Booz & Company
30 October, 2012
Making Ideas Work
The 2012 Global Innovation 1000 Study
Introduction
R&D Spending Trends Analysis
Front-End Innovation Survey Findings Summary
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
1
For the past eight years, Booz & Company has examined
innovation spending and linkages to corporate performance
Previous Global Innovation 1000 Studies
2005:
Money Isn't
Everything
2006:
Smart Spenders
2009:
Profits Down,
Spending Steady
Booz & Company
2007:
The Customer
Connection
2010:
How Top Innovators
Keep Winning
2012: Making Ideas Work
2008:
Innovation Beyond
Borders
2011:
Why Culture
is Key
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
Our 8th annual study of the world’s
1000 largest corporate R&D spenders
focuses on the “front end” of the
innovation process – the tools,
mechanisms and networks companies
use to generate ideas and convert them
into projects for commercialization.
2
The Innovation 1000 study continues to be well recognized as an
important contributor to the study of R&D and innovation
Selected Media Coverage Highlights
 Covered by ABCNews and MSNBC television
 Featured on NPR radio in US and BBC Radio in UK
 Cited in over 170 publications across 27 countries
 Called “The most comprehensive assessment of the
relationship between R&D investment and corporate
performance” by The Economist
Representative Publications
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
Furthering the Innovation Dialogue
2005
 Initiated study to better understand how organizations can maximize their
return on innovation investment
 Found no statistical relationship between R&D spending and key
measures of corporate success
2006
 Confirmed lack of relationship between R&D after adding additional data
(e.g., patent records) and analyzing using more complex methods
 Defined “High Leverage Innovators” who produced
better results per R&D dollar than industry peers
 Awarded “2006 Special Achievement Award
for Advancing Innovation” by Innovate Forum
2007
 Examined the connection between performance and the elements of
innovation strategy, including customer focus and alignment of corporate
and innovation strategies
2008
 Identified characteristics of global innovation networks (i.e. R&D
footprint) that correlated with higher performance
 Awarded “Best of Visions” award from PDMA
 Awarded Silver Award for Editorial Excellence: Original Research and
National Bronze Award for Graphics Excellence by American Society of
Business Publication Editors
2009
 Reported impact of 2008-09 global recession on worldwide R&D spend
2010
 Identified the critical capabilities required for successful innovation and
their relationship to corporate performance
2011
 Examined the links between business strategy, innovation strategy and
culture
3
In addition to our annual R&D spending trends analysis, the theme
of this year’s study is the “front end” of the innovation process
2012 Innovation 1000 – “Making Ideas Work”
Annual R&D Spending Trends Analysis
 Annual R&D spend growth across the 1000 largest
spenders on R&D (publicly-traded firms)
 R&D spend by region and industry (absolute
spending, growth and proportion of total)
 Spend as percent of revenue (R&D “intensity”)
Survey: The “Front End” of the Innovation Process
1. Idea Generation
Generating good ideas and/or
decisions on platform refresh
 Top 20 R&D spenders
 Top 10 “Most Innovative Companies” and financial
performance comparisons to Top 10 spenders
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
2. Idea Conversion
Converting good ideas into
actionable projects for execution
4
Introduction
R&D Spending Trends Analysis
Front-End Innovation Survey Findings Summary
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
5
R&D spend grew 9.6% in 2011, continuing 2010’s strong growth
after the 2009 decline
Innovation 1000 R&D Spend
2001–2011; $Bn
$603
11-year CAGR
5.50%
= 6%
$550
$521
$495
$503
$450
$353
$369
$355
$417
$391
3-year CAGR
=9.5%
3-year CAGR
=3.5%
2001
Annual
Growth
2002
0.6%
2003
3.7%
2004
6.2%
2005
6.5%
2006
7.9%
2007
10.0%
2008
5.4%
2009
-3.5%
2010
9.3%
2011
9.6%
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
6
The top 3 industries continue to be Computing and Electronics,
Health, and Automotive
2011 R&D Spend by Industry
($603Bn)
Telecom Other
Consumer
2%
Aerospace and Defense
3%
2%
4%
Software and Internet
7%
Chemicals and Energy
Industrials
Computing
and Electronics
28%
7%
10%
21%
16%
Health
Automotive
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
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Two-thirds of the $53Bn spending increase came from the
Computing and Electronics, Automotive, and Industrials sectors
Decreases
Change in 2010-2011 R&D Spend by Industry
Change in R&D Spend
(Million USD)
55,000
50,000
45,000
While Health is the third largest
spender, Industrials experienced the
third largest absolute spend increase
1,718
Increases
1,655
352
1,487
52,632
Consumer
Telecom
Aerospace
and Defense
Total
3,607
6,037
40,000
6,229
35,000
7,867
30,000
25,000
13,214
20,000
15,000
Represents 66% of total
R&D spend increase
10,000
5,000
13,440
0
Computing
and
Electronics
Automotive
Industrials Software/Internet Health
Chemicals
and Energy
Other
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
8
India/China-based firms continue to increase their R&D spending at
a higher proportionate rate than those in more mature regions
Change (%) in R&D Spend by Region
R&D Spend by Region
2010 – 20111)
28
2006 - 2011
2010-11 Increase
27.2%
45%
26
24
40%
22
38% rate in last
year’s report
20
35%
18
30%
16
14
12.2%
12
Average
9.7%
10
9.6%
Size of bubbles are
proportionate to the
R&D spending 2006-11
India/China
15%
North America
10%
ROW
8
5.4%
6
Europe
5%
Japan
4
2.4%
2
0
0%
-5%
India/China
ROW
North
America
Europe
Japan
-5%
0%
5%
10%
50%
2006-11 CAGR
1)
Innovation 2012 yearly R&D spend comparison for the 918 companies for which R&D spend available for both 2011 and 2010
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
9
India and China have been steadily gaining share in R&D
spending – but are gaining revenue share at an even faster rate
Innovation 1000 Company R&D Spend and Revenue by Region: 2008-2011
1.0%
4.9%
1.5%
4.3%
9.5%
2.3%
4.2%
9.6%
5.3%
22.6%
24.4%
6.1%
2.7%
7.3%
11.7%
23.3%
21.3%
6.1%
10.5%
23.3%
21.7%
20.1%
21.1%
32.1%
31.1%
30.1%
35.0%
34.5%
8.5%
29.9%
33.6%
32.4%
India/China
ROW
Japan
Europe
38.6%
# Companies in
Innovation 1000
China HQ
India HQ
R&D
2008
29.9%
Revenue
2008
15
4
38.5%
R&D
2009
30.0%
Revenue
2009
38.3%
27.4%
R&D
2010
23
6
40
10
North America
37.9%
Revenue
2010
27.3%
R&D
2011
Revenue
2011
47
9
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
10
R&D spending and sales increased for a second year in a row while
R&D intensity returned to historical levels
R&D Spend and Revenue CAGR1)
R&D Intensity
2006-2011
3.80
CAGR (%)
3.73%
20
3.70
15%
15
10
3.60
9% 8%
10%
10% 10%
8%
6% 5%
7%
5
3.52%
3.50
3.40
0
3.40%
3.42%
3.42%
2007
2008
3.43%
3.30
-4%
-5
-10
2006 - 2011
Intensity (%)
3.20
Revenue CAGR
R&D CAGR
3.10
-11%
-15
2005-’06
‘06-’07
‘07-’08
‘08-’09
‘09-’10
‘10-’11
3.00
2006
2009
2010
2011
1)
Innovation yearly R&D spend and Revenue comparison for companies for which R&D spend and Revenue available for both years
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
11
Overall R&D spending continued to rise with sales, though R&D
intensity declined slightly in 2011
Indexed to 1997
R&D Spending, Sales, and R&D Intensity
Indexed to 1997
3.0
R&D Spending
2.8
2.6
Sales
2.4
2.2
2.0
1.8
1.6
1.35
1.4
1.2
1.20
1.23
1.24
1.23
1.21
1.24
1.15
1.001.05
1.13
1.14
1.14
1.17
1.14
R&D as % of Sales
1.0
0.8
0.6
0.4
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sources: Bloomberg data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
12
Daimler (#19) is a new entrant to the Top 20 R&D spenders this year
2011 Top 20 R&D Spend Ranking
2012 Top 20 R&D Spend Ranking
(2010 data)
(2011 data)
2011
Rank
Company
Geography
Industry
2010 R&D
Exp.
$Bn
2012
Rank
Company
Geography
Industry
2011 R&D
Exp.
$Bn
1
Roche Holding AG
Europe
Health
9.6
1
Toyota Motor Corp
Japan
Automotive
9.9
2
Pfizer Inc
North America
Health
9.4
2
Novartis AG
Europe
Health
9.6
3
Novartis AG
Europe
Health
9.1
3
Roche Holding AG
Europe
Health
9.4
4
Microsoft Corp
North America
Software & Internet
8.7
4
Pfizer Inc
North America
Health
9.1
5
Merck & Co Inc
North America
Health
8.6
5
Microsoft Corp
North America
Software & Internet
9.0
6
Toyota Motor Corp
Japan
Automotive
8.5
6
Samsung
ROW
Computing & Electronics
9.0
7
Samsung
ROW
Computing & Electronics
7.9
7
Merck & Co Inc
North America
Health
8.5
8
Nokia OYJ
Europe
Computing & Electronics
7.8
8
Intel Corp
North America
Computing & Electronics
8.4
9
General Motors Co
North America
Automotive
7.0
9
General Motors Co
North America
Automotive
8.1
10
Johnson & Johnson
North America
Health
6.8
10
Nokia OYJ
Europe
Computing & Electronics
7.8
11
Intel Corp
North America
Computing & Electronics
6.6
11
Volkswagen AG
Europe
Automotive
7.7
12
Panasonic Corp
Japan
Computing & Electronics
6.2
12
Johnson & Johnson
North America
Health
7.5
13
GlaxoSmithKline PLC
Europe
Health
6.1
13
Sanofi
Europe
Health
6.7
14
Volkswagen AG
Europe
Automotive
6.1
14
Panasonic Corp
Japan
Computing & Electronics
6.6
15
IBM
North America
Computing & Electronics
6.0
15
Honda Motor Co
Japan
Automotive
6.6
16
Sanofi
Europe
Health
5.8
16
GlaxoSmithKline
Europe
Health
6.3
17
Honda Motor Co
Japan
Automotive
5.7
17
IBM
North America
Computing & Electronics
6.3
18
AstraZeneca PLC
Europe
Health
5.3
18
Cisco Systems Inc
North America
Computing & Electronics
5.8
19
Cisco Systems Inc
North America
Computing & Electronics
5.3
19
Daimler AG
Europe
Automotive
5.8
20
Siemens AG
Europe
Industrials
5.2
20
AstraZeneca PLC
Europe
Health
5.5
Total
Booz & Company
$141.8
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
NEW
Siemens moved to #22
Total
$153.6
Increase or decrease within Top 20 ranking compared to 2011
13
Amazon bumped Facebook as a new entrant in the Top 10 “Most
Innovative” ranking; Samsung rose in rank for 3rd straight year
2012 Top 10 “Most Innovative Companies”
2012
Rank
% of
Respondents
Company
2011 R&D
Spend ($M)
Overall
Spend
Rank
Industry
Spend
Rank
2011
Revenue
($M)
R&D Spend as %
of Sales
(Intensity)
1
79.8%
Apple
$ 2,429
53
16
$ 108,249
2.2%
2
43.1%
Google
$ 5,162
26
2
$ 37,905
13.6%
3
15.2%
3M
$ 1,570
86
7
$ 29,611
5.3%
4
14.9%
Samsung
$ 9,017
6
1
$ 149,080
6.0%
5
11.4%
General Electric
$ 4,601
30
2
$ 142,237
3.2%
6
10.7%
Microsoft
$ 9,043
5
1
$ 69,943
12.9%
7
9.3%
Toyota
$ 9,881
1
1
$ 235,482
4.2%
8 - Tie
7.7%
IBM
$ 6,258
17
5
$ 106,916
5.9%
8 -Tie
7.7%
Procter & Gamble
$ 2,001
72
1
$ 82,559
2.4%
10
6.3%
Amazon.com
$ 2,909
48
4
$ 48,077
6.1%
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
14
Looking at movement across the past three years shows Samsung’s
rise and others’ continued success
Change in the Top 10 “Most Innovative Companies”
3-yr. R&D Spend CAGR
2010-2012
2010-2012
2010
2011
2012
1st
Apple
35%
2nd
Google
35%
3rd
3M
4th
Samsung
5th
General Electric
10%
16%
18%
Microsoft 0%
6th
7th
Toyota
4%
8th
P&G
4%
9th
IBM
4%
10th
Amazon
Tie
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
53%
15
Once again, there are significant differences between the Top 10
“Most Innovative Companies” vs. the top R&D spenders
2012 Top 10 “Most Innovative Companies” (2011 Data)
Company
Apple
Google
Industry
Computing &
Electronics
Software &
Internet
2012 Top 10 R&D Spend Ranking (2011 data)
2011 R&D
Spend
($Bn)
2011 Sales
($Bn)
Spend as
% of Sales
(Intensity)
Company
Industry
2011 R&D
Spend
($Bn)
$ 2.4
$ 108.2
2.2%
Toyota
Automotive
$9.9
$ 235.5
4.2%
$ 5.2
$ 37.9
13.6%
Novartis
Health
$9.6
$ 58.6
16.4%
2011 Sales
($Bn)
Spend as
% of Sales
(Intensity)
3M
Industrials
$ 1.6
$ 29.6
5.3%
Roche
Health
$9.4
$ 48.1
19.5%
Samsung
Computing &
Electronics
$ 9.0
$ 149.1
6.0%
Pfizer
Health
$9.1
$ 67.4
13.5%
General
Electric
Industrials
$ 4.6
$ 142.2
3.2%
Microsoft
$9.0
$ 69.9
12.9%
Microsoft
Software &
Internet
$ 9.0
$ 69.9
12.9%
Samsung
$9.0
$ 149.1
6.0%
Toyota
Automotive
$ 9.9
$ 235.5
4.2%
Merck & Co
Health
$8.5
$ 48.0
17.7%
Procter &
Gamble
Consumer
$ 2.0
$ 82.6
2.4%
Intel
Computing &
Electronics
$8.4
$ 54.0
15.6%
$ 6.3
$ 106.9
5.9%
$8.1
$ 150.3
5.4%
$ 2.9
$ 48.1
6.1%
$7.8
$ 53.8
14.5%
Computing &
Electronics
Software &
Amazon.com
Internet
IBM
Software &
Internet
Computing &
Electronics
General Motors Automotive
Nokia
Computing &
Electronics
Companies appearing on both lists
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
16
In line with last year’s findings, the Top 10 “Most Innovative”
outperform the Top 10 spenders across three financial metrics
Top 10 “Most Innovative Companies” vs. Top R&D Spenders
Highest
Possible
Score: 100%
Top 10 Most Innovative
Top 10 R&D Spenders
Observations
 The Top 10 R&D spenders lag their industry
peers on revenue and market cap growth
68%
Normalized
Performance
of Industry
50%
Peers1):
65%
62%
54%
45%
 On the “Most Innovative Companies” list,
only Apple, Google, and Samsung
outperform their industries across all 3
metrics
40%
 Intel still outperforms across all 3 metrics,
but is no longer a Top 10 Innovator…
Lowest
Possible 0%
Score:
 …and remains among the Top 10 highest
R&D spenders (moved from #10 to #8 in
2011)
Revenue Growth
(5-yr. CAGR)
EBITDA as a
% of Revnue
(5-yr. AVG.)
Market Cap
Growth (5yr. CAGR)
1) Financial metrics were normalized in each industry sector among the Innovation 1000 companies to control for industry performance fluctuations and to set performance values to a
100-point scale. A score of 50% is the normalized performance across industries for each financial metric.
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
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Executive Summary – R&D Demographics
 After growing 9%+ for the second consecutive year in 2011, R&D spend is back on its 10-year
historical growth trend after its one-year decline in 2009
 The top three industries by R&D spend continue to be Computing and Electronics, Health, and
Automotive – Industrials, Automotive and Health accounted for 66% of the overall growth
 North America grew at an above-average rate of 9.7%; Europe and Japan grew at below-average
rates of 5.4% and 2.4%, respectively…
 …while India and China-based firms increased R&D spend at a phenomenal rate (27%) – albeit
from a small spend base
 The Top 20 R&D spenders averaged 5% R&D growth, compared with a 9.6% increase overall
 The Top 10 “Most Innovative Companies” outperformed the Top 10 R&D spenders across key
financial metrics – revenue growth, EBITDA as a percentage of revenue, and market cap growth
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
18
Introduction
R&D Spending Trends Analysis
Front-End Innovation Survey Findings Summary
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
19
Nearly half of the respondents felt that their organizations were only
marginally effective at generating ideas and converting them to projects
Idea Conversion(1) vs. Idea Generation (2)
Idea
Conversion
ALL RESPONDENTS (N = 685)
~11%
~25%
~46%
~18%
1
2
3
4
5
Highly
Effective
Marginally
Effective
1
2
3
Respondent ranked idea generation
effectiveness as 1,2 or 3
4
Idea Generation
5
Respondent ranked idea generation
effectiveness as 4 or 5
Highly
Effective
Note:
(1) How effective do you feel your organization is at converting ideas into projects for execution? “Please rank your company’s level of effectiveness in idea conversion.” With “1”=Marginal Effective and “5” = Strongly Effective.
(2) How effective do you feel your organization is at generating new ideas? “Please rank your company’s level of effectiveness in idea generation.” With “1”=Marginal Effective and “5” = Strongly Effective.
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
20
Companies that are highly effective at idea generation and
conversion outperform their peers on average
Financial Comparison of
Idea Conversion Performance1
Financial Comparison of
Idea Generation Performance1
Highest
Possible 100
Score:
Strongly Effective
N = 60
Strongly Effective
Marginally Effective
N = 53
N = 47
Marginally Effective
N = 66
65%
Normalized
Performance
of Industry 50
Peers2:
60%
46%
50%
52%
54%
45%
56%
50%
58%
49%
42%
0
Lowest
Possible
Score:
Revenue Growth
(5-yr. CAGR)
EBITDA as a
% of Revenue
(5-yr. AVG.)
Market Cap
Growth (5yr. CAGR)
Revenue Growth
(5-yr. CAGR)
EBITDA as a
% of Revenue
(5-yr. AVG.)
Market Cap
Growth (5yr. CAGR)
Note:
(1) Data derived from survey Question 8: A. “How effective do you feel your organization is at generating ideas? B. “How effective do you feel your organization is at converting ideas into projects for execution?” With “1”=Marginal
Effective and “5” = Strongly Effective.
(2) For all companies for which financial performance data was available, financial metrics were normalized in each industry sector to control for industry performance fluctuations and to set performance values to a 100-point scale. A
score of 50% is the normalized performance across industries for each financial metric.
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
21
Companies reported that the majority of new ideas are still
generated from traditional sources…
Top 5 Ranking for “Which of the following tools and mechanisms, if
any, does your organization use to generate new ideas?” (1)
ALL RESPONDENTS (N = 685)
45%
42%
40%
35%
31%
Recoded Mean
30%
25%
22%
19%
20%
18%
15%
15%
10%
5%
0%
Direct Customer
Observation
Traditional
Market Research
Feedback from
Sales and
Customer Support
Idea WorkOut Sessions
Technology
Road Mapping
All other categories
(<15% each)
Note:
(1) “Please force-rank up to five of the following tools in order to influence by ranking the most influential mechanism 1st, the next most influential mechanism 2nd and so on. Responses above reflect the recoded means, that is, responses
of 1 or 2 = 1, all others = 0
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
22
…and internally-focused mechanisms are the most useful tools for
converting those ideas to products
“Which of the following mechanisms or processes are the most effective in evaluating and converting
an idea to a promising product or service concept for commercialization?” (1)
ALL Responses (N = 685)
0%
5%
10%
15%
20%
25%
30%
Rapid / virtual prototyping (proof of concept)
29%
Rapid / virtual prototyping (preference testing)
29%
Advanced development review teams
22%
Lead customer surveys
22%
21%
Business case competitions
21%
Seed-funded due diligence and concept design
18%
Third party partners (e.g., for rapid assessment)
17%
Focus groups
Externally-focused
13%
Third party partners (e.g., for concept development)
Learning launches
Internally-focused
11%
Note:
(1) All mechanisms assume adequate customer/consumer research and insights are available. “Please force-rank up to five of the following tools in order to influence by ranking the most influential mechanism 1st, the next most influential
mechanism 2nd and so on. Responses above reflect the recoded means, that is, responses of 1 or 2 = 1, all others = 0.
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
23
In 2007 we defined three distinct innovation strategies which we
further explored in this year’s study
Three Innovation Strategies
Example Companies
Need Seekers – Consistently strive to be first
movers; Proactively engage customers to
determine needs and shape new innovations;
Determine new innovations market back from market
need identification
Market Readers – Adopt a 2nd mover strategy;
Focus on driving value through incremental change;
New innovations determined market back; although
not as proactively as Need Seekers
Technology Drivers – Drive innovation via
technological achievement; Leverage technology
for both incremental and breakthrough change.
The least proactive of the three strategies in directly
contacting customers
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Similar to our findings on capabilities and culture in past studies,
each Innovation Model has a distinct front-end innovation profile
Market Readers
Top Ranked Internal Network Structures
Top Ranked Front-End Mechanisms
 Sales & Customer Support Feedback  Communities of Practice
 Organized Conferences w/ Technical staff
 Traditional Market Research
All Three
Need Seekers
Top Ranked Front-End Mechanism
 Direct Customer Observation
Top Ranked Internal Network Structures
 Innovation Champions
 Cross-unit Staffing (non-rotational)
Top Ranked External Network Structures
 Customers
 Channel Partners & Suppliers
Top Ranked Front-End Mechanisms
 Idea Work-out Sessions
 End-user focus groups
Top Ranked Internal Network Structure
 Focused Technical Innovation
Networks across the business
No distinct difference in External
networks by strategy model
Tech Drivers
Top Ranked Front-End Mechanisms
 Technology Road-mapping
 Meetings w/ External Technical
Community
Top Ranked Internal Network Structures
 IT Collaboration Tools
 Facilities Layout
Sources: Bloomberg data; 2010 Booz & Company Innovation 1000 survey; 2011 Booz & Company Innovation 1000 survey
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On an indexed basis, the innovation models use idea generation tools
and mechanisms at the front end that support their innovation strategy
“Which of the following tools and mechanisms, if any, does your organization
use to generate new ideas?” (1)
Indexed average value across all survey respondents
End-User Insight Tools




1.17
Idea Work-OutEnd
Sessions
User Insight Tools
Social Network Data Mining
End User / Customer Focus Groups
Direct Customer Observation
0.92
0.96
Market
Insight Sppt
Tools
 Feedback from Sales
& Customer
 Traditional Market Research
 Seed Funding for Exploratory Research
1.16
0.91
0.85
 Periodic Meetings of Technical
Technology Foresight Tools
Community
 Technology Road Mapping
 External Technology & Idea Scouting
 Cross B.U. Communities of Practice
(1) Responses reflect the indexed value of the likelihood that respondents are choosing a value
higher or lower compared to the average across all responses. An index value of “1” represents
the indexed average of responses
Booz & Company
Market Readers
over-index on
tools/mechanisms
that provide
market insights
and demand leads
0.91
Market Insight Tools
Technology Foresight Tools
Need Seekers
over-index on
tools/mechanisms
that provide deep
end-user insights
0.90
1.21
Need Seeker (N = 182)
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
Market Reader (N = 255)
Technology
Drivers over-index
on tools/
mechanisms that
guide where/ how
they can push the
tech frontier
Technology Driver (N = 248)
26
While priorities differ slightly, the Strategies agree that much-hyped
tools like Social Networks and Seed Funding are least important
Top 5 Ranking for “Which of the following tools and mechanisms, if
any, does your organization use to generate new ideas?” (1)
Need Seekers
43%
Direct Customer Observation
External Technology and Idea Scouting
11%
Periodic Meetings of Tech Community
10%
Social Network Data Mining
10%
Seed Funding for Exploratory Research
15%
15%
Technology Road Mapping
19%
29%
18%
End User / Customer Focus Groups
31%
16%
21%
Feedback from Sales and Cust. Support
40%
34%
24%
Idea Work-Out Sessions
Technology Drivers
42%
26%
Traditional Market Research
Cross B.U. Communities / Sharing
Market Readers
16%
13%
15%
22%
12%
14%
10%
7%
9%
9%
11%
8%
17%
9%
12%
8%
Least Important
(N=182)
(N=255)
(N=248)
Note:
(1) Respondents were asked to rank their top 5 tools and mechanisms from a list of 11 choices. Total responses reflect the recoded means: responses of 1 or 2 ranking were counted as 100%, all others (3-5) were counted as 0 for
statistical separation and significance.
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Social Networks are the least influential idea generation mechanisms for
engineered products industries like Automotive, Industrials and A&D
Avg.
Recoded Mean
15%
15
Industry breakout of respondents ranking “Social Networks” within the
Top 2 most used tools for generating ideas (1)
11%
10%
10
7%
6%
5
3%
3%
2%
0%
0
Software
and Internet
Health
Chemicals
and Energy
Computing
and
Electronics
Consumer
Auto
Industrials
Telecom
Aerospace
and Defense
Note:
(1) Respondents were asked to rank their top 5 tools and mechanisms from a list of 11 choices. Total responses reflect the recoded means: responses of 1 or 2 ranking were counted as 100%, all others (3-5) were counted as 0 for
statistical separation and significance.
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Customers and Channel Partners are the most prevalent external groups
while governments and open networks are used the least in ideation
Which of the following external network groups are most often used by
your organization during idea generation? (1)
Need Seekers
Market Readers
3.0
2.9
Universities
2.1
2.1
2.5
2.6
2.0
2.1
Note:
(1) Average of total responses for prevalence and effectiveness (score scale 1-5 with 5 being highest) for an External Network group category
)
Booz & Company
2012 Innovation 1000-Making Ideas Work-Results Summary EXTERNAL.pptx
2.7
2.7
2.3
2.4
2.5
2.5
( N = 182)
3.0
2.9
2.8
2.8
3.0
3.0
Suppliers
3.6
3.6
3.0
3.0
3.2
3.3
Channel Partners
Open Networks
3.8
3.7
4.0
4.1
Customers
Government Agencies
Technology Drivers
2.7
2.7
2.3
2.3
2.0
2.2
(N = 248)
(N = 255)
Prevalence
Effectiveness
29
Executive Summary – Survey Findings
 Nearly half of the respondents felt that their organizations were average or below average at both
generating ideas and converting them to projects…
 …which has implications on financial performance – companies that are highly effective at idea
generation and conversion outperform their peers in revenue, market cap, and EBITDA growth
 The majority of new ideas still come from traditional sources and rigorous process management –
going against popular innovation concepts in mainstream media (e.g., “crowdsoucing”)
 External networks that are part of the ecosystem are used by companies to generate ideas (e.g.,
customers, suppliers) but those outside of the ecosystem (e.g., government and universities) are not
considered primary sources of ideas
 Consistent with our definitions, the innovation strategy models have a distinct set of front-end
innovation mechanisms and use different networks for generating ideas:
– Need Seekers focus on discovering unarticulated customer needs through direct customer
observation, end-user focus groups and idea work-out sessions
– Market Readers “cherry pick” from existing ideas by mining traditional market research and feedback
from their sales and customer support channels
– Technology Drivers focus on developing technology-based breakthrough products
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For the complete study and additional
information on the annual
Booz & Company
Global Innovation 1000 Study
Please Visit:
www.booz.com/innovation1000
For media or other inquiries, please contact
Siobhan Ford
+1-212-551-6234
+1-978-314-6382
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