Innovation’s role and contribution to economic development has been dissected and discussed over the years. That innovation has a positive impact on economic growth is clear. Despite the volatility experienced in the world today, innovation continues to endure, even flourish.
Crucially, innovation can help drive recovery and new growth. While the global innovation ecosystem is fragmenting rapidly, with more and more inventions being incubated in smaller companies and individual inventors, the tenth edition of the Clarivate Top 100 Global Innovators reveals that innovation culture matters. Twenty-nine companies have appeared on the list every year, and on average, they have been creating, adapting and innovating for over a century. If innovation creates value, what might be the value of consistency in innovation?
Tangible impact of innovation culture
For the first time, our Top 100 Global Innovators looked at the stock performance of the 28 top ten Top 100 Global Innovators which have consistent stock make-up over the past decade. By treating them as a single investment group, the report revealed that these 28 companies outperformed the Dow Jones Industrial Average and S&P 500, returning almost 2.5 times growth in market capitalisation for the period from October 2014 and October 2020.
The report also compared the group of consistent Top 100 Global Innovators with 24 innovators that exited the list early (in 2013/2014). This latter group’s market capitalisation grew 1.2 times. In a span of six years, the consistent innovators opened a valuation gap of US$57bn per company to the innovators that exited the list in 2014.
While there are certainly many more factors that contribute to a company’s long-term success, a culture of ideation is a significant factor and powerful indicator.
Our analysis of the companies that have appeared every year in the Top 100, from Saint-Gobain – founded 356 years ago – to the more recent Qualcomm (founded in the 1980s), showed that consistent innovators share common traits. Irrespective of external factors, they have consistently contributed new ideas, solved problems and delivered new value – an enduring commitment to innovation and a culture that celebrates invention.
Quantifying the culture of ideation
Innovation and the culture that spurs innovation do not happen overnight. Conceiving ideas, transforming them into something concrete and creating new value is often a difficult, time-consuming process. Patent activity is one of many possible outcomes of the innovation process. Leaning on advanced patent information, a measure of the ideation culture which resulted in those patents can be defined.
Our Top 100 Global Innovators programme tracks innovation based on four indicators: volume, influence, success and globalisation, using sophisticated patent data from Derwent World Patents IndexTM (DWPI) and Derwent Patent Citation IndexTM. Using these four indicators, we can assess the commitment, influence and the novelty of companies’ patented research. These four indicators have also enabled us to deliver, for the very first time, the industry innovation leaders beyond the Top 100 list, and showcase the top innovators across 15 key industries.
Healthy disdain for the status quo
Staying innovative, however, is not an easy task. Innovative companies have nurtured an environment where there is a common desire for constant improvement, consistently challenging the status quo and maintaining a sense of urgency. It is not just about spending money on research and development. Rather, it is about an ability to transform research into something tangible – revenues and performance.
So how can entrepreneurs and smaller businesses, which often face greater financial pressure and constraints than their larger counterparts, weave a culture of ideation into the fabric of their identity?
- Champion a habit for the new – embed an internal culture where your people never stand still and are always looking over the horizon, striving to improve and make your own technology obsolete. Arm, a new entrant to our Top 100 Global Innovators 2021, embodies this, with its “pattern of pre-emptive disruption”
- Collaborate to create – the fragmentation of the global innovation ecosystem was noted in our report last year, where the average number of listed inventors per patent record on DWPI data has risen 5.3 per cent. As technologies converge and innovation becomes more knowledge intensive, deeper and broader expertise is required. This is not unique to smaller companies, although the lack of multiple layers of expertise may be more acute. Help is at hand, for example through Innovate UK which provides not just funding but crucially, facilitates knowledge transfer partnerships to innovative new businesses.
- Choose strong IP protection – there is a misconception that patents are closed tools, used primarily to restrict and protect original works. With patents, new knowledge – technical knowledge of the patent – becomes public information and incentivises and encourages further innovation. It also means companies need not start from zero and can “invent around” patented inventions, using them as the jumping off point for further ideas and improvement.
- Lean on patent data as a business resource – patent data can be a valuable resource for a young company, providing vital insights such as competitive intelligence and patentability of your technology or product which enables better decision making. Patents offer new and young companies a licence to understand the market they operate in and take concrete steps forward.
Ideation is a tougher challenge today than ever before. As they did before, innovators large and small will continue to be a catalyst for recovery and growth, today and in the future.
Ed White is head of analytics, IP Group at Clarivate