Does size matter – in innovation? some observations on the BCG innovation report

IN INNOVATION, BIG IS BACK - This is a key message in "The Most Innovative Companies For 2020" report published recently by the Boston Consulting Group's 2020 innovation report

The study starts by saying: "In innovation—as in life—drive, size, and skill are a powerful combination. Drive to set an ambitious agenda and fund promising opportunities. Size to transform these opportunities into real sources of new revenue. And the skill, as embodied in a well tuned innovation system, to be able to do it over and over again"

True, you need drive – you can't accomplish anything meaningful without drive. You also need skill - lots of skill – even to innovate once, not to mention for repeated innovation.

But size? Is innovation really best accomplished by the larger companies?

The authors define an innovation leader as a company that generates a larger percentage of sales from products or services launched within the past three years. But they don't compare how much of the sales is derived from such new products or what is considered a new product -  does an iPhone launched last year count as an "innovative" new product?Furthermore, I would say that very often this revenue generated over the last 3 years is based on innovative technology obtained from smaller companies through M&A activity. 

So does size really matters in innovation?

It seems to me this is a classic example of circulus in probando (aka "circular logic") - a logical fallacy in which the reasoner begins with what they are trying to end with.

According to BCG, the ranking was compiled through a survey of 2,500 global innovation executives, on parameters such as "Global Mindshare”, "Industry Peer View" "Value Creation", that includes share buybacks.

When these are the questions you ask, don't be surprised you get only big companies names as answers. But I am not sure you can then conclude that "BIG is BACK" – in innovation.

Maybe the report should be called "the 50 most innovative BIG companies for 2020" instead?

In fact, the authors recognize that "Conventional wisdom suggests that when it comes to innovation, small companies have the edge. They are quick and nimble.They have no legacy organizations, technology, or infrastructure to hold them back. Because they are often privately owned, they can play for the longer term. Big companies, by contrast, are weighed down by internal bureaucracy, bound by out-of-date systems and ways of working, and if publicly traded, too focused on the next quarter’s earnings to think about the longer term"

I couldn't have said it better. So may be conventional wisdom is right after all?

So what do you think – where is most/best innovation done – in small or big companies?

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A separate note of the nature of the companies in the BCG report:

Among the companies on that list, there are 10 companies the authors classify as "Technology Hardware", that include either semiconductor companies (e.g. Intel) or companies with very active semiconductor activity (such as Apple, #1 on the ranking or Huawei, up 42 (!) places this year) . Furthermore, as the report points out, today many companies are innovating in fields that are not their original own, so we should add to this list at least 10 additional companies that have a considerable investment in semiconductors, even if they are under the "Software & Services" category (such Amazon, Microsoft, Facebook) or under "Automotive & Components" (e.g. Bosch). As someone deeply involved in the semiconductors' world, I am proud to see such a presence of these companies among the most innovative companies.

On the other hand, as a citizen of the world undergoing a major health crisis - that could be potential cured by better and faster development of vaccines and treatments - I'm disappointed by the weak performance of Pharma companies. BCG found only 3 such companies that can be called innovative: Johnson & Johnson (rank#26, down -12 places from last year!); Bayer (rank#38, down -14!) and Novartis (rank#47, new in the ranking).

Is there anything the Pharmaceutical industry can learn from the other allegedly more innovative companies/industries?