Thomson Reuters has issued their Top 100 Global Innovators list. And, when we compare the conclusions with those of BusinessWeek last year, it’s clear that there is more to Innovation than patents.
This study by Thomson Reuters came up with the most innovative companies and countries, as recognised by the patent offices across the world, and by the peers of those companies. The aim was to measure the usefulness and applicability of the companies’ patents in a globalised world.
I found that report very interesting, certainly nowadays, because of the increased importance of the patent portfolios of the companies, as we have witnessed different episodes of the so-called ‘patent wars’ between Internet companies and device makers.
The analysis by Thomson Reuters measures companies by the proportion of their patent applications that are granted (“Success”); the number of “quadrilateral” patents (those granted in China, Europe, Japan and America), which measures the “Global” aspect of innovation (measured using the Thomson Reuters Quadrilateral Patent Index); how often patents are cited by other companies (“Influence”, measured by the Thomson Reuters
Derwent Patents Citation Index); and whether patents relate to new techniques or inventions (“basic” patents) or are refinements (“equivalents”) of existing ones (“Volume”). All very objective, isn’t it?
In terms of geographies, Thomson Reuters cites the following:
The largest percentage is from North America: 40%. Asia accounts for 31% of the most innovative companies in the world and Europe for 29%. ^…*
In Asia, Japan dominates with 27% of the representation. As a testament to Japan’s solid innovation foundation, it has representative companies in 12 of the 16 industries. The only other Asian nation present is South Korea, with 4% of the companies. The lack of companies from China is noteworthy and underscores the fact that although China is leading the world in patent volume, quantity does not equate to influence and quality.
And the first thing that stroke me when I first read this report by Thomson Reuters was the difference in conclusions with a similar report that BusinessWeek and The Boston Consulting Group issued last year.
The difference between the two reports is outlined by the fact that BusinessWeek stated that “the age of Asian innovation has begun”, seemingly contradicting the conclusions by Thomson Reuters.
The difference seems to lay in the methodologies that were used in each of these two studies. Indeed, the study by BusinessWeek / BCG was based on a mix of opinions by executives and of a series of financial measurements:
A 21-question poll to senior executives around the globe. The 1,590 respondents, who answered anonymously, were asked to name the most innovative companies from outside their own industry in 2009. BCG then factored in the financial performance of the vote-genders. The final list weights the survey results 50%, stock returns 10%, and three-year revenue and margin growth 5% each.
All in all, I do have a preference towards the analysis by Thomson Reuters, mainly because it seems much more objective and less biased by opinions.
Now, an interesting thing to note is that the analysis by BusinessWeek / BCG grants a lot of importance to the financial results of the companies, and they use profitability as a measure for Innovation; whereas Thomson Reuters does not take this into account to rate the level of company innovation.
Why is this interesting? Well, it seems that there is quite a gap between Innovation objectively measured and the perception by the industries (understood as the set of executives that were polled by BusinessWeek / BCG). This gap is exemplified first by the difference in the importance that Thomson Reuters and BusinessWeek grant to Asia as a increasingly breeding ground for Innovation. Another example of such a gap is given by the fact that Thomson Reuters does not include Google as one of the top 100 innovative companies, whereas BusinessWeek cites Google as the second most innovative company, right after Apple; who wouldn’t be tempted to list Google as a top innovator?
There deffinitely seems to exist a difference between perception and reality, doesn’t it? Or is it that there are other forms of Innovation — such as Organisational Innovation — that are part of the perception by the main industries, and that cannot be measured by any patent index? In the case of Google, probably the second question holds true.
Anyway, here is a diagram that shows the importance of the different industries in Innovation, and of geographies in innovating in two important sectors for me: Telecommunication Equipment and Semiconductor & Electronics:
Figure 1: 100 Most Innovative Companies in the World, 2011, by Country
Regards,
Carlos.
