To be a Top-50 Innovator, CEOs Must be Prepared to Look Outside

After all, companies from the automotive to financial sectors are facing faster-changing markets populated by technology startups that threaten to entirely upend their business models. The smartest leaders are rising to the challenge by striking a strategic balance between internal and external innovation, according to BCG partner Andrew Taylor. “They are smart and efficient at scanning for external ideas—and deft at bringing them inside.”

Topping this year’s list, as they did last year, were Apple, Google, Tesla and Microsoft. Amazon jumped four spots to fifth, while Netflix and Facebook moved into the top ten for the first time, taking out sixth and ninth places, respectively.

The results were based on a survey of 1,500 senior innovation executives across a wide range of countries and industries, BCG said.

As recently reported in Chief Executive, companies such as Apple, Google, Intel and Microsoft are indeed ramping up partnerships with other companies, large and small, to tap their know-how.

“The smartest leaders are rising to the challenge by striking a strategic balance between internal and external innovation.

Microsoft, for example, in October announced a new partnership with Renault-Nissan to develop advanced navigation and predictive maintenance technology for its cars. “We don’t develop a technology for the sake of developing a technology. We develop a technology when we think nobody is developing it,” Renault-Nissan CEO Carlos Ghosn said at the time.

BCG found a clear correlation between performance and a preparedness to apply sophisticated techniques for sourcing external ideas. Strong innovators, for example, took a more analytical approach, with 65% saying they found new ideas through social networks and big data mining, compared with just 14% for weak innovators.

Strong innovators were more open to flexibility, with two-thirds saying they found new ideas through external partnerships versus 22% for weak innovators. They also were more likely to employ corporate venture capital and incubators to harvest external information.

This year’s top 50 had 10 new entrants, including Uber, Airbnb and high-tech apparel chain Under Armour.

Ranked at 22, Under Armour has displayed a noteworthy ability to combine external and internal innovation to rapidly grow into a $17 billion company, BCG said. CEO and founder Kevin Plank got things rolling by finding a material that repels perspiration, and following that up with acquisitions to add fitness devices and apps to the company’s offering.

“Plank understands that data is at the center of everything he is trying to do,” the BCG report, which can be viewed here, said. “He has focused intently on capturing and employing data both for the users of Under Armour products and for the company’s innovation and growth programs.”

Ross Kelly :Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.