Most Innovative Does Not Mean Best Investment

Posted by: Michael Arndt on July 12, 2010

It’s reality-check time for the 2010 Most Innovative Companies ranking, and for now, at least, reality is that while the list may spotlight the world’s best generators of fresh products and services, these are not the best investments.

We published this year’s roster three months ago. The list is based mostly on a survey of top executives around the world conducted by our long-time partner in the annual project, Boston Consulting Group. But the lineup is adjusted for financial performance including stock return. If we were presenting the ranking today, it undoubtedly would look different.

Of the 23 publicly traded companies in the Top 25, 13 underperformed the Standard & Poor’s index of 500 stocks over the past three months. (And it’s not that the S&P 500 has done all that well; it’s down 11 percent since mid-April.) Just three honor-roll members were actually up: Apple, BMW, and Hyundai. By sector, only automotive came out ahead.

The laggards included seven of the Top 10, with every one of them—Google, Microsoft, Amazon.com, LG Electronics, BYD, General Electric, and Sony—down 18 percent or more. The biggest loser overall was 23rd-place Nokia; its share price has tumbled 45 percent since it was named one of the Most Innovative Companies of the year.

I’ll check back in three more months to see if our ranking correlates more with stock performance. Meantime, what do you think this says about the power of innovation?

Reader Comments

Erika Lundahl

July 14, 2010 7:46 PM

I don't know that I agree with what this article is trying to say about the value of innovation. Innovation when done with purpose for the sake of the consumer can be incredibly valuable and at times a make or break for brands that trying to differentiate from the competition. Also, with the state of the economy I don't know that its a fair correlation to draw between innovation and poor business.

Interesting commentary and perspective though.

There's a recorded Webinar on product differentiation given by InsightsNow CEO Dave Lundahl PhD.

http://www.insightsnow.com/resources/webinars/beating-the-private-label-challenge

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What comes next? The Bloomberg Businessweek Innovation and Design blog chronicles new tools for creativity and collaboration, innovation case studies in both the corporate and social sectors, and the new ideas that have the power to change the way things have always been done.

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