Booz and Company has done a study of 1000 global companies with respect to innovation, and published their findings in the linked report.
They looked at the front end of innovation, and broke it into two parts: idea creation, and idea conversion. Most companies appear to be pretty good at coming up with ideas; very few are very good at picking the right ones.
“It’s often said that the means by which companies seek out and find good ideas tend to be vague, or fuzzy, or highly variable from one company to another. Yet according to our survey, the most successful innovators in all industries have developed a variety of consistent, manageable ideation practices that are well aligned with their innovation strategies. And when moving ideas into the development stage, they tend to depend on an equally consistent set of principles and processes. Indeed, any company in any industry can take advantage of these tools and processes to get the most out of the money they spend on innovation.”
They divided companies into three categories: Need Seekers, Market Readers, or Technology Drivers.
Need Seekers develop products and services based on superior end-user understanding. They are often first to market with new products. Practitioners include Apple and P&G.
Market Readers respond to markets, customers and competitors, and usually do incremental innovations. They are usually “fast followers”. Practitioners include Caterpillar and Hyundai.
Technology Drivers depend heavily on their internal technical capabilities to develop breakthrough and incremental innovations. Their new products usually address (stated or unstated) customer needs through application of technology. Practitioners include Google and Bosch.
“The process of choosing which ideas to convert to full-scale product development is perhaps even more critical to a company’s innovation success than is the ideation stage.” One of the tools that most companies use to help them at this stage is “leading customer reviews”, particularly among Market Readers.
“Yet the true key to success at the conversion stage isn’t the specific tools and mechanisms used — after all, companies report that, by and large, they all use quite similar processes. The key to success is for companies to have the right people in place to manage the process, using experience and judgment to rigorously make the needed decisions. Says [CTO Darlene] Solomon of Agilent: ‘Our pipeline is about how much we think a technology can move the needle in creating value for our customers, and usually, that’s not a numbers question when you are assessing a disruptive technology. It’s easy to make anything look good. [What matters is] the judgment of people who are very experienced in leading research, and we are fortunate to have really smart people who have a good combination of technology and business sense.’
“That combination is critical when deciding which ideas to carry through to commercialization and which to kill. As ideas and projects move down the pipeline, business considerations become increasingly important. ‘In managing the research portfolio that is in the labs’ funnel,’ says Solomon, ‘we constantly ask ourselves, ‘What have we learned about the technology that makes it more or less attractive than [it was] six months ago? What have we learned about the market, the competitive technologies — and what’s going on in the world that might help us decide whether the technology is now even more valuable or perhaps becoming a “me-too” technology? What has changed within Agilent in terms of our business priorities?’ All of these perspectives evolve over the course of our longer-range research, and influence our decision whether or not to continue to invest in a particular project.’”
For the record, their list of the top ten innovative companies, in order: Apple, Google, 3M, Samsung, GE, Microsoft, Toyota, P&G, IBM and Amazon.