The Innovation Insights - The Innovation Index Annual Report - Chapter Three
The Innovation Index Annual Report – Chapter One reported the total Innovation Activity in 2006 at the Top 20 Innovators. It also correlated the stock performance of the Top 20 Innovators with their Innovation Activity – Total Innovations introduced across New Products, Collaborations and Acquisitions. The Top Innovator – The Innovator of Innovators was announced in Chapter Two of The Innovation Index Annual Report.
Chapter Three of The Innovation Index Annual Report summarizes the Five Principles driving successful Innovations, key Innovation Insights gained over 2006, Innovation Trends and further explanation on the Rankings.
My observation and analysis on how the Top 20 Innovators drive Innovation led me to summarize the following five principles for successful innovation:
The Five Principles for Successful Innovation
Successful business innovations that drive growth are guided by the following five principles:
1. Vision to create new products, business models or processes that make a difference and create new markets
2. Systematic processes and rigor that stimulate creativity and learning to execute on the vision
3. Reward and recognition system for teams to take measured risks and experiment
4. Focus on clear and present customer needs, the market facts, and the intangible
5. Growth-oriented leadership that is decisive, inclusive, focused, takes risks, and has market expertise
Selected references:
Leading eBook on Creativity and Innovation in Business
Creativity and Innovation Best Practices
Creativity and Innovation Case Studies
The Innovation Index
Top 50 innovative companies in the world
If you enjoyed reading the five principles, I also recommend the complete list of Creativity Innovation Best Practices.
Since September 2006, when I began this blog on Creativity And Innovation Driving Business, I have studied and reported on most of the Top 20 Innovators of The Innovation Index and some of their Disruptors. Here is a quick recap, beginning with the first story:
1. Google - Can Ambiguity and Chaos Create Innovation? You bet...
What's amazing is Google continues to innovate using what is described as "spaghetti method of product development (toss against wall, see if sticks)" requiring all Engineers to spend at least 20% of their time on new ideas.
2. Yahoo! - Hackers, Controlled Chaos and Innovation
If Yahoo! is indeed successful in finding "new twists on Yahoo services" through a controlled chaos of an event such as this with all the hackers, it would certainly be a first in their long page of innovations.
3. 3M and Johnson & Johnson - Failures and Stumbles driving Innovation
The failures result at J & J from the fact that the company emphasizes placing bets on many potential opportunities--most opportunities possibly fail, but the ones that do succeed, they succeed big. The bets, or the experimentation, are an essential price to pay for successful Innovation and Long-term growth
4. Wal-Mart - The Green Innovation
Green Innovation is a win-win for the business, the environment and the community. The business creates a better image, saves money and potentially creates new revenues. The environment becomes safer and cleaner. The community benefits with better health and enjoyment from a cleaner environment.
5. Intuit - Creating Innovations in Software Industry
Intuit's Innovation Recipe: Customer Evangelist Culture, Customer-Intuitive Design, Customer-driven Marketing and Product Management, Direct Marketing and Retailing, The Process driving Innovation.
6. Google - Acquisiton of YouTube. $1.65 billion Innovation and counting
YouTube Innovations: First, the vision of Founders to create a Video download service for FREE. Second, the intense focus on providing the best and most comprehensive experience for users interested in uploading, watching and sharing videos. Finally, YouTube created key partnerships with various Music and Broadcast players in the industry.
7. Toyota - Innovation Factory
Toyota's Innovation Principles: 7.1. The Art of Ingenuity. 7.2. The (relentless) Pursuit of Perfection. 7.3. The Rhythm of Fit.
Innovation Traps: 7.1. Swinging For Fences. 7.2. Getting Too Clever 7.3. Solving Problems Frivolously.
8. Apple - iPod - Apple's Best Innovation
iPod, powered by Apple, introduced in 2001 and masterminded by Steve Jobs, combines outstanding design, easy-to-use interface, superb performance, and an experience like no other. Apple assumed the world’s number one innovative company position and held it again in 2006 in large part due to the exponential growth of iPod – aptly called the iPod phenomenon.
9. Microsoft - The Innovator
Is Microsoft launching a new wave of innovation with Windows Vista, Office 2007 and Exchange 2007 and some 30 new products? Or are these merely nice-to-have product enhancements that users were asking for, and were just delayed for the past few years? Who is going to benefit the most from this new wave?
10. General Electric and Proctor & Gamble - Innovations Driving Growth
GE's innovation recipe: 10.1. Focus on key technologies. 10.2. Growth-oriented leadership 10.3. Core Business portfolio.
P&G's innovation recipe: 10.4. Brand mix. 10.4. Global top team. 10.6. New product collaborations.
11. 3M - The Innovation Machine
Five takeaways stimulating Innovation:
11.1. "Give it a try--and quick!"
11.2. "Accept that mistakes will be made."
11.3. "Take small steps."
11.4. "Give people the room they need."
11.5. "Mechanisms - build that ticking clock!"
12. Southwest Airlines - Flying High with Innovations
It is technology innovations such as DING! that bring Southwest that much closer to its customers who leverage the communication and messaging service to buy more tickets, besides new destinations, low fares, new nonstop services, new vacation packages and more
13. Starbucks - Innovations Brewing at Starbucks
Starbucks has become a pervasive coffee brand throughout the world, and the company is cleverly exploiting the Starbucks brand to launch new innovations in complementary and adjacent industries accounting for the solid revenue growth.
I discovered several new Innovation Trends shaping The Top 20 Innovators, and the industry at large:
1. The Innovation Gap
While the Sustainer is Innovating at a different pace and trajectory serving the needs of its profitable and larger customers, and focused on profitable investments, the Disrupter is Innovating at a faster pace and trajectory serving the needs of the broader market, and creating new market share.
2. Can Leadership Create Innovation?
Key Executives believe the following ingredients drive Innovation:
2.1. Marketing 2.2. Size 2.3. Culture 2.4. Technology 2.5. Passion 2.6. Active Participation 2.7. Hard Work 2.8. Internal Development 2.9. Targeted Acquisitions 2.10. Agility
3. Blocking Creativity and Innovation
Key processes that an organization can create to unblock Creativity and drive Innovation:
3.1. Open communication within and between departments, and across all management layers.
3.2. Hiring of people with diverse backgrounds and experience, and avoiding "cloning."
3.3. Encouraging employees to find new ways to do their daily work, and empowering them to make decisions.
3.4. Creating an organization that extends out to customers, suppliers, partners, and environment.
3.5. Stimulating research activities and providing employees some free time to experiment.
3.6. Allowing employees to take measured risks (with small costs), and seizing opportunities.
3.7. Creating processes to evaluate any idea on merit, regardless of where it is coming from.
3.8. Identifying and separating the creative from operational functions in the organization.
3.9. Using group creativity techniques frequently to promote team building and generate new ideas
4. Co-Creation driving Innovation
As Co-Creation demonstrates tangible results, more mainstream businesses will experiment and adopt it - not just technology companies. The best side effect of Co-Creation is it brings you that much closer to your customers and creates a positive business environment.
5. Six Ways to Find Innovation
How can an organization find Innovation? Here are Six Ways to Find Innovation:
5.1. Stand in different places
5.2. Use the lenses of other domains
5.3. Ask powerful questions
5.4. Foster new knowledge
5.5. Create a visual verbal journal
5.6. Change the pace of attention
I introduced The Innovation Index in December 2006 from an epiphany born out of the BusinessWeek article on the world's top innovators. The Innovation Index Report incorporates the following objectives and is released weekly:
1. Report, analyze and project the stock performance of the top 20 Innovators in North America every week, and compare their performance to S&P, NASDAQ and Dow Jones.
2. Compare and contrast best practices, initiatives, new products, successes, strategies, stories, leadership and insights on Creativity and Innovation at the top 20 Innovators.
3. Showcase Disruptors challenging these top Innovators, their disruptive innovation strategy, and their current and potential impact on the Innovators' customer base and market share.
This brings me back to this, the final chapter of The Innovation Index Annual Report: Chapter Three - The Insights.
Why did I not choose Apple and Google as the top two innovators in The Innovation Index Rankings for 2006? Why is Microsoft ahead of them for 2006? Why is Research In Motion also ahead of Apple and Google for 2006? Why are IBM and HP tied for the top rankings? What about Cisco Systems and GE?
The primary reason was Stock Performance in 2006. Apple and Google each gained 18% and 11% in stock performance gains in 2006. Microsoft stock gained 16%. Research In Motion stock gained 94%. IBM stock gained 20%. HP stock gained 45%. Cisco stock was up 60%, and GE stock was up 9%.
The secondary reason was Innovation Activity in 2006. Apple and Google had innovation activity of 69 and 75 total innovations in 2006. Microsoft had innovation activity of 159 total innovations in 2006. Research In Motion had innovation activity of 87 new innovations. IBM led all innovators with 187 innovations in 2006. HP had 106 innovations. Cisco had 72 innovations, and GE had 79 innovations in 2006. One can argue though that press releases touting incremental enhancements and basic collaborations are hardly new innovations. However, it appears though that most innovators are leveraging the media to make every announcement. Perhaps a filter to weed out the run-of-the-mill announcements may be required in 2007.
The final reason was the X Factor. Apple's iPod line of products in 2006 had key expansions from 2005; on the other hand the new iMac came onto its own in 2006 with the new Intel dual core series and support for Windows. The biggest draw for Apple though was the iPod integration partnerships with major airlines and major auto makers. Google's search engine leadership and related innovations were introduced before 2006; Google expanded on Search in 2006. Google Earth became the innovative application for mapping, and the acquisition of YouTube was the clincher. Microsoft introduced the much awaited Vista, Office, Live services, Pay-As-You-Go computing and Mobile. Research In Motion went on a tear with Blackberry Connect and Blackberry business expansion all over the world. New patents introduction were also key. IBM, HP, Intel, Microsoft and GE led all innovators in filing new patents.
A ranking of the top 20 Innovators in North America is inherently controversial. After all, we are talking about the best of the best. And each Innovator in turn is a fierce competitor. I would be sure to read the new edition of BusinessWeek when it announces the annual rankings of the world's top innovators. What I have tried though is to correlate Stock Performance, Innovation Activity and the X Factor. Together, the Top 20 Innovators of The Innovation Index are a barometer of the Innovation Activity in North America.
About The Innovation Index
The Innovation Index introduced in December, 2006 is a weighted stock price index of the top 20 Innovators in North America.
The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.
The Normalized Innovation Index has returned 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.
The alphabetical list of the top 20 Innovators of The Innovation Index along with their stock ticker symbols are presented below:
3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movile - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)
The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.
Chapter Three of The Innovation Index Annual Report summarizes the Five Principles driving successful Innovations, key Innovation Insights gained over 2006, Innovation Trends and further explanation on the Rankings.
My observation and analysis on how the Top 20 Innovators drive Innovation led me to summarize the following five principles for successful innovation:
The Five Principles for Successful Innovation
Successful business innovations that drive growth are guided by the following five principles:
1. Vision to create new products, business models or processes that make a difference and create new markets
2. Systematic processes and rigor that stimulate creativity and learning to execute on the vision
3. Reward and recognition system for teams to take measured risks and experiment
4. Focus on clear and present customer needs, the market facts, and the intangible
5. Growth-oriented leadership that is decisive, inclusive, focused, takes risks, and has market expertise
Selected references:
Leading eBook on Creativity and Innovation in Business
Creativity and Innovation Best Practices
Creativity and Innovation Case Studies
The Innovation Index
Top 50 innovative companies in the world
If you enjoyed reading the five principles, I also recommend the complete list of Creativity Innovation Best Practices.
Since September 2006, when I began this blog on Creativity And Innovation Driving Business, I have studied and reported on most of the Top 20 Innovators of The Innovation Index and some of their Disruptors. Here is a quick recap, beginning with the first story:
1. Google - Can Ambiguity and Chaos Create Innovation? You bet...
What's amazing is Google continues to innovate using what is described as "spaghetti method of product development (toss against wall, see if sticks)" requiring all Engineers to spend at least 20% of their time on new ideas.
2. Yahoo! - Hackers, Controlled Chaos and Innovation
If Yahoo! is indeed successful in finding "new twists on Yahoo services" through a controlled chaos of an event such as this with all the hackers, it would certainly be a first in their long page of innovations.
3. 3M and Johnson & Johnson - Failures and Stumbles driving Innovation
The failures result at J & J from the fact that the company emphasizes placing bets on many potential opportunities--most opportunities possibly fail, but the ones that do succeed, they succeed big. The bets, or the experimentation, are an essential price to pay for successful Innovation and Long-term growth
4. Wal-Mart - The Green Innovation
Green Innovation is a win-win for the business, the environment and the community. The business creates a better image, saves money and potentially creates new revenues. The environment becomes safer and cleaner. The community benefits with better health and enjoyment from a cleaner environment.
5. Intuit - Creating Innovations in Software Industry
Intuit's Innovation Recipe: Customer Evangelist Culture, Customer-Intuitive Design, Customer-driven Marketing and Product Management, Direct Marketing and Retailing, The Process driving Innovation.
6. Google - Acquisiton of YouTube. $1.65 billion Innovation and counting
YouTube Innovations: First, the vision of Founders to create a Video download service for FREE. Second, the intense focus on providing the best and most comprehensive experience for users interested in uploading, watching and sharing videos. Finally, YouTube created key partnerships with various Music and Broadcast players in the industry.
7. Toyota - Innovation Factory
Toyota's Innovation Principles: 7.1. The Art of Ingenuity. 7.2. The (relentless) Pursuit of Perfection. 7.3. The Rhythm of Fit.
Innovation Traps: 7.1. Swinging For Fences. 7.2. Getting Too Clever 7.3. Solving Problems Frivolously.
8. Apple - iPod - Apple's Best Innovation
iPod, powered by Apple, introduced in 2001 and masterminded by Steve Jobs, combines outstanding design, easy-to-use interface, superb performance, and an experience like no other. Apple assumed the world’s number one innovative company position and held it again in 2006 in large part due to the exponential growth of iPod – aptly called the iPod phenomenon.
9. Microsoft - The Innovator
Is Microsoft launching a new wave of innovation with Windows Vista, Office 2007 and Exchange 2007 and some 30 new products? Or are these merely nice-to-have product enhancements that users were asking for, and were just delayed for the past few years? Who is going to benefit the most from this new wave?
10. General Electric and Proctor & Gamble - Innovations Driving Growth
GE's innovation recipe: 10.1. Focus on key technologies. 10.2. Growth-oriented leadership 10.3. Core Business portfolio.
P&G's innovation recipe: 10.4. Brand mix. 10.4. Global top team. 10.6. New product collaborations.
11. 3M - The Innovation Machine
Five takeaways stimulating Innovation:
11.1. "Give it a try--and quick!"
11.2. "Accept that mistakes will be made."
11.3. "Take small steps."
11.4. "Give people the room they need."
11.5. "Mechanisms - build that ticking clock!"
12. Southwest Airlines - Flying High with Innovations
It is technology innovations such as DING! that bring Southwest that much closer to its customers who leverage the communication and messaging service to buy more tickets, besides new destinations, low fares, new nonstop services, new vacation packages and more
13. Starbucks - Innovations Brewing at Starbucks
Starbucks has become a pervasive coffee brand throughout the world, and the company is cleverly exploiting the Starbucks brand to launch new innovations in complementary and adjacent industries accounting for the solid revenue growth.
I discovered several new Innovation Trends shaping The Top 20 Innovators, and the industry at large:
1. The Innovation Gap
While the Sustainer is Innovating at a different pace and trajectory serving the needs of its profitable and larger customers, and focused on profitable investments, the Disrupter is Innovating at a faster pace and trajectory serving the needs of the broader market, and creating new market share.
2. Can Leadership Create Innovation?
Key Executives believe the following ingredients drive Innovation:
2.1. Marketing 2.2. Size 2.3. Culture 2.4. Technology 2.5. Passion 2.6. Active Participation 2.7. Hard Work 2.8. Internal Development 2.9. Targeted Acquisitions 2.10. Agility
3. Blocking Creativity and Innovation
Key processes that an organization can create to unblock Creativity and drive Innovation:
3.1. Open communication within and between departments, and across all management layers.
3.2. Hiring of people with diverse backgrounds and experience, and avoiding "cloning."
3.3. Encouraging employees to find new ways to do their daily work, and empowering them to make decisions.
3.4. Creating an organization that extends out to customers, suppliers, partners, and environment.
3.5. Stimulating research activities and providing employees some free time to experiment.
3.6. Allowing employees to take measured risks (with small costs), and seizing opportunities.
3.7. Creating processes to evaluate any idea on merit, regardless of where it is coming from.
3.8. Identifying and separating the creative from operational functions in the organization.
3.9. Using group creativity techniques frequently to promote team building and generate new ideas
4. Co-Creation driving Innovation
As Co-Creation demonstrates tangible results, more mainstream businesses will experiment and adopt it - not just technology companies. The best side effect of Co-Creation is it brings you that much closer to your customers and creates a positive business environment.
5. Six Ways to Find Innovation
How can an organization find Innovation? Here are Six Ways to Find Innovation:
5.1. Stand in different places
5.2. Use the lenses of other domains
5.3. Ask powerful questions
5.4. Foster new knowledge
5.5. Create a visual verbal journal
5.6. Change the pace of attention
I introduced The Innovation Index in December 2006 from an epiphany born out of the BusinessWeek article on the world's top innovators. The Innovation Index Report incorporates the following objectives and is released weekly:
1. Report, analyze and project the stock performance of the top 20 Innovators in North America every week, and compare their performance to S&P, NASDAQ and Dow Jones.
2. Compare and contrast best practices, initiatives, new products, successes, strategies, stories, leadership and insights on Creativity and Innovation at the top 20 Innovators.
3. Showcase Disruptors challenging these top Innovators, their disruptive innovation strategy, and their current and potential impact on the Innovators' customer base and market share.
This brings me back to this, the final chapter of The Innovation Index Annual Report: Chapter Three - The Insights.
Why did I not choose Apple and Google as the top two innovators in The Innovation Index Rankings for 2006? Why is Microsoft ahead of them for 2006? Why is Research In Motion also ahead of Apple and Google for 2006? Why are IBM and HP tied for the top rankings? What about Cisco Systems and GE?
The primary reason was Stock Performance in 2006. Apple and Google each gained 18% and 11% in stock performance gains in 2006. Microsoft stock gained 16%. Research In Motion stock gained 94%. IBM stock gained 20%. HP stock gained 45%. Cisco stock was up 60%, and GE stock was up 9%.
The secondary reason was Innovation Activity in 2006. Apple and Google had innovation activity of 69 and 75 total innovations in 2006. Microsoft had innovation activity of 159 total innovations in 2006. Research In Motion had innovation activity of 87 new innovations. IBM led all innovators with 187 innovations in 2006. HP had 106 innovations. Cisco had 72 innovations, and GE had 79 innovations in 2006. One can argue though that press releases touting incremental enhancements and basic collaborations are hardly new innovations. However, it appears though that most innovators are leveraging the media to make every announcement. Perhaps a filter to weed out the run-of-the-mill announcements may be required in 2007.
The final reason was the X Factor. Apple's iPod line of products in 2006 had key expansions from 2005; on the other hand the new iMac came onto its own in 2006 with the new Intel dual core series and support for Windows. The biggest draw for Apple though was the iPod integration partnerships with major airlines and major auto makers. Google's search engine leadership and related innovations were introduced before 2006; Google expanded on Search in 2006. Google Earth became the innovative application for mapping, and the acquisition of YouTube was the clincher. Microsoft introduced the much awaited Vista, Office, Live services, Pay-As-You-Go computing and Mobile. Research In Motion went on a tear with Blackberry Connect and Blackberry business expansion all over the world. New patents introduction were also key. IBM, HP, Intel, Microsoft and GE led all innovators in filing new patents.
A ranking of the top 20 Innovators in North America is inherently controversial. After all, we are talking about the best of the best. And each Innovator in turn is a fierce competitor. I would be sure to read the new edition of BusinessWeek when it announces the annual rankings of the world's top innovators. What I have tried though is to correlate Stock Performance, Innovation Activity and the X Factor. Together, the Top 20 Innovators of The Innovation Index are a barometer of the Innovation Activity in North America.
About The Innovation Index
The Innovation Index introduced in December, 2006 is a weighted stock price index of the top 20 Innovators in North America.
The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.
The Normalized Innovation Index has returned 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.
The alphabetical list of the top 20 Innovators of The Innovation Index along with their stock ticker symbols are presented below:
3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movile - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)
The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.
0 Response to "The Innovation Insights - The Innovation Index Annual Report - Chapter Three"
Post a Comment