We knew our ranking of the world's 50 most innovative companies would be controversial. For an unassailable list, we would have used some dull quantitative metric, like number of new patents. Instead, we polled experts, researched products, and spent way too much time debating Madonna's cultural relevance (see No. 33, Live Nation). By focusing more on big ideas than the bottom line, we invited controversy. To keep the debate rolling, we grilled innovation specialist Dev Patnaik of Jump Associates, a consulting company that has developed new products and processes for such big players as Nike, HP, and NBC.
Fast Company: First of all, in the interest of full disclosure, your company has worked with several of the companies on our list, yes?
Dev Patnaik: Jump does a lot of innovation strategy work. I look at the list of the Fast 50 and maybe a third of these companies are or have been our clients. We have strategic relationships with GE, Nike, Target, HP. Obviously, business is a constantly shifting landscape, so if a car company wants to know what comes after SUVs, we help them figure it out. You need the big product ideas, but we also think in terms of metrics, processes, and culture. You need seeds, but you also need soil.
FC: So, in your opinion, which companies have the big ideas — the seeds and the soil — but still got left off of our list?
DP: I was surprised that JetBlue didn't make it, even though they hit a rough patch a while back. And Virgin Atlantic — they're constantly trying to pioneer new service capabilities. They say, "Why can't the power outlets on airplanes looks like the plugs in your house?" Virgin innovates on a larger scale, too, with its work on biofuels and with Virgin Galactic — space tourism. But it's also the way in which it innovates. People don't pay attention, but believe it or not, Virgin actually innovates through lawyers and accountants. If you look at Richard Branson's top people, they're all barristers. Frances Farrow, head of Virgin USA, is a lawyer. Virgin will cut a deal with a mediocre company, but the real innovation happens in how it sets up that deal and exerts control over a big company like Sprint — it forces a relationship that works for the company. So it has product innovation on the ground but also process innovation.
FC: Are there companies on our list that you feel don't have the product or process innovation to merit the distinction?
DP: For starters, Chipotle. I think it's really cool, but I think it's cool in the same way as some of these other folks: It's a company that is an innovation in itself, as opposed to a company that innovates. Whole Foods, too, had a very innovative premise and they're riding on that premise. It invented supermarket pastoral — sounds almost like a new fiction genre — but Tesco is doing more interesting stuff on the ground. If you get credit for having one big visionary idea, then why isn't Starbucks on the list? Then I want to see FedEx.
FC: That's a valid question, and it's something we agonized over — you know, is one big idea enough, especially if it's semi-untested? Is it important that a company is perennially innovative or that it has had a great idea in the last year?
DP: Right. Like take GE. It did some amazing stuff maybe four or five years ago and now it's like, "What have you done for me lately?" GE is coasting on the Ecomagination projects, but it's more buzz than substance. Internally — because I know what's going on behind the scenes — it's like, "Let's kick it up a notch." Beth Comstock just got renamed CMO and head of growth ventures a few days ago, which is phenomenal because she was the one responsible for much of the innovation. GE is back in the game.
FC: Are there other large, older companies on our list that could have become these slow monoliths but instead have managed to stay in front of the field?
DP: Sure. There are the Fortune 500s, like P&G and IBM. IBM defies Clayton Christensen's whole thing — that an organization gets good at one thing and that prevents it from getting good at another thing or adjusting to new paradigms. And P&G is always asking the big, forward-looking questions, like "How are people's fears about superbugs going to change what we're doing over the next 10 years?"
You put Toyota all the way down at 39, but I'd put them in the same tier as IBM. Toyota is innovative not just for the Prius, which is buzzworthy, but because the company points at a fundamental point about innovation, which is that it's so much about execution. Some companies are like, "I'll make crappy cars that are dropping parts on the road, but I'll be innovative." The button I have on my Prius is exactly the same button that's in the Lexus, because Toyota has found a way to make a high-tech, beautiful part, and then roll it out en masse for its entire fleet. The Toyota Sienna has more American-made parts than a Ford Mustang, which also signals that something really cool is going on.
FC: We put Toyota in the bottom half because its quality ratings have been slipping lately. It's funny that being in the 39th position is almost seen as a slight to a company like Toyota, while many smaller companies are thrilled just to be on the list. Who are some smaller players that are doing interesting things?
DP: Well, you have Nintendo, Amazon, Herman Miller — companies that are uniquely cool and doing great stuff on a slightly smaller scale, although it's not clear whether it's going to sustain for a century. And then you have Current TV and AKQA, which I would label the "company as experimental test case" — an interesting blip to pay attention to.
FC: Right. Well, as for AKQA, we debated whether to include an "old school" ad agency, a company like Goodby or Crispin that is still focused on traditional media buys but consistently invents great TV and radio campaigns, or to look at agencies that are pioneering in the new media space — you know, breaking the mold.
DP: Well, at Crispin Porter, they are using old channels and new channels. I would put an agency like TBWA\Chiat\Day in the IBM endurance category. In the '80s, they hit with their Absolut strategy, so there's a vodka ad on the back of every magazine you pick up. Then a decade ago they came up with Apple's "Think Different" campaign. And now it's the Snickers and Skittles commercials, which are almost wackiness for wackiness sake. But Chiat has been able to create compelling narratives for decades. They've got it in their DNA.
FC: I agree. Everyone is fretting over this exodus of creative talent that Chiat has been experiencing over the past few months, but they've been at it for a long time. They'll recover.
DP: We've actually worked with Chiat, BBDO, and Goodby. Oftentimes, ad agencies are called in to wrap a narrative around something that doesn't exist. With Goodby, we got pulled in because Saturn was coming up with cool cars but the dealerships weren't different. Every dealership in this industry is trying to put in couches and do the Starbucks thing. They're trying to make it feel homey, but no one is under the impression that it's their home. It takes you back to when you were 8 years old and you had to go to Aunt Millie's house for tea. Plus, the lack of transparency at these dealerships is galling. Now the Saturn showroom is more interactive and hands-on, and the salespeople are more like docents in a museum. It's about changing the basic script.
FC: It sounds similar to what BMW is doing with the Welt complex in Munich. Speaking of BMW...
DP: BMW is just so-so. What about Tesla? The electric car has been a running joke in the auto industry for decades. But Tesla is poised to actually make money selling these boondoggles. It helps that it makes a hot sports car that can hit 60 miles per hour in under 5 seconds. The company is likely to succeed where many others have failed because its leaders realized that the opportunity wasn't in making the most efficient electric car possible, but instead in making a lust-worthy sports car that just happens to be electric.
FC: We've taken some flak for not being global-looking enough. Are there any international companies we might have missed?
DP: C.K. Prahalad's book The Fortune at the Bottom of the Pyramid got a lot of people talking about economic development for the poorest markets. Unfortunately, not many people started acting. But Taj, an Indian company that owns a huge number of hotels, paid attention and hired Prahalad to help them create a bottom-of-the-pyramid strategy. The result, called Ginger, is a chain of self-service microhotels that are affordable to a wider swath of Indian travelers than almost anything else on the market. They offer a wide variety of amenities, including free Wi-Fi, and rooms cost less than 1,000 rupees — or $25 U.S. And Taj is bringing this model to America, targeting the upper-middle range of the market. The status quo should start getting ready for an onslaught.
FC: Who else should have been included that we might not even have considered?
DP: As far as cool companies in the stealth category: Commerce Bank. It's this great thing where the founder owned, like, five Burger Kings and he had this realization that if he ran his fast-food business the way most banks operate, he'd be out of business. He knew that all people really want from a bank is convenience, so he reinvented the banking game. They're open seven days a week until 8 o'clock. It's so smart.
And Safeway. Part of what makes Safeway innovative, paradoxically, is that it's as mainstream as businesses come. It's America's market. So when it makes a commitment to a movement, the whole country takes notice. Their O brand has taken natural food from the niche to the mainstream, and at affordable prices. I think Safeway did for organic food what Apple did for MP3s — they took a fringe weirdo thing and figured out a way to make it palatable to the masses. Now people are arguing over just how organic organics really are, which is crazy, because up until recently, we were all eating Kraft and Hungry Man dinners.
FC: Last question: What's the most innovative company on our list?
DP: In the innovation space, Ideo is a champ.