2020.) aumkers he

sepped up bh he deelpme f elecric

d hybrid ehicles d heir effrs im-

pre he milege f mss-mrke mdels

hrugh such dcemes s mre efficie

pwer ris d ligher cr bdies. a he

sme ime, ehicle sfey sdrds ciue

rise, d umkers re pursuig d-

ced sfey iis such s self-brk-

ig sysems d ehicle--ehicle cmmui-

cis. the persie ppulriy f mbile

deices hs led csumers expec d-

ced elecric d eerime sysems

i crs h iegre semlessly wih heir

deices.

Respdes medi d eerime

cmpies hd he highes pii f hem-

seles regrdig ii. I h grup, 37

perce red heir cmpies s srg i-

rs (12 percege pis mre h re-

spdes frm he secd-plce umie

idusry), lhugh ly belw-erge 73

perce sid hey iew ii s p

pririy. a surey-rilig 69 perce f re-

44

46

50

53

52

52

54

53

54

54

55

54

53

54

56

60

53

56

57

59

59

61

62

63

63

63

64

65

65

65

65

67

70

0 20 40 60 80Respondents who agree or strongly agree (%)

Incentives and recognition are linked to one's contribution

There is an appropriate appetite for risk

Strong leadership is extended to projects

The right people are staffed on projects

There is deep user and market understanding

Senior management commits the necessary time

Top management is committed

IP is leveraged proactively

Projects receive sufficient budget and resources

IP rights are obtained via patent

The life cycle of a product is actively managed

Dedicated resources are available for a project

Projects are completed on time

How would you rate your businesss capabilities on the following elementsrelated to innovation and product development?

2012 2013

Proper infrastructure is made available

Roles and responsibilities are clearly defined

Cross-functional teams work on projects

Decision-making processes are clear and transparent

Source:20122013 BCG Gob iovtos svs.Note:Th qsto bot whth th f cc of poct s ctv g ws ot sk 2012.

Exb 3 | Respondents Believe They Have Signifcantly Improved Their Innovation Process


9/27

T B C G | 7

Sources:2013 BCG Gob iovtos Sv; BCG ss.Note:nC = o chg; e = t st; r = t to st. Th chg fo 2012 s th b of pcs tht cop ov p o ow.

Exb 4 |The Most Innovative Companies in 2013

CompanyChange

from 2012 Industry CompanyChange from

2012 Industry

1 app nC

Tchoog

telecom 26 Sh 9

eg

vot

2 Ssg 1Tchoog telecom

27 SoBk 4Tchoog telecom

3 Google 1Tchoog telecom

28 BaSF 5ist pocts pocsss

4 mcoso nCTchoog telecom

29 nok rTchoog telecom

5 Toot 6 atootv 30 Intel 11Tchoog telecom

6 IBM nCTchoog telecom

31 d 13Tchoog telecom

7 azo 2Cos retail

32 Boeing 6ist pocts pocsss

8 Fo 4 atootv 33 Fst rtg 1Cos retail

9 BmW 5 atootv 34 uv eCos retail

10Generalectc

6istpocts processes

35 Tencent eTchoog telecom

11 So 4Tchoog telecom

36 Kia 23 atootv

12 Fcbook 7Tchoog telecom

37 nk 2Cos retail

13General

Motors

16 atootv 38 nss 16 atootv

14 Vokswg 31 atootv 39 Ss 13ist pocts pocsss

15 Coc-Co 2Cos retail

40 exxomob reg vot

16Hwtt-Pck

1Tchoog telecom

41 Tesla e atootv

17 H 7 atootv 42 Virgin 5Cos retail

18 Ho r atootv 43 Ft r atootv

19 a 6 atootv 44 BP reg

vot

20 d r atootv 45 dow Chc eist pocts pocsss

21 W-mt 1Cos retail

46 Cisco rTchoog telecom

22 lovo 5Tchoog telecom

47 Target rCos retail

23Procter &Gamble

26Cos retail

48 rt 14 atootv

24 B e Health care 49 Philips 16ist pocts pocsss

25lGectocs

rTchoog

telecom

50 nst rCos

retail


10/27

8 | T M I C 2013

spdes frm helh cre cmpies sid

hey see ii s p pririy, bu ly

10 perce f helh cre respdes iew

heir cmpies s wek irs (e-hlf

he erge).

the judgme f seir mgeme is he

mehd cied by he ms respdes (w-

hirds erll) fr deermiig which ides

me i prduc deelpme. Similrly

high perceges f respdes sid h

sregic d ficil crieri ply key rle

s well. the rle f seir mgeme is

priculrly pruced srg irs,

where 83 perce sid i is fe r ery fe

driig frce, cmpred wih ly 55 per-

ce f cmpies i he bm quiile.

Srg irs lise cusmers. the

iews f key cusmers ply s igific rle

i he ii d ew-prduc prgrms

f 73 perce f srg irs, cmpred

wih ly 42 perce f weker cmpies

d 56 perce erll.

Mgig IP d usig i s cmpeiie d-

ge re grwig i imprce. alms

70 perce f respdes sid h IP is i-

cresigly impr i heir idusry, d

similr percege sid h wig IP is cru-

cil chieig reur ii. Mre

h hlf (53 perce) sid h heir cmp-

ies use IP exclude hers. Srg i-

rs re priculrly ggressie i heir pr-

eci d use f IP.

We dded ew cegry ur surey his

yer: up-d-cmig cmpies. these re

cmpies h re sill reliely yug r

he ye rech he scle f he p 50 glb-

l gis bu re eheless mkig hem-

seles kw fr ii. (See Exhibi 6.)

their iis re reled, surprisig-

ly, he les echlgiesscil medi,

mbile pplicis, d clud-bsed seric-

esd lms ll re mkig use f mbile

plfrms. (See he sidebr Ii Sys-

ems: aligig he Iceies.)

7068

79

7174

72746971

72

80

64

74

85

78

7175

91

83

76

69717273

78798284

84

77

0

20

40

60

80

100

Respondents who selected "top" or "top three" priority (%)

Globalaverage

Technologyand

telecom

Automotive Consumerand retail

Financialservices

Healthcare

Industrialproducts

andprocesses

Energyand

environment

Mediaand

entertainment

Transportation,travel,and

tourism

201320122010

Where do innovation and product development rank amongyour companys top strategic priorities?

Sources:20102012 BCG/BusinessweekSo exctv iovto Sv; 2013 BCG Gob iovtos Sv; BCG ss.

Exb 5 |Automotive and Technology Companies Rank Innovation as a Top Priority


11/27

T B C G | 9

Sources:2013 BCG Gob iovtos Sv; BCG ss.

Exb 6 |The Up-and-Coming Companies in 2013

abb F of -coc ptfos

Groupon loc os

l (nHn Copoto) F ob-tpho ssgg ptfo

ntx itt sbscpto svc fo ovs TV shows

Pinterest Soc-twokg ptfo

rkt Internet retailer

Spotf Stg-sc svcs

Sq mob pts ptfo

Whtsapp F ssgg ptfo

Xo Tchoog Stphos cos ctocs

One of the most striking elements of

this years list of up-and-coming innova-

tors is the number of companies that

dependin whole or in parton plat-

forms and standards created by two

longstanding most-innovative companies:

Apple (number one) and Google (numberthree). WhatsApp and Line are both

messaging apps, and Pinterest, Square,

Nti, and Spti a vag Apps

iOS and Googles Android platforms

to bring a mobile dimension to their

products.

These interrelationships highlight the role

that system architecture increasingly plays

in innovation. For an innovation system to

work, it needs to be more than the sum of

its pats. In t mbi wd, amp,

the iOS and Android platforms radically

simplify the technical and marketing

challenges for app makers, lowering the

cost of innovation. And by enabling the app

makers, Apple and Google help shape the

relative competitive advantage of iOS

versus Androidand the device and

advertising revenues they drive. Everybody

wins bas standads aw dint

parts of the overall system to evolve

independently. The system enjoys the

bnts a pti indpndnt bts;

in a world of open recombination, anyone

can try his or her hand, and no innovator

has to ask permission.

The plain fact, as we all know, is that no

company can be good at everything. The

d AT&T, amp, was biiant at

fundamental innovation (seven Nobelprizes!), but it plodded when it came to

making a new handset. (The Trimline took

13 years to bring to market.) Toyota, by

ntast, s at dimnsin mit

innovationsthat is, the aggregation of

thousands of small improvements in cost

wigt in. Siin Va, a

its self-referential mystique, is most

tantd at mbining isting tn-

gies in order to address unmet user needs.

Ts a gd asn tis. Dint

kinds of innovation require their own

institutional arrangements and capabili-

tis: dint tants, ts, pating

scales, funding methods, incentives, time

horizons, and appetites for risk. A smart-

pn, amp, mbins ndamnta

innovations that originated in universities

and t abs B IBM; mpnnts

are the product of sustained dimension-of-

merit improvements by the likes of Corn-

ing, Qamm, and Nvidia; and t

coolest apps typically come from young

tts s as WatsApp Gpn

INNoVATIoN SySTeMS: AlIGNING The INceNTIVeS


12/27

10 | T M I C 2013

companies that bet big on a hypothesis

about what will be fun or useful for users.

Maing a ts dint pis w

together requires legal interfaces, such as

patent licensing, and technical interfaces,

such as application programming inter-

faces. These interfaces are the architecture

an innvatin sstm, n dminatd

by a single orchestrator such as Apple or

Google.

The best architectureand not the bestproductwins in the long run. But architec-

ture is a two-edged sword: it can also

constrict innovation. Architecture creates

boundariesand while it liberates innova-

tion within those boundaries, it also inhibits

innovation across them. Whether this is a

gain or a loss depends on the product and

where it stands in its life cycle. When the

product is young and performance-con-

staind, aitta ibiit is tpia

wt m; as t pdt mats, ts innvatin sis m pman

to cost and customization, so modular

interoperability tends to gain ground.

In designing or trying to shape an innova-

tion system, the key is to focus on how tocreate the technical, economic, and legal

conditions that will enable the system to

is smbitia b aigning t

incentives of diverse participants. Ultimate-

, it is t nd-s pin tat

matters, and just as in a repertory theater,

that depends not on the stars but on the

performance of the ensemble.

Philip Evans

Philip Evans is a senior partner and managing

director in the Boston oce of The Boston

Consulting Group and a BCG Fellow whose

research focuses on the strategic implications of

the changing economics of information.

INNoVATIoN SySTeMS: AlIGNING The INceNTIVeS(continued)


13/27

T B C G | 11

FIve sourCes oF

InnovaTIon sTrengTh

F L SWrks he grges f Silic vlley frmre srucured crpre prgrms d

prcesses, ii kes my frms d

fllws myrid phs. theres e righ wy

d ii, f curse, bu bsed ur

50 yers f wrkig wih ll mer f clies,

d ur sureys f cmpies i mre h 15secrs d mre h 20 curies cduced

er erly decde, we he ideied e

key ribues h sepre srg irs

frm heir weker cuerprs:

their p mgeme is cmmied ii s cmpeiie dge.

they leerge heir IP.

they mge prfli f iie iiiies.

they he srg cusmer fcus.

they isis srg prcesses, whichled srg perfrmce.

these re idiidul driers f success;

hey re ierceced d reciprclly rei-

frcig. Srg cmpies fe pssess ll fie.

Li Cmmitmtas is he cse wih s my her specs f

crpre perfrmce, he cmmime f

p mgeme hs l d wih cm-

pys ii rck recrd. nie u f

e respdes ideifyig heir cmpies

s srg irs repred h p m-

geme is cmmied ii, cm-

pred wih less h hlf s my wek i-

rs. alms hlf f respdes srg

irs cied he chirm r CEo s hedriig frce behid he cmpys i-

ie effrs. Fur u f fie rked ii

higher h her sregic pririies.

T cmmitmnt f tpmanagement has a lot to do

with innovation success.

the rle f ledership Smsug uder

Chirm Ku-Hee Lee hs lg bee leged-

ry i is hme mrke. this repui hs

becme glbl i rece yers s he cmp-

y hs med frm iie success suc-

cessi fl-scree echlgy, smr deices,

d, ms recely, helh cre. Smsug hs

uled up he rkigs i ur surey, frm

umber 26 i 2008 secd plce his yer.

Smsug hries ii, d p m-

geme is respsible fr he philsphy be-

hid culure d pprch h urure bld

ides d execues big echlgicl dc-


14/27

12 | T M I C 2013

es. Perhps he bes-kw exmple is he

cmpys ew mgeme iiiie, de-

clred i 1993, which becme he clys fr

Smsugs explsie grwh s ledig glb-

l ir i elecrics d ifrmi

echlgy. the iiiie brugh bu fu-dmel chges i crpre culure, sys-

ems, d prcicesshifig he fcus frm

quiy d cs-drie gls prduc

quliy, desig, d R&D. Uder he ble cry

Chge eeryhig excep yur wife d chil-

dre, i clled fr exesie iesme i re-

serch, he ururig f glblly mided l-

e, d he irduci f efficie,

glbl mgeme sysem. these prgrms

led prduc iis ispired by bh

echlgy ledership d glbl perspeciesfrm Smsugs glbl ewrks.

Smart companies are

incasing sing IP as ameans of establishing

competitive advantage.

oe f he fudmel driers f Smsugs

ii effrs is is lederships releless

pursui f chge d ew grwh pprui-

ies. Mgeme isills culure f c-

cepig he sus qu d beig frid

chge. Smsugs ledership is kw fr

recgizig prducs h c drie he cre-

i f whle ew mrkesfl screes d

smrphes re w exmplesd ies-

ig heily i heir deelpme. Smsugs

ppulr Glxy ne mbile deice cme i

beig s he cmpy sugh cmbie he

prbiliy f mbile phe wih he brd-

er usbiliy f ble. this led he crei

f ew mbile-deice prduc cegry

dubbed phble, d i helped Smsug be-

cme he umber-e mker f mbile

phes glblly.

Uder is visi 2020 iiiie, which ws

uced i 2009, he cmpy is w

buildig is esblished sregh i ech-

lgy d iesig i life cre busiess-

essuch s medicl deices d eergy-s-

ig LED echlgyh fcus helh

d he eirme. a he sme ime, i is

ciuig iis i her dced-

echlgy res, such s gree memry s-

luis h seek icrese cmpuig per-

frmce while reducig pwer csumpi.

Li Ipthe rece lche f high-prfile pe

cses, mily i he echlgy d elecm-

muicis secr, hs mde i cler h i-

i depeds, i pr, wig he

ide. Precig IP righsh is, mii-

ig exclusie wership f prduc r pr-

cesshs lg bee defesie sregy, bu

smr cmpies re icresigly usig IP s

mes f esblishig cmpeiie d-

ge i he mrkeplce. Sme cmpieshe buil subsil busiesses he bsis

f licesig heir IP hers. (See he side-

br Six Hbis f IP Wiers.)

IBM is ble exmple. the 102-yer-ld

echlgy cmpy hs bee cs

presece mg he e ms iie

cmpies i eery BCG surey gig bck

2005. the cmpy reprs h i hs pped

he rks f U.S. pe recipies fr 20

yers srigh, wih 6,478 i 2012 d erly67,000 i he ps decde. IBM ciely m-

ges (d prues) is prfli s he lue f

idiidul pes flucues er ime. ac-

crdig e sudy, by 2012, he cmpy

hd bded erly 40 perce f he p-

es i receied i 2007.

I IBMs iew, ii, grwh, d lu-

ble pes re ierwied. the imprce

f IP is busiess cmes frm he p.

My f he pe lwyers i is exesie

glbl ewrk he echicl, s well s le-

gl, bckgruds. they re iled i R&D

prjecs frm he begiig, which mes

h IP csideris re refleced hrugh-

u. the cmpy hs buil IP rgiz-

i wih key fucis embedded bh

he ceer d i idiidul busiesses e-

sure h sregy d pririies re liged

crss he rgizi.

oe resul f his fcus d cmmime

IP is subsil d grwig reeue

srem frm sellig d licesig IP. Ree-

ues, which he bee icresig bu 6

perce per yer, reched $575 milli i


15/27

T B C G | 13

Innovation both depends on and generates

intellectual property. And its not just a

tech thing. Smart companies across allindustries increasingly use IP as both an

nsiv and a dnsiv mptitiv

wapn. hndds miinsi nt

biins das an b at sta;

organizations need to up their IP game to

ptt tat invstmnt. In pin,

IP winners take a strategic and proactive

appa tat mbas si bad pa-

tices, and each practice, in turn, is associ-

ated with critical subcapabilities. These

practices and capabilities come together ina amw w a t IP w. (S

t ibit bw.) In gna, t ns t

smtst and swist id int t t,

organizations should aspire to be well-

ndd in a si patis.

Laser-Like Focus on Value. IP winners puta price on the value generated by their

innovations. They quantify all aspects of

their IPlicensing revenues, the

premiums that innovations build into

products, and the competitive advan-

tages those innovations provide in themat, inding t abiit t d

others. Many IP leaders build dedicated

businesses around licensing. They also

actively seek out third-party assets that

will strengthen and round out licensing

portfolios.

Freedom to Operate. In an increasinglymp wd, innvativ nw pd-

ts, dsigns, and tngis n

require access to a range of IP. Few ifany companies own all the IP they need

in order to innovate and grow. Strong IP

companies constantly analyze their own

IP, as well as the portfolios of competi-

ts and patnt-asstin ntitis (n

d t as patnt ts), wit t

aim nsing adab ass t t

IP they need now and in the future.

They protect their freedom to operate

by managing their own portfolios

SIx hABITS of IP WINNerS

Laser-like focuson value

Freedom tooperate

Eye onthe future

Quality overquantity

Lean and focusedorganization

Premium onspeed

Efficiency and effectiveness Value creation

Foresightinto

technologytrends

Ecosystemshaping

Speed:disclosureto filing

Effectiveness:net revenue

QualityMarketshare

In searchof risk

Ability toexclude,

differentiate,and exploit

Regularportfolio

managementand review

Revenuegeneration

Competitiveintelligence

Success rateof applications

Average of oil-field-service companies

Average of IP winners in consumer goods,technology, and pharmaceuticals

Average of integrated oil companies

Average of utility companies

1

5432

1

2

34

5

6

Sources:BCG iP bchkg; Copstt; Thoso iovto; BCG ss.

Measuring Performance: The Six Habits of IP Winners


16/27

14 | T M I C 2013

2012, cuig ddiil $500 milli

i icme frm cusm deelpme.

Is surprisig h srg irs such

s IBM re mre h wice s likely s heir

weker cuerprs csider IP crieri

whe decidig which ew prduc ides

push frwrd. they ls beliee, likewise by

mrgis f w e, h heir cmpies

re effecie deelpig, precig, d

leergig IP, d hey re mre likely use

IP s surce f cmpeiie dge.

Mi t ptfliI wrld f limied resurces, effecie i-

rs ler hw dee resurces, cu lss-

es, d keep pipelie f high-peil

ides mig frwrd. Srg perfrmers re

disicly beer mgig prflis f

prjecs i deelpme d prducs i he

mrkeplce. (See Exhibi 7.) they defie

cler pririies, d hey he prcesses i

plce sp prjecs whe heir prmise

wes. these cmpies re ls fcused

he fuure; lg-erm dge is primry

strategically. They buy important IP

assets in the market and enter intopartnerships that provide access to

essential technologies. They also amass

their own IP arsenals, signaling to

competitors a willingness to act

aggressively to protect their IP turf.

Eye on the Future. IP winners follow themoves of competitors and anticipate

the direction of technological and

innovation trends. Their analyses feed

their corporate innovation agenda, andthey make sure that their IP strategies

and portfolios are designed to support

that agenda.

Lean and Focused Organization. Top IPplayers organize their IP-related

functions to generate value. They under-

stand the capabilities that they need,

and t bid an, pt tams tat

can cover their costs many times over

through licensing, risk mitigation, pricepremiums, and other yardsticks. The IP

function is viewed as a strategic partner

of the business units, not of an adminis-

tativ sta nit. Sni managmnt

is engaged and pays attention to the

igt isss. Tp tivs ativ

participate in IP and innovation reviews

to ensure that innovation activities are

aligned with strategy.

Premium on Speed.

IP winners are quick

t patnt appiatins wn t

have inventions worth protecting. They

n appiatins in mtipnations in order to achieve coverage in

key markets. The emphasis on speed

has become especially important in the

U.S., where, starting in March 2013,

patents are being awarded on the basis

st-t- at tan st-t -invnt,

harmonizing U.S. patent policy with

that of the rest of the world. IP leaders

also actively shepherd their patents

through the application process.

Quality over Quantity. Companies thatmanag ti IP assts tiv a

more successful than their competitors

at winning approval for their applica-

tions, securing patents more than 60

percent of the time. They control a

disproportionate share of the IP within

their industries, measured not neces-

sarily by raw numbers of applications

and claims but by breadth and depth of

coverage. A recent trend among IPleaders appears to be reducing the

number of patent applications and

focusing instead on the more important

ones, emphasizing quality over quantity.

Wendi Backler

Wendi Backler is an expert principal in the

Toronto oce of The Boston Consulting Group

and the global topic leader for both intellectual

property and network science.

SIx hABITS of IP WINNerS(continued)


17/27

T B C G | 15

gl f ii fr hem. they ciely

mge he mix f icremel iis

d mre rdicl, ew he wrld prd-

ucs, plfrms, echlgies, d serices.

Strong innovators are

focused on the future; long-

term advantage is a primary

goal of innovation for them.

BMW, which med up fie plces umber

ie i he 2013 surey, hs lg fllwed

sphisiced sregy f prfli mge-

me d ii. a Muich-bsed em

mges he ii prfli, rckig

ech ide frm geeri hrugh cmple-

ed prjec d mirig he resuls. Wih

hree disicie brds i is sbleRlls

Ryce, Mii, d he meske BMW, plus

muliple idiidul mdels (3 Series, 5 Series,

d s )he cmpy pls yers hed

keep ech f is rius mrques he

cuig edge.

BMW uses is prfli les pply ides

d isighs i wys h re csise wih

ech brds psiiig d cusmer p-

pel, d i emplys ew echlgies sub-

sie brd prmise d esure differe-

ii. the cmpy ls fllws sregyf keepig is prducs i he irduci

d grwh sges by brigig u ew md-

els i ech prduc lie befre he crs cur-

rely i he mrke rech he pi f mu-

riy r declie.

I he ps few yers, BMW hs bee ddig

susibiliy s cre eleme, wih he

gl f esblishig he BMW brd s he

ulime driig mchie mg eir-

melly friedly ehicles. true is prf-

li-sregy pprch, he cmpy hs em-

brked muliyer cmpig h

icludes, mg her higs, ew mbiliy

cceps d he use f echlgies em-

phsize sregic differeiiesurig,

fr exmple, h BMW ehicles he he

lwes crb dixide fpri mg pre-

mium cmpeirs. Iis such s

brke eergy recuperi by he lerr

d fuel-sig umic sp-sr fuc-

i furher uderscre cmmime he

ccep. BMW deelped cmprehesie,

frm-he-grud-up ccep fr he ew i3

he firs cr i is elecric i lieh is

fully dediced he eeds f elecric

Processes exist toeffectively stop projects

Products in the marketplaceare actively managed

30

6

44

35

0

20

60

40

80

Respondents (%)

WeakStrong

75

41

38

11

46

35

0

20

40

60

80

100

Respondents (%)

Strongly agree Agree

WeakStrong

45

84

Priorities are clearly definedfor projects in development

49

3034

0

20

40

60

80

100

Respondents (%)

Weak

4

Strong

49

83

34

34

38

Source:2013 BCG Gob iovtos Sv.

Exb 7 |Strong Performers Actively Manage Their Innovation Portfolios


18/27

16 | T M I C 2013

ehicle. the ew desig icludes crb

fiber bdy srucure, wih he bery psi-

ied beeh he drier d pssegers,

d i uses hs f susible merils

i he ierir gie he cr cmpleely

differe feel frm he cmpys hermdels.

Fci t CtmFr Prcer & Gmble, he cusmer is he

csumer. P&G, which jumped 26 plces

umber 23 i he 2013 surey, iess heily

i fudil csumer reserch, cduc-

ig sme 20,000 sudies ilig mre h

5 milli csumers i erly 100 curies.

the cmpy beliees h ii re-quires bh creiiy d cllbri. I

hs buil ii ceers h pride sim-

uled i-hme d i-sre eirmes. a

hese ceers, P&G ems c ierc wih

csumers d reil cusmers fr dys r

ee weeks ime.

the sme is rue i her idusries: i-

i shuld ke plce i cuum.

Srg irs ile cusmers i heir

ide-deelpme prcesses d decisis, mehd h hs les hree big beefis. I

helps esure demd fr he cmpys i-

is whe hey hi he mrke. I keeps

hem clse heir cusmers. ad i helps

id he csly erspecifyig r eregi-

eerig f prducs beyd wh cusmers

eed d re willig py. Mre h 70

perce f srg irs sy h key cus-

mer iews ply criicl rle i selecig

ides fr deelpme, cmpred wih ly

42 perce f weker perfrmers. alms 60

perce use cusmer sisfci mesure

ii success, cmpred wih 41 perce

f weker irs.

Cusmer feedbck is pr f ew-prduc de-

elpme mre h hree-qurers f

srg irs bu ly bu e-hird

f weker perfrmers. Smr irs seek

cusmer ipu key pis i he prduc

deelpme prcess; hey ls seer cler f

pe-eded feedbck, lckig i he prduc

specs desiged pi d mig fr-

wrd wih he deelpme prcess. (See he

sidebr Iegrig Cusmer Ipu i new-

Prduc Desig.)

st pc, stpfmcSrg perfrmers defie gerce d de-

cisi-mkig prcesses, which leds he

-ime cmplei f prjecs. (See Exhibi

8.) they re fr mre likely h wek i-rs fllw sdrdized prcesses i re-

iewig he prgress f prjecs i deelp-

me, dhere decisi-mkig crieri h

re cler d rspre, d cmplee prj-

ecs ime. they differeie clerly

mg gerce, prfli mgeme,

d prjec mgeme, d hey recgize

h srg prcess requires beig effecie

ll hree. they ls emphsize emwrk,

esurig sufficie cmmuici mg

em members d represei deel-pme ems frm ll rele fucis.

(See he sidebr Brekig thrugh: Pre

Ide-Geeri Prcices.)

Successful innovation means

involving customers in idea-

development processes and

decisions.

P&G, which seeks mke ii sysem-

ic, replicble, relible, d iegrl is busi-

ess, hs rigrus fur-sge prcess fr

ide deelpme, seleci, desig, d

luch. Whe he cmpy luches ew

prduc, i is sriig cree he ex bil-

li-dllr brd.

I he serch d discer phse, he cm-

py seeks ides frm eerywherec-

sumers, reil cusmers, suppliers, d h-

er prers. I iess smll mus f

cpil es he ibiliy f ew cceps

s hey ke shpe. the secd phse, se-

lec d resurce, iles mkig hrder

chices d llcig hum d ficil

resurces ides h he he ms prm-

ise. I cmbies sme ides i bigger p-

pruiies. I kills he es h d mke

he cu, ermiig fr mre prjecs h i

mes frwrd.

I phse hree, desig d qulify, muli-

discipliry ems frm prduc reserch,


19/27

T B C G | 17

Good ideas do not grow on trees. Neither

does the money it takes to design andproduce the products or services based on

those good ideas and to bring them to

market.

One proven way to focus the design and

dvpmnt tand inas t dds

for successis to involve the customer in

the earliest stages of the product develop-

mnt pss. T impat an tiv

customer-driven design program can be

especially strong as companies pursue newproduct introductions in rapidly developing

economies such as the BRICI nations

(Brazil, Russia, China, India, and Indone-

sia). In these regions, demand runs high,

the sheer number of potential new custom-

ers is enormous, and the historical, social,

and ta taditins a v dint

from those of the developed economies of

the West.

on t st stm-divn dsignpsss was yji Aas qait ntin

dpmnt (QfD) mtd, wi

introduced in Japan in 1966. The goal was

to transform customer needs into

engineering characteristics for a product or

service.

There have been many QFD-type advances

in the last half-century that seek to hone

the ability of companies to design products

that meet customer needs. Todays cus-

tm ss dintiatin. T abiit t

ma t igt tads ding t initia

pdt dnitinsiing sts t

sppt dintiating atsas

become an increasingly important com-

ptitiv apabiit. W nw tat dinti-

ating 15 to 20 percent of the attributes of

an givn pdt is sint t ma t

va pdt dint in t s t

customer. There is no need to invest scarce

resources in the remaining attributes.

Identifying in advance where to invest in

d t dintiat savs mn and

impvs t pdts ptabiit. At BcG,

we follow a four-step process that has

helped numerous companies improvepdt dsign tg m tiv

customer input.

Cstm-in signcan have an especially

strong impact in rapidly

developing economies.

T st stp is t dn a nt and

consistent set of features that will deter-

mine the products performance and that

can be compared with similar products

already in the marketplace and evaluated

in terms of the needs and wants of custom-

ers. This will include a coherent and shared

vocabulary for these features that is

understandable by all functions in the

company and seeks to bridge gaps betweencustomer desires and the companys ability

to deliver the requisite quality, manufactur-

ability, and serviceability.

Step two involves assembling these

features into a concept and analyzing that

concept and comparing it with others. In

order to assist with this phase, we use a

mati tat aigns pdt ntinait

with the attributes that customers value. It

is fairly common to observe up to a 30

percent improvement in customer value

when realigning product features with

stm nds. In pin, tis

adaptation also leads to a reduction of the

product cost by 10 percent and an increase

in sales of 25 percent.

The results of the second step inform the

tidmaing t dit disins abt

w t dintiat b mpaing t

dnd npts wit mptitiv pd-

ucts, customer value, and product cost to

evaluate the attractiveness of the concept

in the targeted market. The last step, of

INTEGRATING CUSTOMER INPUTIN NeWProDucT DeSIGN


20/27

18 | T M I C 2013

mrkeig, mufcurig, egieerig, fi-

ce, desig, d her fucis deelp

cmprehesie pls mee demdig

success crieri. these pls re qulified

hrugh cmbii f irul d

physicl ess. the suriig iis

me i he prduc luch pipelie, he

fil luch d leerge phse, which i-

les wrkig u he i-mrke deils: re-il disribui, pricig, csumer ril, re-

pe purchse, d, ulimely, sles d

prfi.

Yer i d yer u, P&G iis

regulrly led sme f he p prduc

irducis. three P&G prducs were

mg he e ms successful prduc

irducis i 2012, ccrdig reserch

firm SymphyIRI.

course, is taking the full package back tothe customer and getting validation that

the right decisions have been made.

In pin, sss pdts

result from the integration of brand

attributes, customer needs, and manufac-

turing and regulatory requirements into a

sis dintiating pdt ats. I

the customers voice is present from the

outset, and development resources are

aatd t dsigning t dintiating

features that the customer wants, thechances for success are high. If, however, a

company does a poor job in this critical

initial phase, the resulting problems will

persist throughout the remainder of the

product life cycle and likely include bad

design, value mismatch, overengineering or

underengineering, and weak sales.

INTEGRATING CUSTOMER INPUTIN NeWProDucT DeSIGN(continued)

A standard process exists toreview the progress of projects

in developmentDecision-making processes are

clear and transparentProjects are completed

on time

29

49

34

70

20

40

60

80

Respondents (%)

WeakStrong

78

41

37

29

46

28

50

20

40

60

80

Strong

Very strong Strong

Weak

Respondents (%)

42

75

33

27

9

50

41

0

20

40

60

80

Respondents (%)

WeakStrong

77

50

27


Exb 8 | Strong Innovators Rely on Well-Defned Processes


21/27

T B C G | 19

As the two-time Nobel laureate Linus

Pauling observed, the best way to have agood idea is to have a lot of ideas. Many

tivs a igt sptia nn-

strained creativity or brainstorming ses-

sins. In pin as w, tis tp

b-s, v ida is a gd ida -

cise rarely leads to anything useful. None-

tss, w a big bivs in idatin

dn igt. Tis qis invsting signi-

cant time in preparation, as well as in

developing a thoughtful selection process to

sort through the ideas that emerge. On thebasis of our work with numerous compa-

nies throughout multiple industries, we

have developed the following suggestions

nning an idatin pss tiv:

Challenge existing ideas. Dont start bying nw idas; st , idnti t

lenses you currently look through or the

bs a qnt td t tin

outside of. Ask yourself, Who do we

dn as stms and mptits?What are the assumptions inherent in

t wa w d tings and ? Tn

tin abt w sm ts tts

migt b angd. hw migt

dn wat mpan ata

ds?

Create new boxes. The reason thattining t t b n dsnt

work is that to focus, our brains need

bsamws mnta mds.

The key to fostering practical creativity

is t sap t ida gnatin t b

ating nw bs tat tam an

p. Twnt-v as ag,

amp, Piips etnis ndt

a nw-b is and aizd tat

another world was possible for the

mpan, n tat sd its isting

capabilities to go down an entirely

dint ad pdts and pt.

Today, some 40 percent of Philips

business involves health care devices

such as blood pressure and heart

monitors. A successful brainstorm isnt

necessarily a meeting at which a new

concept suddenly arises. It can be amting at wi an isting npt

suddenly makes a lot of sense to a lot

of people.

Pursue a range of inputs. Dning nwbs qis a mit anasis and

at. Bs nd t b gndd in at.

Dint sts wi a dint

inputs. Some, such as megatrends and

customer research, are relevant for

nearly all situations. OthersIP orntw anatis, amptnd t

be deployed more narrowly.

T assi appa t amining

trends (such as demographic, techno-

logical, and market-based trends) is to

start with a long list and narrow it down

using criteria such as preparedness and

level of impact. Consider another

method: pick a single trend that could

have a massive impact on the businessin t nt v as. Wat a t

dint was tis d appn? o

w migt tw tnds mbin? Wat

would happen if a low-impact trend was

analyzed incorrectly and ended up

having a huge bearing on the organiza-

tin in 2020? In a ts snais,

what new products, services, markets,

and anns d mg? Ta tis

trend analysis further and develop a set

of possible outlooks using scenario

planning.

IP and network analysis is another

useful tool. Tracking competitors

innovations in products, processes, and

mating, amp, an ad t nw

idas. Mapping pinin-ading pts

and inntia tid patis, spia

in tnia ds, an pint t n-

thought-of directions. In each case, its

a question of using all the types of

anasis avaiab t p pand

d visin.

BreAkING ThrouGh: ProVeN IDeAGeNerATIoNPRACTICES


22/27

20 | T M I C 2013

Frame the question eectively. having tigt nw bs is a gat stat, bt

also need to shape the questions that

your team should address within those

bs. Gd qstinst ind tat

lead to resultstend to be narrow and

spi. A qstin s as hw an w

s m widgts? tpia sts in

incremental solutions. Asking a ques-

tin in was tat ang isting

perspectives can lead to more transfor-

mational possibilities. Should we reallyb a widgt mpan? Wat pbms

are our customers using widgets to

addss? I a a pn manat

today, is the more attractive future in

witing instmnts in inpnsiv,

dispsab pasti pdts?

Low-cost airlines such as Ryanair,

Southwest Airlines, and JetBlue have

reimaginedand thoroughly disrupt-

edthe airline industry. But thinkabout how they built their low-cost

mds. A bad si in appa was

the consequence of many smaller

adjustments and adaptations, such as

mving m divs ts t ing n

tp aia, abandning main

airports for secondary facilities, giving

up marketing through travel agents in

favor of selling directly, and replacing

all-inclusive ticket prices with unbun-

dled pricing. Other companies can

bnt m asing wat inds

anags b-a sis migt

apply to their businesses.

Outline binding constraints and criteria forsuccess. Constraints can help creativity

by keeping attention focused on

productive directions. Similarly, they

help everyone understand the criteria

tat wi dn sss. W av sn

many companies invest time, money,

and other resources in developing a

broad range of ideas only to select

those that represent small tweaks to

t stats q. Idntiing spicriteria in advanceincluding feasibil-

it, ptntia nania impat, and

riskputs powerful parameters around

an ida-gnating is.

Allow sucient time to select ideas. Planning and preparation are crucial,

but once a broad set of ideas are in

place, it takes time to narrow and focus

them. Some high-level prioritization can

n b dn immdiatamp, mving m ndds

ideas to dozensbut the remaining

ideas will probably need additional

research or business-case development

before a top few can be selected for

further development.

With one client, we spent several weeks

amining t stngts and pptni-

ties for each of its business units. We

used client and other stakeholderinterviews, research among more than

500 employees, and other tools to

develop more than 2,500 ideas for

improvementbefore starting a

brainstorming and creativity workshop.

We took time to prioritize the top 1

percent, and those 25 alternatives were

analyzed in detail. The company

conducted even deeper evaluation for a

still smaller number before any imple-

mentation began.

Luc de Brabandere and Alan Iny

Luc de Brabandere is a Fellow in the Brussels

oce of The Boston Consulting Group and a

senior advisor in the rms Strategy practice.

Alan Iny is BCGs senior specialist for creativity

and scenarios and is based in the rms New

York oce.

Luc and Alan are the coauthors of the book

Tining in Nw Bs: A Nw Paadigm

for Business Creativity,published by Random

House in September 2013.

BreAkING ThrouGh: ProVeN IDeAGeNerATIoNPRACTICES(continued)


23/27

T B C G | 21

B f ide.the rpid grwh f he cmpies ur 2013 up-d-cmers lis demsres he

speed wih which sigle isigh r i-

i dy c sprk explsi f lue.

Crpre hisry is ls cluered wih

cmpies h were ce rewed fr heir

ieieess bu culd mii heirbiliy ie: he sried mes f

Sudebker, ari, Wg Lbrries, d

Kdk re bu few.

Cmpies h ciully cree lue er

he lg ermmeig decdes r mre

ler hw igri he biliy i heir cr-

pre mkeup; i becmes pr f heir cul-

ure d Dna. they refuse res heir

successes. they celebre heir ps ccm-

plishmes bu ly s hey use hse

chieemes s sprigbrds i he fuure.

Mre h hlf f he ms iie cmp-

ies he 2013 lis re mre h 50 yers

ld. a dze c rce heir rs he ie-

eeh ceury. they we heir lgeiy

riey f fcrssud sregies, fresigh-

ed mgeme, d srg execui key

mg hem. Bu perhps mre h y-

hig else, hey he ciued cree l-ue, jbs, d grwh becuse f heir biliy

isiuilize ii. Is less ll

cmpies wuld d well emule.

InsTITuTIonaLIzIng

InnovaTIon


24/27

22 | T M I C 2013

appendIxSurvey MeThodoloGy

T wereseir execuies represeig wideriey f idusries i eery regi. (See he

exhibi belw.) the mix f respdes is

ery clse h f ls yers surey i

erms f leel, fuci, d lci.

Befre 2008, ur rkigs f he ms i-ie cmpies were bsed sigle crieri-

respdes picks. I 2008, i effr

mke he resuls mre rbus d ruly re-

flecie f he cul p irs, we sup-

plemeed hse chices wih hree ficil

mesures: hree-yer l shrehlder reur

(tSR), hree-yer reeue grwh, d hree-

yer mrgi grwh. We he used h meh-

dlgy eer s ice. Respdes es cu

fr 80 perce f he rkig, hree-yer tSR

fr 10 perce, d reeue d mrgigrwh fr 5 perce ech. (ne h BCG did

publish surey i 2011.)

Industrial products and processes

Technology and telecommunications

Financial services

Consumer and retail

Energy and environment

Health care

Automotive

Transportation, travel, and tourism

Public sector

Media and entertainment

Professional services

Other

Total

405

226

215

195

115

94

55

47

45

41

38

27

1,503

Industry

Chief information officer

Chief technology officer

Chief operating officer

Chief financial officer

Chief executive officer

Chairperson

President

Chief innovation officer

Chief strategy officer

Vice president

Director

Manager

Other

Total

173

122

80

95

77

22

48

33

16

80

143

378

236

1,503

Position

United States

China

Japan

Other Asian countryGermany

France

Other European country

South America

United Kingdom

Italy

Africa

India

Russia

Canada

Spain

Australia

MexicoOther

Total

363

151

136

11787

74

71

53

65

54

41

39

45

40

38

34

2768

1,503

Country or region


2013 Survey Respondent Demographics


25/27

T B C G | 23

noTe To The reader

About the AuthorsKim Wagneris a senior partner gg cto th nwyok oc of Th Bosto Cost-g Gop. Andrew Tayloris a part- gg cto ths Chcgo oc. Hadi Zablitis

pt gg cto BCGs Ps oc. Eugene Foois apojct th s nw

yok oc.

AcknowledgmentsTh thos gtf to thfoowg BCG pts cogs fo th sghts ssstc: mch as,Stv Ch, as dg, PF, n H, Xv mosqt,

dvsh rj. Th wo sok to ckowg mck Btts,mthw Ck, dv d foth hp vopg wtgth pot Kth aws,G Ch, ls Ck, Shdvs, K F, SStsst fo th ssstcwth tg, sg, pocto.

For Further ContactKim WagnerSenior Partner and Managing DirectorBCG nw yok+1 212 446 [email protected]

Andrew TaylorPartner and Managing DirectorBCG Chicago+1 312 993 [email protected]

Hadi ZablitPartner and Managing DirectorBCG Paris+33 1 40 17 10 [email protected]

Eugene Foo

Project LeaderBCG nw yok+1 212 446 [email protected]


26/27

Th Bosto Costg Gop, ic. 2013. a ghts sv.

Fo foto o psso to pt, ps cotct BCG t:e-: [email protected]: +1 617 850 3901, ttto BCG/Pssosm: BCG/Pssos Th Bosto Costg Gop, ic. O Bco Stt Bosto, ma 02108 uSa

To th tst BCG cott gst to cv -ts o ths topc o oths, ps vst bcgpspctvs.co.

Foow bcg.pspctvs o Fcbook Twtt.

9/13


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