This post is inspired by an excellent post with a very similar title and purpose but different angle. Jay Baer just a few days ago looked at a Comparison of 100 Top Companies on Social Business and Corporate Culture. He took data from Dachis’ Social Business Index for the most social businesses and correlated it with FORTUNE’s 2012 list of 100 Best Companies to Work For to see if being a good place to work for impacts Social Business or being employee-centric inherently impacts the social business aptitude of the company. I thought he did a fine job and wondered about the correlations with Innovation.
I started with a point that I recalled from a recent research report by Arthur D Little, the management consultancy, entitled The Future of Innovation Management: The Next 10 Years (free download of report). My premise has always been that innovation is essentially a social activity and better delivered through collaborative effort. The study further posited that this is a major trend in future innovation management efforts.
Social networking is a major converging trend where companies will become more flexible and creative in defining the way to interact with customers, more sophisticated in open innovation approaches and focus more on the role of employee engagement in innovation. Arthur D Little, 2011
Innovation efforts and social business are increasingly intertwined
As with Jay Baer who’s core premise is that culture impacts social business propensity, so too did a recent study by Booz & Co (The Global Innovation 1000 – Why Culture Is Key) in relation to innovation and they also specifically point out “the growing power of social media as a rich source of innovation on the Internet”. I thought this was a meaningful line of correlation (culture influences social business which influences innovation). 3M applies social business to product development and MIT Sloan have looked at Creating Employee Networks That Deliver Open Innovation (registration required) including the use of social business practice. This study by PwC on Decoding Innovation’s DNA also finds great links.
What I was trying to find
I was trying to explore the correlations between innovation and social business using a similar methodology to Jay Baer. I used a Forbes list – The world’s most innovative companies. I chose this over the list created by Booz & Co mentioned above which is a very prominent annual list, for the very conclusions they reached: their list of 1000 businesses was based predominantly on R&D spend and this had little bearing on actual innovation effectiveness. The Booz & Co report also had a shorter list of 10 companies which they reached by asking executives to vote on which firms they think are most innovative. Forbes’ list on the other hand specifically goes against this latter methodology by relying on investors, who vote with their wallets, to identify the companies they expect to be innovative today and in the future (more here on their methodology). I thought for comparison purposes it would be useful to summarise Jay’s findings alongside mine.
NOTE: Here is a link to a Google Spreadsheet with a list of the companies and a comparison against the Social Business Index companies that I used as a basis for my numbers and analysis.
Note the same caveats mentioned by Jay Baer in terms of the shortcomings of the analysis apply. Yet similar to Jay Baer’s line of questioning, I wonder if being innovative inherently impacts the social business aptitude of the company and vice versa, did being more social mean a business would become more innovative. I’m also very interested in other influences, the flow of influences and what comes first (Jay’s chicken and egg paragraph covers similar). For example, earlier I wrote that culture influences social business which influences innovation in relation to the Booz & Co study which found that culture played a far greater role on innovation capability than R&D spend. But I wonder to what degree social business influences culture which in turn influences Innovation and that finally influences performance. Now that would be a study worth carrying out because there is no way of telling from this little exercise – see my little diagram below, perhaps the base hypothesis of a future study if I ever get the luxury.
Despite the analytical shortcomings of this entire approach I believe there is some value in having done the exercise. And in line with the findings in Jay’s work, there appears at least to be an even stronger correlation between being innovative and being deft at social business and vice versa. Its a tenuous correlation I know and would require many years of tracking and closer scrutiny to verify (The Social Business Index is after all only about 6 months old and indeed the practice of Social Business is itself only in its infancy). I also think that innovation and social business capability and ultimately the impact on a firms performance to produce ever increasing returns is the more interesting line to track (with all due respect to Jay :).
I’d love any and all feedback, good or bad, on where I went right, wrong, etc.