Wednesday, September 29, 2010

A list of reasons why innovation lists are worthless

It's that time again - the time to breathlessly await which Fortune 500 firm will be anointed as "the most innovative" firm.  Typically we see several "Top 50" lists each year nominating particular firms as the "most" innovative.  This year, as in several previous years, BCG has created its "50 Most Innovative Firms" list. 

I guess you can tell from my tongue in cheek introduction what I think of these lists.  There are so many reasons to find fault in the listings that one scarcely knows where to begin. 

First, I think many of these lists are simply to validate the egos of the firms in question.  How can one compare an Apple to a Haier to a 3M and argue that one is clearly more innovative than the other?  In what dimensions?  3M has a stated corporate goal to generate a significant share of its earnings from products that are less than 3 years old.  Therefore they have a significant public stake in the financial markets on innovation.  Apple, the "leader" in the innovation field, creates one new product about every 18 months.  Those products don't break new ground technically, but innovate around a customer experience or business model.  Can these two firms really be compared?  If P&G's partnering and networking strategy can be compared with Apple's "go it alone" strategy then we can compare apples and oranges.  There's really no good methodology to use to "measure" how innovative a firm is and measure it against another.

Second, the list is composed almost exclusively of large, well-known firms.  Do we really believe that all the valuable and interesting innovation is happening in these firms?  I'd have to disagree.  There are many mid-sized and smaller firms that are doing much more innovation, and much more consistently,and as a larger percentage of their revenue and earnings, than the firms named in this list.  Let's simply look at another cultural phenomenon - the TED talks.  Many of the firms or individuals who present at the TED talks are doing exceptionally innovative work, yet they aren't on this list of the Top 50 most innovative firms.  Why?  They don't have the same publicity engines.  Yet where do disrupters come from?  Christensen has shown they are usually smaller, new entrants rather than large, existing firms.

Third, as in most of life we recognize greatness only after it has reached its peak.  Sports figures and actors often win awards later in their career, after their peak performances, once their body of work is established.  Many of the firms on this list - Google for one, I have argued recently, may be past their innovation prime already.  When people put lists like these together, they are usually looking backward at achievements from several years ago, not forecasting what the firm is likely to do next.  This list includes potential up and comers (like Haier) and those who may be on the downslope of their innovation greatness already (Google).

And sorry, while GE is large and a very profitable company, it is not especially innovative, regardless of what their marketing wants us to believe.  Good marketing and messaging don't necessarily demonstrate good innovation, and a firm locked in the embrace of Six Sigma often finds it difficult to create interesting, disruptive innovations.

I understand the reasons for a list of innovative firms.  We enjoy short rankings like this because they create an artificial hierarchy of firms.  The list helps us focus on firms that at least one expert has told us are innovative, which makes it easier for the press and bloggers to respond to.  However, I think this is a ranking of large firms with good publicity that may demonstrate occasional innovation , rather than the most innovative firms on a global basis. 

These lists are moderately interesting but ultimately don't tell us much.  Are any of you surprised to find Apple at the top?  What's insidious about these kinds of lists, however, is that they distract from really interesting work being done in a number of firms not on the radar screen and direct our attention to firms that aren't all that innovative but are constantly in the news.  So, we ignore excellent innovation that is happening in smaller, less publicized firms and focus on firms that are actually becoming less innovative or that simply have great PR.
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posted by Jeffrey Phillips at 6:35 AM


Blogger Tor Hershman said...

Well, they're worthless 'cause the universe is worthlessness en masse.

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