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Professional investors would The Innovation Index
find companies that could ben-
efit from operational expertise The list of firms that comprise the mutual
and put in their people to stream- fund compose the 25 most innovative
line everything. The combination companies, compiled by the aptly named
of great management and cost Innovation Index Group, are updated once
cutting meant higher profits. But a year. For every company that is added,
that strategy only works well if another drops out.
you are hoping to sell the com-
pany you acquired as soon as you Not surprisingly, this index traditionally
wring out every bit of excess you outperforms the returns turned in by the
can find. S&P 500 in most years. Here is a sampling of
companies on the current list:
If you want to grow the firm,
you need a different strategy. Amazon (AMZN)
Enter the Idea Monkey. Today, Apple (AAPL)
many VCs are actively looking BMW (BMW.GR)
for companies that have unique Byd Co Ltd (1211.HK)
intellectual property that can be Coca-Cola (KO)
deployed in new, profitable ways. Fast Retailing (9983.JP)
Professional money is now hiring Ford Motor Co (F)
chief marketing officers to invent General Electric (GE)
new possibilities and launch Google (GOOG)
new products and services based Hewlett-Packard (HPQ)
on the newly acquired IP. Why? Honda Motor Co (HMC)
Because they have learned that Hyundai Motor Co (005380.KS)
is the way to make a lot more IBM (IBM)
money. While the cost-cutting Intel (INTC)
savings are a one-time thing, the LG Electronics (066570.KS)
revenue created by Idea Monkeys Microsoft (MSFT)
can continue for a very long time. Nintendo (NTDOY)
Nokia (NOK)
Says Dustin Cohn, former Procter & Gamble (PG)
director of marketing at Gatorade Research in Motion (RIMM)
and now CMO of Optimer Brands, Samsung Electronics (005930.KS)
a financial holding company: Sony (SNE)
“We actively pursue inventive Toyota Motor (TM)
marketers to help us reposition, Volkswagen AG (VOW.GR)
Walmart (WMT)
Each company’s weight in the index is
derived from a combination of two rankings.
The first is a qualitative ranking based on the
company’s position in the annual Bloomberg
Businessweek/BCG survey. The second is
a quantitative ranking based on three fac-
tors used to estimate a company’s inno-
vation — three-year earnings growth, three-
year sales growth and R&D as a percentage
of sales. A composite score is calculated
for each company by adding the qualitative
and quantitative scores. For details, go to
www.indices.standardandpoors.com.
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