What Sets the Most Effective Innovators Apart

Incumbents and start-ups around the world collectively spend hundreds of millions of dollars per year on innovation-related activities. Yet according to our analysis of 170 of the largest global companies by revenue, the return on innovation spending has significantly declined. We believe a reason is many companies, under pressure to show that they can disrupt a market (or to stave off disruption), are pursuing innovation haphazardly. Much of the investment ends up being non-strategic, poorly linked to the business, and undermanaged. Some have even argued that innovation spending and activities are often exercises in corporate image-building rather than attempts to increase productivity or performance. No wonder companies are disappointed by their results. In a study of C-level executives at 840 companies from eight countries and 14 industries with revenues over $500 million, we identified a small number that appear to be bucking the trend. Their secret: They strive to innovate in ways that would have a major impact on markets and society, and they revamped how their organizations pursued innovation and brought their capabilities together in a single “architecture.”