For the third straight year, the evidence is mounting: companies that both prioritize innovation and make sure that they are ready to act are widening the gap over less capable competitors. The leaders at these firms are consistently delivering new products, entering new
markets, and establishing new revenue streams. The laggards struggle to make headway beyond incremental improvements.
This year, the findings from our global innovation survey dovetail with other new BCG research showing that companies
built for the future share a common set of attributes that enable them to exhibit superior performance, be more resilient to shocks and disruptions, and exploit innovation faster for value-creating growth. In addition to people and technology capabilities (including, importantly, AI), one of these attributes is an innovation-driven culture.
In this year’s Most Innovative Companies report, we examine what innovation-ready leaders (those that are ready to develop product, process, and business model innovations that can deliver sustainable impact) are doing to pull ahead and how innovation is building their resilience to economic uncertainty and fueling their pursuit of lower emissions. In “A Downturn Ups the Stakes in Innovation,” we explore how a potential downturn in 2023 is evoking a much different response than did the 2009 financial crisis, especially among leading firms. In “How Early Winners Are Unlocking AI’s Potential,” we dig into the critical role of artificial intelligence (AI) in innovation as in many other areas of business today.
Innovation has never been more important—and leading innovators are showing why. The top 50 companies in the 2023 Most Innovative Companies report outperform the MSCI World Index on shareholder return by 3.3 percentage points per year.
How Leaders Are Demonstrating the Advantages of Innovation
In this year’s Most Innovative Companies report, we examine what innovation-ready leaders (those that are ready to develop product, process, and business model innovations that can deliver sustainable impact) are doing to pull ahead. We also discuss the importance of innovation in terms of how it helps leaders build their resilience to economic uncertainty.
Download the 2023 Most Innovative Companies report
The Formula for Innovation from Leading Companies
Leaders are consistently delivering new products, entering new markets, and establishing new revenue streams, while laggards struggle to make headway beyond incremental improvements.
A Downturn Ups the Stakes in Innovation
Times have changed. During the 2009 downturn, only 58% of companies planned to increase spending and almost 15% expected to cut innovation investment. Today, a growing number of companies are beginning to recognize the advantages of innovation, with 79% ranking it among their top three priorities (15 points more than in 2009) and 66% planning to increase spending (42% by more than 10%).
How Early Winners Are Unlocking AI’s Potentials
The question is not whether AI can have an impact, but rather if companies are using AI properly and for use cases with the potential to drive real business value.
Building Resilience and Advantage Through Innovation
Once again, we see the most innovative companies producing greater shareholder returns and building resilience and advantage through innovation. BCG’s 2023 global survey highlights the advantages of innovation and how leaders are outpacing others by using tools whose importance is climbing fast, such as M&A, portfolio planning, and AI.
Our 2023 survey found a near-record high level of innovation importance: 79% of companies ranked innovation among their top three priorities, up from 75% in 2022, and more than 40% expect to significantly increase spending this year, a jump of 16 percentage points over the last economic downturn in 2009.
But there is also an emerging group of companies that is going much further and putting innovation front and center in their future growth strategies. While all companies on average expect to allocate more money toward incremental innovations close to the core, this small group of innovation-ready companies is allocating fully one-third of spending toward developing breakthrough innovations.
These companies use a wide array of strategic tools to strengthen their innovation platforms and practices and are much more aggressive in their use of M&A, targeting innovative technologies or processes, or acquiring leaders and employees with a demonstrated ability to innovate. They also are more likely to orchestrate or participate in ecosystems, engaging with external partners—and even competitors—on innovations. They drive digital innovation with a clear bias toward new digital products, agile teaming, and improving customer and marketing insights. They leverage the power of innovation in AI, and regularly review the performance of innovation units or vehicles and shift resources toward centers of success. They understand that effective portfolio governance and management, especially with respect to data transparency, are key to driving impact.
Authors: By Justin Manly, Michael Ringel, Amy MacDougall, Will Cornock, Johann D. Harnoss, Konstantinos Apostolatos, Ramón Baeza, Ryoji Kimura, , Beth Viner, Jean-Manuel Izaret, Wendi Backler, Vladimir Lukic, Sylvain Duranton, and Romain de Laubier