Tech Drives Innovation and Reinvention
A decade ago, in April 2009, BCG’s annual innovation report focused on such issues as spending and corporate sensitivity to costs (hardly surprising, as the global recession took hold), the hurdles of risk-averse cultures and long development times (the more things change, the more they stay the same), and customer satisfaction and revenue growth as two main gauges of innovation success. The only hint of the tech revolution to come lay in some of the members of the top 50 list: Apple and Google at numbers one and two, Microsoft at number four, and Amazon at number 11. Ten years later, in our just-released 13th report, Google, Amazon, Apple, and Microsoft rank one, two, three, and four, respectively. (See The Most innovative Companies 2019: The Rise of AI, Platforms and Ecosystems).
It’s not news that tech has taken over innovation as it has many other areas of business. But it’s worth pausing for a moment to consider how fast and far tech’s influence has come. BCG’s last several innovation reports highlighted the impact of digital technologies on both digital natives and more traditional industries. This year’s survey shows that the use of AI—which was not on the radar screen for any traditional corporate innovation function ten years ago—is rapidly expanding. Nine out of ten respondents in our current survey say that their companies are investing in AI, and more than 30% expect AI to have the greatest impact of any innovation area on their industry over the next three to five years. Leaders are already pulling ahead. Four in ten self-described strong innovators report receiving more than 15% of their sales from AI-enabled products, compared with less than one in ten weak innovators.
In addition, many companies are relying more on platforms and their cousin, ecosystems, in order to gain access to the technologies and tech capabilities they need to support and accelerate their innovation efforts. These vehicles serve multiple functions, including facilitating (and sometimes profiting from) the innovation of others, expanding reach and collaboration, and enabling new multiparty solutions and offerings. Again, strong innovators are more likely than weak ones to expect a significant impact within three to five years and to be actively targeting these areas. The opportunity to innovate entirely new revenue streams, business models, and sources of continuing advantage is strong, thanks in part to the masses of data that can be accessed through partnerships and collaborations.
The tech juggernaut will only accelerate. As another new BCG report documents, corporate and investor interest in so-called deep tech—novel technologies that offer significant advances over those currently in use—are attracting an unprecedented amount of interest and activity. (See “The Dawn of the Deep Tech Ecosystem,” BCG article, March 2019 [add link].) The aggregate global private investment in seven deep tech categories soared by more than 20% a year from 2015 through 2018 to reach almost $18 billion. These fields include advanced materials, blockchain, drones and robotics, and quantum computing, all of which can be expected to have significant impact on the innovation programs of the future. A new deep tech ecosystem is taking shape, with big ramifications for all players, most notably companies, investors, and startups. This ecosystem reflects a new model, one that is far more fluid and dynamic than the ways in which research and technological development have been conducted in the past.
One point bears repeating, especially with regard to the four trailblazers referenced above. These companies are serial reinventors. Google constantly revises its algorithms and offerings. Amazon continuously invents new categories, services, models, and ways of engaging its customers. Apple’s continuing innovations are the stuff of business legend. Microsoft has transitioned from its longtime reliance on the Wintel partnership in PCs to become a cloud-based tech company.
The tools and technologies of innovation evolve. The basic orientation toward change—never being satisfied and always being willing to reinvent oneself—remains part of some companies’ lifeblood.