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When it comes to innovation, large organizations have a reputation for being too risk-averse to make it happen.
Someone must have forgotten to tell that to the firms on this year’s list of the World’s Most Admired Companies (WMAC). In our new survey of these impressive organizations, product and service innovation was their number one growth strategy.
And it seems to work. Our research shows that 60% of the most innovative companies on the 2024 WMAC ranking—the ones we call our WMAC Innovation Leaders—have grown by more than 10% over the past few years. Less than half of their less-innovative peers can say the same.
Innovation delivers tangible business value through new ideas, methods, products, or services. It’s about fostering change and transformation, both incremental and radical, to drive growth.
We asked the WMAC Innovation Leaders which tactics they’re using to promote innovation within their firms, and our experts at Korn Ferry have added context to these different innovation strategies.
A strong majority (70%) of the Innovation Leaders invest more in research and development than their less innovative peers. There’s a good reason for that: not only does R&D help create ideas for new product and service offerings, but it helps businesses find more efficient ways to operate.
Even when new product or process ideas hit a dead end, innovative companies continue investing in R&D because it prevents them from staying put. “They know if they remain static, somebody else will come along and copy them— so they keep pushing the boundaries to remain leaders in their categories,” says Wil Schoenmakers, Senior Client Partner and Head of Global Consumer Consulting at Korn Ferry. It's a good approach, he continues, because we know leaders who expand existing category boundaries by introducing new products and services can create stronger and more meaningful relationships with consumers and customers.
By now, most business leaders know that AI isn’t just a flash in the pan. In recent Korn Ferry research, 82% of CEOs and senior leaders said they believe AI will have a significant or even extreme impact on their business.
They’re right—and the world’s top companies know it. A large portion of WMACs are investigating, experimenting, or actively using AI to their advantage. Crucially, WMAC Innovation Leaders are doing so more than other businesses.
More than half of WMAC Innovation Leaders are creating dedicated teams that leverage AI capabilities across business functions—compared to less than a third of their peers. They are giving employees the time and space to experiment with AI while working to alleviate any fears they might have about the tech (for example, that it will soon come for their job). Mike Solomons, Inclusive Innovation Solutions Leader and Senior Client Partner at Korn Ferry, says this can also be a good way to discover AI’s true potential in specific business functions.
“Knowing they have the ability to experiment with it in a sandbox is important,” he says. Companies should have a ‘promotion mindset’ rather than a ‘prevention mindset’ during times of technology upheaval, he argues, as growth can suffer otherwise at the expense of maintaining the status quo.
Making the choice to prioritize innovation can have huge rewards, but there’s always the risk of failure. The World’s Most Admired Companies accept that innovation projects—which could be anything from an incremental process improvement to a radical, disruptive product innovation—will sometimes be unsuccessful.
Risk is an inevitable part of innovation, and it should be embraced, not feared, says Schoenmakers. Be skeptical when companies say they have a 95% success rate with their innovation projects. “They’re operating in a tunnel instead of a funnel,” he says. These companies are pushing through projects that involve little risk—and as a result are likely to have little impact in the market.
The most innovative organizations take risks, refine what they’re doing, and recognize that sometimes it doesn’t hit the sweet spot, Schoenmakers explains. “You have to be willing to learn, optimize, adjust, and pivot.”
At many organizations, responsibility for driving innovation sits solely with the CEO and senior executives, but that doesn’t mean this is the best practice. The most innovative companies give employees across the business opportunities to contribute to innovation processes—and some even extend those opportunities to suppliers and customers. Encouraging a more inclusive approach to innovation tends to yield richer and more diverse solutions.
Eric Tachibana, Senior Client Partner at Korn Ferry, says companies sometimes forget that front-line staff can often provide valuable insights to spur innovation. “They're the ones that live with the customer day to day, so they have the best spider sense for what’s going on,” he says.
Just as there are checks and balances in other parts of the business, WMAC Innovation Leaders regularly measure innovation programs to determine if they’re having an impact or need fine-tuning.
What’s more, they recognize the need to incentivize employees to develop and apply these programs. “I see a lot of frustration among employees asked to provide ideas that go nowhere,” says Tachibana. While companies will host innovation think tanks and reward great ideas, he says they often have no genuine intention of investing in these innovations or committing to enterprise-wide change.
To alleviate bottlenecks in innovation, companies must consider all the people across a workforce who may be disrupted by any changes. “The people who are maintaining the current business see change as a threat—so it comes down to what they’re rewarded on,” says Solomons. Financial incentives that encourage employees at every level to embrace innovation are always welcome, notes Solomons, but there are also non-monetary rewards that can motivate effectively too.
Leading companies understand the value in connecting people with diverse ideas and experiences who can challenge the status quo. “So much of innovation involves expanding your spotlight and going into areas that are typically occluded,” says Solomons. “The best innovators know they need to disrupt their own ideas because that’s a growth mindset.”
Still, he says most companies don’t pay enough attention to diverse-by-design teams, even though research shows they are more effective than homogenous ones in capturing new markets and seeing ideas become marketable products. Innovative companies put a priority on creating diverse teams, he says, and they provide the tools and coaching needed for them to thrive.
“One of the critical inputs into having an innovative culture are inclusive, diverse teams—with a double emphasis on inclusive,” adds Tachibana. And this starts at the top. “You can bring in diversity, but if you have a non-inclusive leadership team making decisions the way they always have, it ruins any benefit to those diverse voices.”
As the World’s Most Admired Companies show, when innovation is prioritized in the workplace in consistent, measurable, and sustainable ways, it can improve business functions all around and fuel growth.
But of course, innovation isn’t the only growth strategy of the WMACs. Discover all the different ways they’re fueling growth—and how you can, too. Or check out our webinar, where the World’s Most Admired will share their growth secrets.
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