Amidst a backdrop of global economic uncertainty, innovation has emerged as a paramount corporate objective for 2023. According to a recent report published by Boston Consulting Group (BCG), an overwhelming 83% of African executives identify innovation as a top-three priority for this year, surpassing the global average of 79%. This notable increase of 21% from the previous year highlights a growing recognition of the critical role innovation plays in driving business success.
In a marked departure from the last economic downturn in 2009, when less than two-thirds of global companies deemed innovation a top priority and a mere 58% planned to increase their investment in it, the current landscape presents a stark contrast. Today, 66% of companies worldwide are planning to boost their innovation spending, with 42% intending to allocate over 10% more resources towards this endeavour.
BCG’s 17th annual report, titled “Reaching New Heights in Uncertain Times,” delves into the strategies employed by leading companies to bolster their commitment to innovation and build resilience in the face of economic uncertainty. Drawing on insights from over 1,000 global executives and an extensive innovation performance database, the report examines the correlation between innovation and corporate success.
“The connection between innovation, growth, and advantage is stronger than ever,” affirms Justin Manly, a BCG managing director and partner, and co-author of the report. “Companies that prioritise innovation and remain agile in their actions will continue to widen their lead and deliver exceptional returns.”
The report unveils the top 50 most innovative companies of 2023, wherein technology firms maintain their dominance, securing five out of the top ten spots. Apple, for the third consecutive year, reigns supreme at the top, followed closely by Tesla, which climbs three positions to claim second place. Amazon retains its position at third. Notably, nine new entrants have joined the coveted top 50 list this year.
In addition to the tech giants, international energy companies hold a significant presence among the top 50, possibly reflecting survey respondents’ concerns regarding climate change and their expectation of the energy sector to contribute creatively to the solution.
Geographically, the 2023 top 50 most innovative companies exhibit remarkable diversity, with roughly equal representation from North America and the rest of the world. Europe and Asia boast strong showings, while the Middle East makes its inaugural appearance on the list.
While African firms did not secure a place among the top 50 most innovative companies for 2023, their readiness to embrace innovation aligns with global standards. Serial innovators on the continent employ innovative systems that generate new value propositions and effectively address customer challenges. Industries such as transportation, durable goods, and materials stand out for their superior average innovation readiness scores. BCG’s innovation-to-impact (i2i) score, which evaluates innovation readiness based on over 70 best practices, demonstrates that companies with mature systems achieve up to 20% higher innovation output.
Climate and sustainability emerge as pressing priorities for 52% of African companies, slightly lower than the global figure of 60%. Early adopters who prioritise sustainability gain a competitive advantage in emerging markets and capitalise on the value created by this global drive. Such companies exhibit a more assertive approach to various aspects of their innovation systems compared to their counterparts.
BCG’s report further underscores the significant role innovation plays in driving business performance. Since 2005, the portfolio of the 50 most innovative companies identified by BCG has consistently outperformed the broader market in terms of shareholder returns, averaging a remarkable 3.3 percentage points per year.
Investment trends in technology reveal that African companies prioritise advancements in Artificial Intelligence (AI), robotics, and the Internet of Things (IoT).
“African companies prioritise tech investments in Artificial Intelligence (AI), robotics, and the Internet of Things (IoT),” explains Nihmal Marrie, a managing director and partner at BCG, Johannesburg.
As AI continues to expand the realm of innovation, investment priorities reflect this trend. In 2023, 66% of African companies are directing investments towards AI and machine learning, surpassing the global average of 61%. Notably, this figure exceeds investments in robotics and process automation by 7 percentage points, as well as investments in IoT and Edge technologies by a substantial 28 percentage points.
However, while 83% of global firms have systematically implemented AI to support innovation across one or more use cases, a mere 45% have successfully translated these endeavors into tangible business impact.
The select companies that achieve meaningful impact from AI emerge as powerhouses of idea generation, generating over five times as many ideas as their peers and incubating more than twice as many minimum viable products.
“The best innovators establish a self-reinforcing, virtuous cycle. AI serves as an excellent example of this phenomenon, as more ideas increase the likelihood of identifying optimal use cases for AI. Implementing AI, in turn, generates more ideas,” explains Michael Ringel, a BCG managing director and senior partner, and co-author of the report. “Once this innovation cycle gains momentum, it creates its own driving force and fosters transformative competitive advantages.”
As the business landscape continues to evolve, African companies are poised to leverage innovation as a potent tool to overcome challenges, drive growth, and secure a thriving future in a world of constant change.