Chinese firms slip in BCG innovation list as AI reigns supreme

23 April 2019 Consultancy.asia

The big names in Chinese commerce and tech have slipped in this year’s most innovative company rankings as compiled by BCG, with Tencent dropping out altogether.

After last year together cracking the top fifteen in Boston Consulting Group’s annual ‘50 Most Innovative Companies’ report, the 2019 edition has seen both Alibaba and Tencent slide down the rankings – the latter dropping out altogether from 14th place after having returned to the list in 2018 following a high of 12th in 2015. Alibaba meanwhile has dropped 13 places to 23rd, while Samsung holds steady in fifth after peaking in second in 2013.

Now into its 14th year, the highly-regarded BCG compilation takes in the views of some 2,500-plus senior innovation leaders operating in a wide range of sectors worldwide, with other Asian headquartered companies to make this cut this year including South Korea’s LG Electronics (at 18th for its first appearance in four years), Toyota and Japanese IT entity NTT Docomo (at 36th and 37th) and Huawei (clinging on at 48th), with Nissan dropping out.

BCG most innovative companies 2019

Elsewhere, a particular patch of land in Northwestern Europe has performed particularly well for innovation this year, with the Netherlands and Germany together contributing thirteen names to the list; yet it’s the US-based companies which continue to dominate, and particularly at the top, claiming twelve of the first fifteen places. There was, however, a shake-up at the very top for the first time in the life of the survey, with Apple finally bumped from its perch.

The new innovation king: Alphabet, parent of Google, with Amazon also climbing past Apple on the podium to take second place. Microsoft meanwhile made fourth – with Netflix, IBM, Facebook, Tesla and Adidas rounding out the top ten. And the most common element among the strongest innovators this year, according to BCG; the embrace of artificial intelligence in both their products and services, as well as how they create them – or the innovation process itself.

The consultancy outlines: Alphabet is an “AI first” company according to its CEO, and has long embraced both platforms and ecosystems. Amazon, besides using AI in its retail business, has pioneered voice recognition technology and platform-based services. Apple helped pioneer voice recognition software and provided a premier virtual workplace for app developers. Microsoft has evolved from a software company into a provider of AI and platform-based services.

Use of data on innovation process – AI leaders/laggards

“All of the ten highest-ranking companies – and many in the top 50 – use AI, platforms, and ecosystems to enable themselves and others to pursue new products, services, and ways of working,” the report states. “Nine out of ten respondents in our current survey say that their companies are investing in AI, and more than 30 percent expect AI to have the greatest impact of any innovation area on their industry over the next three to five years.”

Already, nearly half of the self-described strong innovators report receiving over 15 percent of their sales revenues from AI-enabled products, compared with less than ten percent of weak innovators. Subtitled ‘The Rise of AI, Platforms, and Ecosystems’, this year’s report also notes that strong innovators are in addition to AI increasingly looking to platforms and ecosystems as a way to benefit from external data, ideas, and capabilities.

“Digital technologies enable collaboration platforms, and collaboration platforms enable ecosystems that bring together a group of organisations to build a new capability or product or service offering, or to push forward a new field of science or technology,” explains BCG partner Florian Grassl, with fellow report author and BCG senior partner Ramón Baeza adding; “Digital technology and external innovation have become watchwords.”

Rise of platforms and ecosystem for strong innovation

Grassl continues; “Not all ecosystems are alike, however. They have different types of glue that bind their participants. Money is one type, of course, but knowledge, data, skills, and community can be equally important.” Here, the firm describes some ecosystems as traditional ways of organising and doing business, with established hierarchies and structures and an ‘orchestrator’ at the center with which all the other participants interact.

Other ecosystems, however, including many of those that are involved in the early research phase of R&D, tend to be more dynamic – relying more on multifaceted interactions among participants. “The use of platforms and ecosystems will undoubtedly expand. The more complex the technology, the narrower the expertise – and the more likely it will become that companies must look outside their own organisations for the skills to use the latest developments.”

The report concludes: “Like any powerful new technology, AI is the subject of lots of hype. But in this case, real fire lies behind the smoke. In a few short years, artificial intelligence and its subfield, machine learning, have gone from futuristic vision to near-mainstream capability at many large companies, including in their innovation programs. As significant as the impact of AI will be on business processes, its area of greatest potential lies in developing new products and services that can evolve into major revenue streams over time.”