Despite global economic uncertainty, innovation rose as a top corporate priority for 2023.
According to a new report released by Boston Consulting Group (BCG), 83% of African executives view innovation as a top-three priority for this year, compared to 79% of companies around the world that see it as a top-three priority. This is a 21% increase from last year when only 62% of African companies ranked innovation as a top priority.
Globally, 66% of companies plan to increase spending – 42% by more than 10%. This is in stark contrast to the last downturn in 2009 when fewer than two-thirds of global companies ranked innovation as a top-three priority and only 58% planned to increase spending.
For its 17th Most Innovative Companies report titled, Reaching New Heights in Uncertain Times, BCG examines how leading companies are raising their commitment to innovation, and how innovation is building their resilience to economic uncertainty. The report draws on the firm’s annual survey of more than 1,000 global executives on innovation trends and its global innovation performance database of more than 1 000 companies.
“The connection between innovation, growth, and advantage is stronger than ever,” says Justin Manly, a BCG MD and partner and a co-author of the report. “The companies that both prioritise innovation and make sure that they are ready to act will continue to widen their lead and deliver outsized returns.”
The 50 most innovative companies of 2023
Despite the market headwinds that they experienced in 2022, tech companies continue to dominate the top 50, including five of the top 10 slots. For the third consecutive year, Apple holds the top spot on the list. Tesla climbs three positions to second place, and Amazon remains at third. Nine new companies join the top 50.
In addition, international energy companies hold five spots, possibly reflecting survey respondents’ concerns over climate change and the fact that they’re looking to the energy industry to be a creative part of the solution.
The 50 most innovative companies for 2023 are a geographically diverse group, roughly evenly split between North America and the rest of the world. Europe and Asia are well represented, and the Middle East joins the list for the first time.
While there are no African innovators among the 2023 top 50 most innovative companies, African firms have similar innovation readiness than those in the rest of the world.
Serial innovators use innovation ‘systems’ to generate new value propositions and profitably solve customer problems. Industries in Africa with superior average i2i score include transportation, durable goods and materials. BCG i2i score scans innovation systems and impact over 70 best practices to assess innovation readiness.
“Our research shows that companies with mature systems generate up to 20% higher innovation output – a percentage of sales originating from innovations in the past three years,” says Nihmal Marrie, MD and partner at BCG, Johannesburg.
Fifty-two percent of African companies prioritise climate and sustainability, compared to 60% globally. Early-movers are establishing leads in burgeoning new markets and capturing value created by the push for sustainability. On top of that, climate and sustainability prioritising and innovation ready companies emphasise many aspects of their innovations systems more aggressively than other companies.
BCG’s report also underscores the role innovation plays in driving performance. Since 2005, BCG’s portfolio of the 50 most innovative companies has outpaced the broader market in shareholder returns by a significant margin – an average of 3.3 percentage points per year.
Companies are investing in AI
“African companies prioritise tech investments in Artificial Intelligence (AI), robotics and the Internet of Things (IoT),” says Marrie.
AI is rapidly expanding innovation possibilities, and companies’ investment priorities reflect this: 66% of African companies are investing in AI and machine learning this year, compared to 61% of companies globally. This is 7 percentage points higher than robotics and process automation and 28 percentage points higher than IoT and Edge, which survey respondents selected as the second and third most attractive technologies for investment respectively.
However, while 83% of global firms have systematically implemented AI to support innovation in one or more use cases, only 45% have managed to translate this into business impact.
Those select companies that ultimately realise impact from AI become idea-generation powerhouses. They generate more than five times as many ideas than others and incubate more than twice as many minimum viable products.
“The best innovators develop a self-reinforcing, virtuous cycle. AI is a great example of this – more ideas mean greater likelihood of finding the best use cases for AI, and implementing AI helps generate more ideas,” says Michael Ringel, a BCG MD and senior partner and a co-author of the report. “Once the innovation cycle starts, it creates its own momentum and produces transformative competitive advantage.”