November 2010

Unlocking the Secrets of Innovation Strategy

For the last half-dozen years, a Booz & Company team led by Barry Jaruzelski and Kevin Dehoff has tracked the 1,000 public companies globally that invest the most in innovation—a group that accounts for almost half the world’s entire pool of R&D. This year’s Global Innovation 1000 reveals how R&D held up under the pressures of the "Great Recession"—better than you might think, but with big shifts in the list of top spenders. But the team also explored the most important—and mysterious—question about R&D: Why two apparently comparable companies can spend similar amounts on innovation and get dramatically different returns. To my knowledge, there’s plenty of data documenting the phenomenon, but very little that illuminates what causes it. Read the study—then visit our Innovation Strategy Profiler to see how to apply its insights to improve your own performance.

Two articles listed below look in depth at a couple of key industries. Media executives—and media-company shareholders—have watched agonized as print dollars turn into "digital dimes." It doesn’t have to be that way. As you’ll see from "Making Digital Content Pay," the right combination of content and capabilities can create a path to profitability from digital content. There are surprises, too, in "Does Size Matter?" which shows how industry logic in the consumer-packaged goods industry has turned upside down. It no longer favors enormous companies, as it did; now, it rewards strategic coherence and focused product portfolios.

Both of these articles—and Innovation 1000—reveal the existence of a performance premium for companies that create a coherent strategy, one that is driven by capabilities that are aligned with a clearly articulated market position and a carefully chosen business and product portfolio. A questionnaire (see Do you have the right to win?) will help you diagnose how well your company is positioned to earn the coherence premium.

Anyone who has ever led or participated in organizational change knows easily it can derail or fail. Usually, the problem lies in a failure to work with both formal and informal levers of change. How to use each and both is the subject of "Making Change Happen, and Making It Stick." Don’t miss it.

Best wishes,

Tom Stewart
Chief Marketing & Knowledge Officer

Thinking Ahead

The 2010 Global Innovation 1000: How the Top Innovators Keep Winning by Barry Jaruzelski, Kevin Dehoff Why are some companies able to consistently conceive of, create, and bring to market innovative and profitable new products and services while so many others struggle? It isn’t how much they spend. Succeeding at innovation requires a focused set of innovation capabilities that is carefully tuned to a company’s innovation strategy and aligned with overall corporate strategy. This year’s Global Innovation 1000 reveals the three fundamental innovation strategies and the key capabilities required to succeed at each of them—and demonstrates that companies that match capabilities to strategy outperform their industry peers in terms of both profit margins and market capitalization growth.read more >

Making Digital Content Pay: The Billion-Dollar Question for Publishers by Gregor Vogelsang, Santeri Kirvelä, Sebastian Blum, Mikko Pulkkinen Publishers, arise! Digital paid content can become commercially viable. Publishers must not only differentiate their paid content from their free content; they must also provide customers with a better user experience, offer premium and complementary services on top of their content, and build the right pricing models and packages around their content.download (2.8mb, PDF) >

Does Size Matter? Rethinking the Importance of Scale in Consumer Goods Companies by Steffen Lauster, Elisabeth Hartley Over the last decade, the best performers in the consumer-goods industry have been small companies with relatively narrow product portfolios supported by three to six differentiated capabilities. These exemplary companies exhibit coherence, which allows them to be efficient in their activities, disciplined about their portfolios, and unmatched at delivering what matters most to the customers they serve.download (370kb, PDF) >

Making Change Happen, and Making it Stick: Delivering Sustainable Organizational Change by Ashley Harshak, DeAnne Aguirre, Anna Brown Few organizations have escaped the need for major change in the past decade as new technologies and global crises have reshaped entire industries. However, the fact that change has become more frequent does not mean that it is easier. Successful companies address the need for change comprehensively—taking into account both the "boxes and lines" of the organizational structure and the "unwritten rules" of how decisions are made and what creates pride in the organization.download (458kb, PDF) >