Apple and Google, #1 and #2 Of World’s Most Innovative Companies. Why?

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Apple Overtakes Google As World's Most Valuable BrandBoston Consulting Group’s survey of the world’s most innovative companies is standard fare – you see P&G there along with 3M (just back on the list), Ford, Amazon, BASF. All well known brands with a strong innovation background. And of course Apple and Google are at the top as they were in the last survey, in 2010. That should force us to ask questions. Surely times have changed.

The first question is whether both Apple and Google deserve to stay stuck to the ceiling. Apple has done little to justify its position in the past two years, though may be back with surprises in 2013 or 2014.

Apple is in many aspects a very old fashioned company. Think back to the 1990s when consumer electronics companies tended to launch an innovative product with a high price to tempt the early adopters and then, generally, reduce the price to soak up a wider market (sometimes stripping out a few features).

Apple did it with the Nano and then the iPad. And while sales are strong has resisted it with the iPhone.

Another 1990s strategy was to build services around product to protect it from commoditization. Apple has done that successfully with the Nano (iTunes) and iPhone (apps).

Supply chain management? Got it nailed.

In an important sphere of its activities Apple is a classroom lesson in how to do good product innovation. Its executives are on very strong ground because they play it by the book. Nothing wrong with that.

But there are important areas where Apple refuses to go with the times. Its social media strategy seems to be dead in the water and its reputation management has gone from great to poor.

But perhaps its most important innovation is its corporate form. In The Elastic Enterprise, Nick Vitalari and I wrote extensively about this – about the use of the developer community to scale its business as it entered mobile and what it took to externalize this critically important aspect of its business.

In that area, Apple is a case study in systemic or structural innovation. Here, though, it now seems stalled.

Apart from an offer to repatriate jobs to America – under pressure from its complex supply chain – Apple doesn’t appear to be doing much new to its wealth-creating model.

I am sure this is why people are consistently perceiving it as a less and less innovative company. Having said that, one finding from a small study I did a year ago was that all companies have a period in the innovation doldrums.

A little over a year ago perceptions of Google had slipped. Web opinion no longer perceived Google as such an innovative company. Then it made more of its driver-less car technology and augmented reality (Google glasses) and we started to sit up and listen to Google once more.

So Google’s position is clearly cyclical. The point about the BCG list is that it is a vote by senior executives, so it says something about Apple and Google but at the same time also says something about how executives perceive innovation.

Any rational assessment of innovation would see these companies rise and fall as their existing products go up the maturity curve and their labs and design teams figure out which markets are ripe for which new products. During this period they could well be working on ideas that either never materialize or fail even before they reach a market.

Yet executive perceptions of innovators don’t seems to change hugely at the top of the tree. Nor do they seem to equate a company’s resources with its innovation record – Apple and Google sit on vast cash-hoards, which they do not use to broach new markets – even though a telling conclusion of the BCG research is that diversified conglomerates deal with economic downturns better than non-diversified enterprises.

Could Apple surprise the market by introducing a systemic innovation as powerful as the apps’ developer community or iTunes? It looks unlikely. In the absence of a new community of interest like this, I doubt Apple will innovative so powerfully as it did with the iPhone.

I suspect that executives perceive Apple as innovative because their own organizations are profoundly impacted by BYOD, driven by the iPhone or iPad. Apple has forced innovation on them, which it should look to exploit.

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15 thoughts on “Apple and Google, #1 and #2 Of World’s Most Innovative Companies. Why?

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