World's most innovative companies using AI to increase advantages

28 June 2023 Consultancy.uk 3 min. read

As the rate of technological change in the global economy gathers pace, companies are investing more and more money in innovation – particularly in artificial intelligence and automation. The trend comes as firms realise the companies who have already adapted to new digital technologies are outperforming the competition.

For 17 years, Boston Consulting Group (BCG) has been analysing the trends around investing in innovation, and its impacts on companies of all industries, to compile its annual Most Innovative Companies report.

The latest edition of the study – subtitled ‘Reaching New Heights in Uncertain Times’ suggests that even as firms look to shore up their balance sheets, in the wake of the pandemic, massive inflation and an economic slowdown, their appetite for sinking capital into new products has not declined.

In fact, despite the uncertainty of global markets, innovation rose as a top corporate priority for 2023.

World's most innovative companies using AI to increase advantages

BCG polled more than 1,000 global executives on innovation trends, as well as consulting its own global innovation performance database of more than 1,000 companies, to determine that 79% of companies still identify innovation as a top-three spending item on their annual agenda, with 66% saying they expected to increase spending.

This stands in stark contrast to BCG’s initial findings back in 2009, in the fallout of the Great Recession. Then, a 10% chunk did not identify it as a priority at all, while 26% only ranked it as a top-10 priority. The combined number of firms seeing innovation as so unimportant has since declined by 15%.

At the same time, the amount firms are willing to pump into innovation efforts has soared. In 2009, the number of leaders thinking they would bump up spending on new products by more than 10% that year was 26%. At the same time, 42% thought they would maintain the same level of spending, or reduce it. Now, though, 42% of leaders anticipate a more-than 10% spending increase, while only 33% said they would not increase spending at all.

Explaining why this might be, Justin Manly, a BCG managing director who co-authored the report, said, “The connection between innovation, growth, and advantage is stronger than ever. The companies that both prioritise innovation and make sure that they are ready to act will continue to widen their lead and deliver outsized returns.”

World's most innovative companies using AI to increase advantages

BCG’s report underscored the role innovation plays in driving performance. Since 2005, BCG’s portfolio of the most innovative companies has outpaced the broader market in shareholder returns by some distance. The 50 firms it identifies as leaders on innovation enjoy improved margins of 3.3% per year on average.

Most of those benefits have been realised by firms utilising the digital technology developed prior to the last few years. As firms see a new generation of artificial intelligence (AI) solutions which threaten to disrupt their respective markets even more this time around, many are determined not to be caught sleeping as a new set of opportunities present themselves.

This is reflected in the investment priorities of companies, with more companies prioritising spending on AI than any other form of technology. A 61% majority said they would be putting funds into developing solutions around machine learning – 15% ahead of the next-largest priority of robotics and process automation; the most dominant form of innovation from the last decade.

Meanwhile, interest in blockchains, Web 3.0 and synthetic realities like the metaverse seems to be dwindling. For all their hype – and continued insistence from some supporters that they are simply being ‘misused’ – early adopters have struggled to find workable business cases for them.