What defines innovation? Is it the creation of new ideas or the commercialisation of them?
Is it something that comes from a lone entrepreneur working tirelessly on a ground-breaking project or is it something that can be embedded within a company culture?
Some people would say all of the above counts as innovation. Measuring it, however, can be a little trickier.
Get business news first
Sign up to SmartCompany’s daily newsletter
Forbes uses an investor-led method to define the innovation level. The more investable and commercially viable the innovation, the higher it ranks.
It uses an ‘innovation premium’ – a gauge of how much investors expect a business’ value to rise based on future new products, services and markets.
As Forbes states: “Innovators ask provocative questions that challenge the status quo. They observe the world like anthropologists to detect new ways of doing things.”
“They network with people who don’t look or think like them to gain radically different perspectives. They experiment relentlessly to test new ideas and try out new experiences.”
“Finally, these behaviours trigger new associations which let them to connect the unconnected, thereby producing disruptive ideas.”
So which are the most innovative businesses in the world and what can Australian businesses learn from them?
Here are Forbes’ top five, along with the story behind the innovation of each.
1. Salesforce, US
12-month sales growth: 37.7%
Innovation premium: 73%
In an increasingly crowded cloud computing market, Salesforce has, according to Forbes, stood out from the rest to become not only an industry but global innovation leader.
But how? Fundamentally, the company has strained every sinew to stay ahead of the curve, even if that means making the occasional failure.
CEO Marc Benioff was always keen to push ahead “big ideas” from within, taking on inspiration from customers, partners and the marketplace. The business recently changed tack, realising that it couldn’t do it all itself, it actively sought out other innovators to partner with.
Benioff watched a YouTube video on how social media monitoring was becoming increasingly important for businesses. This inspired him to spend big money on acquiring two start-ups – Radian6 and Buddy Media – to create a new division within Salesforce to do exactly this.
He tells Forbes: “Innovation is a continuum. You have to think about how the world is evolving and transforming. Are you part of the continuum?”
2. Alexion Pharmaceuticals, US
12-month sales growth: 46.5 %
Innovation premium: 72.3%
Alexion was created in 1992 after a casual chat in a US grocery store between friends Leonard Bell and Steve Squinto when Bell mentioned he wanted to launch his own biotech company.
After initially struggling to attract funding, Alexion was on the brink of closure when Bell realised that innovating on unusual diseases and little-known medical niches could prove profitable. Subsequently, the business got $5 million to aid pig organ transplants for humans.
Alexion’s real cash cow has been Soliris, launched in 2007, which treats a rare cause of anaemia. The drug has raised the business $1.1 billion in revenue, at a net margin of 22%.
A key part to the business’ success is pricing its innovation highly. Soliris costs a whopping $440,000 per patient per year, but because it operates in a niche and is highly effective, private health insurers around the world – including Australia – shell out for it.
“We focus on patients with absolutely devastating disorders that are also either lethal or life-threatening,” Bell tells Forbes. “They’re also very, very rare, so they get no attention from anybody.”