The Global Innovation 1000: Why Culture Is Key

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The elements that make up a truly innovative company are many:  a focused innovation strategy, a winning overall business strategy, deep customer insight, great talent, and the right set of capabilities to achieve successful execution. But more important than any of these elements is the role played by corporate culture — the organization’s patterns of behaving, feeling, thinking, and believing — in tying them all together. Yet according to the results of this year’s Global Innovation 1000 study, only about half of all companies say their corporate culture supports their innovation strategy. These findings are reported in “The Global Innovation 1000:  Why Culture Is Key,” in the Winter 2011 Strategy+Business, by Barry Jaruzelski, John Loehr, and Richard Holman of Booz & Company. For the study, the Booz team identified the 1,000 public companies around the world that spent the most on research and development in 2010.  It then compared their performance on key financial metrics for 2001 through 2010. To understand how innovation strategy, culture, and organization affect performance, the team surveyed nearly 600 senior managers and R&D professionals from more than 400 companies. The team then asked respondents to rank their company’s most important innovation goals, cultural attributes, and organizational factors, as well as their perception of their company’s performance on each. The data show that companies with unsupportive cultures and poor strategic alignment significantly underperform their competitors.  Moreover, most executives understand what’s at stake and what matters, even if their companies don’t always seem to get it right. However, throwing more money at research and development is not the answer.  In fact, the study reveals, as it has in each of the past seven years, that there is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues. Many companies — notably, Apple — consistently underspend their peers on R&D investments while outperforming them on a broad range of measures of corporate success, such as revenue growth,...

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