Innovation Awards

In 1897, James Henry Atkinson, a British inventor, came up with the notion of combining a small piece of wood, a wire spring, and a piece of cheese. He called it the "little nipper."

Procter Brothers, the Welsh company that bought the patent from Atkinson, has been fortunate that, in the 107 years since, no one has come up with a more efficient means of dispatching rodents. In fact, the company still commands 60% of the British market. For nearly every other business, though, building just one better mousetrap every century is not enough. To stay ahead, they must constantly search for the next idea that will best the competition.

Of course, successful innovation isn't simply a matter of coming up with ideas. It's the ability to nurture those ideas, make them work, and bring them to market that distinguishes a truly innovative company. With that in mind, Fast Company and global professional-services firm Monitor Group present this inaugural version of the Fast Company/Monitor Group Innovation Scorecard.

"Competitive advantage roots best in soil nourished by disciplined, sustained innovation -- in assets, their configuration, the offerings they make possible, and the business models that support them," says Mark Fuller, Monitor's chairman and CEO. "But such discipline is impossible to sustain without rigorous -- and relentless -- efforts to measure and improve performance along all relevant dimensions."

The Innovation Scorecard will appear every three months in Fast Company, each time tapping the most innovative companies in one or two key industries. The project represents the most comprehensive attempt to date to quantify corporate innovation efforts. Just as important, each package will present compelling models for innovation strategy and culture.

Our first industry: telecommunications and networking equipment. Why telecom? Because it is one of the most dynamic and troubled sectors, a business where innovation is central to survival. We assessed 119 public companies on three crucial criteria: First, how they fared over the past five years -- a rocky time for the telecom industry, to be sure. Next, how do the next five years look? How have companies invested in R&D, and what are expectations for growth?

Finally, what is their capacity for innovation? It's one thing to have built a better mousetrap and another to have a new trap in the works. But the true measure of a company's innovation is less about wood, wire, and cheese than it is about culture. It is difficult to institutionalize innovation. The notion of assigning order to a chaotic process seems contradictory. Yet companies such as Qualcomm thrive on an uneasy equilibrium between creativity and bureaucracy.

You'll find this a startling list. Nokia, which famously missed the consumer shift to flip phones, has been out of favor on Wall Street for several years; its emergence at the top of our list attests to the powerful innovation engine that drives the company. Polycom and Plantronics, both relatively unsung, are introducing one great new product after another. Think of this, then, as a scorecard of the future: If you want to know who will be leading the telecom sector a few years from now, you have to understand who the top innovators are today.

Your Customer Is Your Crystal Ball

Juniper Networks

• Sunnyvale, California
• Return on invested capital: 4%*
• R&D spending/revenue: 25%*

Fast take: "Be careful which customers you choose," says Juniper marketing vice president Christine Heckart. Juniper courts customers at the technology frontier rather than devoting its energies to updating legacy systems. Says Heckart: "We pick customers higher up the mountain, companies that are facing the problems first." Identifying those cutting-edge problems, she says, allows Juniper a glimpse into the future.

How it works

In the late 1990s, ISP provider UUNET had a problem: 100% growth per quarter. While that may seem a nice problem to have, the company was headed for a train wreck, with routers stacked to the ceiling. Juniper focused on building a cheaper, faster, more stable router based on serverlike architecture. The result was a solution that used hardware to do the work of outdated software. Heckart calls it an "appliance approach," which provided the basis for a broader product offering. In 2003, Juniper again stationed itself at the leading edge by launching a global initiative to standardize Internet-protocol architecture. So far, the Infranet Initiative has signed up 25 companies, including Oracle, Microsoft, and AOL.

Challenges

The Internet infrastructure business has been slower than expected in 2004, with customers such as AT&T cutting services and delaying network upgrades. Meanwhile, Cisco hasn't taken kindly to Juniper's entry into the access-router market, responding with aggressive price cuts. -- Lucas Conley

* Five-year averages. Data sources: S&P Compustat, Factiva, Monitor Group analyses.