Executive Thought Leadership

Innovation: Transforming the Way Business Creates

Innovation—defined here as the application of knowledge in a novel way, primarily for economic benefit—is becoming increasingly important for firms and governments. Business leaders value it as a competitive advantage. And government policymakers recognize that their economies will only prosper in an innovative environment.

To better understand the nature of innovation in business, the Economist Intelligence Unit (EIU), in association with Cisco, conducted an Internet survey of 485 executives from diverse industries and job functions around the world. The study provided insight into the drivers of innovation and their relative importance.

The second part of the study was a ranking of 82 of the world’s economies by innovation performance during 2002–2006, with a wider forecast to 2011. Top-level results include:

• Japan, Switzerland, the U.S., and Sweden are the world’s top four innovators among the 82 economies.
• Sizeable spending on R&D is likely to yield dividends in terms of new products and services. Among firms that have R &D spending equal to at least 5 percent of their revenue, 45 percent of respondents perform better than their peers; this compares with 35 percent of the firms that spend less than 5 percent of revenue on R&D.

A broad range of factors was found to make a country innovative, with the top determinants being technical skills of the workforce (92 percent of respondents) and the quality of the IT and telecommunications infrastructure.

For more information on innovation and how it can evolve your business, please refer to the full report from the EIU, Transforming the Way Business Creates (PDF). The overall study is one of three published in 2007 as part of a research program that arose from the EIU’s March 2006 “Foresight 2020”report sponsored by Cisco. This report highlighted a number of important changes to the world economy over the next 15 years. The principal trends the report identified—globalization, demographics, atomization, personalization, and knowledge management—will have a profound effect on the landscape of major industries and the inner workings of companies worldwide.

Three themes were developed into separate research projects: in addition to innovation, personalization and collaboration were studied. The results of each study are intended to stand independently and to fit together, describing from different vantage points the development of the interactions economy, in which customers, suppliers, workers, owners, and others go beyond mere transactions to exchange information for mutual benefit.