Every year, Forbes puts out a list of the top 100 most innovative companies. To determine each company’s rank, they use something they call the “Innovation Premium.” They describe it as “a measure of how much investors have bid up the stock price of a company above the value of its existing business based on expectations of future innovative results (new products, services and markets).” Salesforce.com sits atop this year’s list with an Innovation Premium of 75.9%. The list contains a diverse set of companies in almost every sector from consumer packaged goods to pharmaceuticals.
We thought it would be useful to explore what makes a company innovative. What do these companies from Chipotle to Sherwin Williams have in common?
A Culture of Innovation
Innovation isn’t something that happens only in the board room or engineering department. Great ideas can come from employees at all levels and areas of an organization. Innovative companies recognize this, and foster a culture that invites and rewards innovation. Google takes the idea even further, giving engineers and project managers one day a week to work on ideas that matter to them. This signals not only a devotion to the concept of innovation, but also shows a great deal of trust. Of course, not every company can make this level of commitment, but most can benefit from programs that seek out employee ideas and encourage active discussions around opportunities for innovation.
No Fear of Failure
Innovation simply can’t happen when failure is not an option. Avoiding failure, almost by definition, means doing something that has worked before. Innovation requires the leap of faith to do something that has never been done. Some ideas will pan out, most won’t. Innovative companies are OK with this. Stagnant ones aren’t OK with it. In fact, “Fail fast,” would make a good mantra for innovative companies, as we hear about in "The Lean Startup" methodology. Try an idea, fail, tweak it, fail again, rinse, and repeat. That's also the basis of the Kaizen mindset.
Devotion to Collaboration
Collaboration is central to innovation. Ideas become stronger when people with different points of view and backgrounds work together. Collaboration can help speed the process of vetting, testing, and implementing innovative ideas. Innovative companies foster collaboration with everything from workspace design to cross-functional project teams.
Inside Out Innovation
When most people think of innovation, they think of the end product. However, innovation can take many forms. Toyota has, for example, reinvented every process on their factory floor, changing how cars are made to deliver improved quality and profitability. Netflix, number 30 on the top 100 most innovative companies, was able to kill Blockbuster while offering the exact same product. The innovation was the business model, not the DVD.
This look at what makes a company innovative reveals that intention is the root of success. By approaching innovation thoughtfully and embracing it companywide, organizations can start the flow that will bring the next big idea. We'd love to hear what are you doing to improve your Innovation Premium.
Learn about engaging your employees in innovation in our free eBook!