This Week's Herman Trend Alert

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  The Herman Trend Alert

January 30, 2012

Innovating Companies

Innovation is an important driver of the growth that generates sustained, above-average returns anytime, but especially in a turbulent economic environment. Companies use these new ideas to "increase efficiency, ensure regulatory compliance, improve sustainability, and boost profits".

To support companies in their drive toward innovation, since 2004 the Boston Consulting Group (BCG) has fielded annual innovation surveys. This year's report, released last week, is titled, "The Most Innovative Companies 2012: The State of the Art in Leading Industries". In its report, BCG names 50 companies that that 1,500 global executives ranked as the "most innovative".

"Billions in profits are at stake for companies that can crack the code and deliver meaningful advantage from innovation", said a BCG senior partner and coauthor of the report.

Not surprisingly, the tech and telecom industries have continued to be at the forefront leading innovation. They earned seven of the top ten places on BCG's list. A handful of companies have demonstrated ongoing dominance in the top rankings. Since 2005, Apple has been number one every year. Since 2006, Google has been number two every year. Since 2005, Microsoft has been in the top ten every year. And since 2005, IBM and Sony have been in the top ten almost every year.

However, this year other industries gave the tech sector a run for its money. Traditional industries, including industrial products and automotive together, made up 40 percent of the list. Automotive companies made up seven of the top 25 companies in 2012, and five diversified industrial companies entered or returned to the rankings.

BCG also highlights six practices of the most innovative companies and explores how those practices have played out at innovation leaders across a range of industries:
1) Get the customer involved early.
2) Use data to drive tough decision-making.
3) Think strategically about tradeoffs.
4) Ensure senior leadership commitment.
5) Envision innovation as a holistic system.
6) Optimize intellectual property to create value.

As we have said in the past, properly managed innovation will drive bottom line profitability. We expect to see more traditional companies giving the tech sector competition for these rankings.

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