strategy+business — Winter 2013
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The 10 Most Innovative Companies

This year's list of the most innovative companies, as identified by our survey respondents, reflects the increasing importance of digitally oriented companies whose innovation efforts are transforming our working and personal lives.

Apple continues to lead the list, for the fourth year running (see Exhibit F) . The company boosted its R&D spending by almost US$1 billion this year, to $3.4 billion, raising its rank among the Global Innovation 1000 from 53rd to 43rd. But its innovation intensity remained at just 2.2 percent, thanks largely to the impressive $157 billion it took in this year. However, Apple has also seen its share price fluctuate significantly, due in part to the fact that its iPhone market share has come under increasing pressure from Android phones, and that it has not developed a new killer product in quite a while. Perhaps as a result, just 62 percent of respondents named Apple as the top innovator this year, down considerably from the 80 percent who did so last year. But the company remains strong, and time will tell how it responds to rising pressures.

Google held steady at number two; half of respondents mentioned it, up 7 percentage points from last year. 3M fell to number five, overtaken by Samsung for the number three spot. Samsung's steady climb up the list makes clear that it is not a mere copier of innovations pioneered by other companies. With its Galaxy smart phone, Smart TV, and other inventive products, the company is proving capable of designing devices and equipment almost as crowd-pleasing as Apple's. Amazon, meanwhile, leaped from number 10 last year to number four. The company's skill as an innovator no longer rests solely on the new ideas it brings to online retailing; its cloud service offerings are, by some accounts, more successful than those of the company's many rivals.

The same companies as last year round out the next few spots, with some shifts in the order. But surprise entrant Tesla Motors shows up at number nine, having spent fully two thirds of its $413 million in revenue on R&D, typical for a company that's essentially still in startup mode. Facebook rejoined the list at number 10, probably attributable to its quickly evolving mobile strategy. Continuing a now four-year trend, no healthcare company made the list.

The 10 companies deemed most innovative again had a much better year financially than the top 10 spenders on R&D, surpassing them in terms of both five-year revenue and market cap growth averages (see Exhibit G). The top 10 spenders managed only to keep up with the 10 most innovative companies in the five-year average of the earnings margin, and failed even to match their industry peers in terms of growth in both revenue and market cap. The list of top spenders is still dominated by auto and healthcare companies. From these sectors, only one company, tiny Tesla, appears on the list of top innovators- demonstrating once again that innovation success isn't about how much money companies spend, but how they spend it.