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The World's 50 Most Innovative Companies [for third year in a row]


Not so long ago, no conversation about innovation would be complete without the story of 3M inventor Art Fry’s eureka moment that led to the Post-it Note. Today, that tale, which verges on cliche, has been almost universally replaced by the story of the iPod, Apple’s omnipresent icon of design.

It should come as little surprise, then, that Apple tops the BusinessWeek-Boston Consulting Group’s list of the World’s Most Innovative Companies for the third year in a row. That sort of staying power speaks volumes about the sort of innovation that matters today. Unlike the Post-it Note, which proves the value of lone inventors, the iPod epitomizes today’s innovation sensibilities. These include the ascendance of design, the focus on the user’s experience, and the power of ecosystems: The iPod is a hit because it works so seamlessly with the iTunes software. The company’s much-anticipated iPhone, which launches in June, will likely keep Apple high on our list next year too.

There are some surprises this year, including four new companies in the top 25—Disney, Boeing, Genentech, and Cisco Systems. In other cases, the resilience of corporate reputation was surprising. Wal-Mart Stores suffers from slow growth, but still commands respect for its supply-chain innovations. Dell wears the brand halo of an innovator for its efficient direct-to-consumer model, though it suffered through a management shakeup and fell from No. 14 to No. 22. And what of 3M? It fell too, from No. 3 in 2006 to No. 7 this year.
2007 Rank
2006 Rank
Company Name
HQ CITY
HQ COUNTRY
HQ CONTINENT
STOCK RETURNS
2001-2006*
REVENUE GROWTH
2001-2006*
MARGIN GROWTH
2001-2006*
PATENT CITATION
INDEX**

11APPLE  Cupertino, CAUSANorth America50.60 29.21  NA*** 34
22GOOGLE  Mountain View, CAUSANorth America NA^  NA^  NA^ 1
34TOYOTA MOTOR  ToyotaJapanAsia20.50 8.30 5.21 361
46GENERAL ELECTRIC  Fairfield, CTUSANorth America1.11 5.06 1.36 155
55MICROSOFT  Redmond, WAUSANorth America0.83 11.85 -3.04 174
67PROCTER & GAMBLE  Cincinnati, OHUSANorth America12.20 11.69 3.70 105
733M  St. Paul, MNUSANorth America7.77 7.35 5.49 57
843WALT DISNEY CO.  Burbank, CAUSANorth America11.71 6.29 7.35 8
910IBM  Armonk, NYUSANorth America-3.48 1.26 4.97 94
1013SONY  TokyoJapanAsia-2.62 0.60 1.14 418
1120WAL-MART  Bentonville, ARUSANorth America-3.35 9.79 3.54 0
1223HONDA MOTOR  TokyoJapanAsia13.61 7.40 0.38 377
138NOKIA  EspooFinlandEurope-9.24 5.68 4.37 287
149STARBUCKS  Seattle, WAUSANorth America30.04 24.07 1.51 2
1522TARGET  Minneapolis, MNUSANorth America7.55 8.32 4.23 0
1616BMW  MunichGermanyEurope4.30 4.96 -1.23 84
1712SAMSUNG ELECTRONICS  SeoulSouth KoreaAsia36.24 4.60 8.07 1000
1811VIRGIN GROUP  LondonUnited KingdomEurope Private  Private  Private 0
1917INTEL  Santa Clara, CAUSANorth America-7.57 5.92 12.55 216
2021AMAZON.COM  Seattle, WAUSANorth America29.53 27.96  NA*** 0
2170BOEING  Chicago, ILUSANorth America19.91 1.12 -4.23 59
2214DELL  Round Rock, TXUSANorth America-1.59 12.87 -5.24 16
2327GENENTECH  South San Francisco, CAUSANorth America24.50 34.85 32.40 4
2418EBAY  San Jose, CAUSANorth America12.45 51.47 4.91 1
2528CISCO SYSTEMS  San Jose, CAUSANorth America8.58 5.02 205.04 20
2630MOTOROLA  Schaumburg, ILUSANorth America10.10 7.40  NA*** 466
2725SOUTHWEST AIRLINES  Dallas, TXUSANorth America-3.57 10.34 -1.98 0
2815IDEO  Palo Alto, CAUSANorth America Private  Private  Private 1
2819IKEA  HelsingborgSwedenEurope Private  Private  Private 0
3031DAIMLERCHRYSLER  StuttgartGermanyEurope4.22 -0.16 19.00 181
3142HEWLETT-PACKARD  Palo Alto, CAUSANorth America16.70 15.17 10.47 258
3229NIKE  Beaverton, ORUSANorth America13.21 9.58 3.78 822
3340BP  LondonUnited KingdomEurope11.80 8.52 3.49 2
3424RESEARCH IN MOTION  WaterlooCanadaNorth America NA^  NA^  NA^ 34
35 NR AT&T  San Antonio, TXUSANorth America3.00 6.55 -7.27 16
36 NR CITIGROUP  New York, NYUSANorth America6.70 5.57 3.81 1
37 NR VERIZON  New York, NY,USANorth America0.20 5.58 -6.80 5
3867ROYAL PHILIPS ELECTRONICS  AmsterdamThe NetherlandsEurope-1.10 -3.56  NA*** 97
39 NR NINTENDO  KyotoJapanAsia7.80 2.60 0.30 8
4084COSTCO WHOLESALE  Issaquah, WAUSANorth America4.07 11.57 -1.44 0
41 NR VOLKSWAGEN  WolfsburgGermanyEurope14.66 3.44 -18.88 4
4255PFIZER  New York, NYUSANorth America-5.89 8.56 -4.36 15
43 NR BEST BUY  Richfield, MNUSANorth America8.86 10.71 3.20 0
4453JOHNSON & JOHNSON  New Brunswick, NJUSANorth America4.14 10.02 1.33 31
4587AMGEN  Thousand Oaks, CAUSANorth America3.89 28.86 -4.33 1
46 NR MERCK  Whitehouse Station, NJUSANorth America-1.20 -13.86 6.16 7
47 NR NEWS CORPORATION  New York, NYUSANorth America11.00 14.19 4.18 0
48100MCDONALD'S  Oak Brook, ILUSANorth America12.87 7.74 1.61 0
4985LG ELECTRONICS  SeoulSouth KoreaAsia NA^  NA^  NA^ 394
5051EXXONMOBIL  Irving, TXUSANorth America16.75 15.03 9.09 17




Methodology
The BusinessWeek-Boston Consulting Group 2007 list of the World’s Most Innovative Companies is based on a senior management survey about innovation and was distributed electronically to executives worldwide in late 2006. In October, surveys were sent to the 1,500 largest global corporations, determined by market capitalization in U.S. dollars, with instructions to send the survey to their top 10 executives in charge of innovation. We also distributed the survey to senior management members of the BusinessWeek Market Advisory Board, an online panel consisting of BusinessWeek readers, and via the Knowledge@Wharton e-mail newsletter. Survey participation was voluntary and anonymous, and the survey closed in March, 2007. The survey consisted of 20 general questions on innovation and an optional 12 questions focused on innovation metrics.

A total of 2,468 executives answered the survey. Of those indicating their location, 77% were from North America, 12% were from Europe, and 9% were from Asia or the Pacific region. A larger share of North American voters this year may explain some movement in the rankings of some companies on our list.

Analysis and data provided in collaboration with the innovation practice of The Boston Consulting Group, BCG-ValueScience, along with Standard & Poor's Compustat data and company reports, and the Delphion patent database. We broke ties by comparing one-year total shareholder returns between 12/30/05 and 12/29/06. In ties between a public and a private company, we assumed the private company's shareholder return to be equal to the average return of the public companies on the list, or 19.6%. Ties remain only where two or more private companies receive the same number of votes.

*Stock returns are annualized,12/31/01 to 12/29/06, and account for price appreciation and dividends. Compound growth rates for revenues and operating margins are based on 2001-2006 fiscal year data as it was originally stated. Operating margin is earnings before interest and taxes as a percentage of revenue. Where possible, quarterly and semi-annual data are being used to bring performance for pre-June year ends closer to December 2006. Financial figures are calculated in local currency.

**The patent citation index reflects how often the company's patents filed over the past five years have been cited as a basis for other innovation. The number is calculated by adding, for all patents filed between 2001 and 2005, the number of times each patent or application has been cited or mentioned by other patents up until December 31, 2006. We then adjusted the citation counts for patent age, since older patents have a greater likelihood of being cited than more recent ones. The age-adjusted counts were then indexed to a linear scale

***Calculating five-year compound annual growth rate for operating margins was not possible when either figure was negative.

^Insufficient data.



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