Spoiler: Innovation culture is highly correlated with better performance

I spoke in my last blog post about the barriers that top execs identify in implementing an innovation culture.

That post pre-supposes that an innovation culture is correlated with business success. But is that true? That’s what some recent Accenture research looked at.

What did we find?

Our research team used a natural language processing system to analyze the text of reviews of companies left on the Glassdoor platform. They sampled reviews of companies with revenues of over $3 billion — nearly 300 companies in all.

The team clustered the reviews by looking for words such as “risk-taking,” “collaboration,” and “agility”. These words themselves come from Accenture research where they are associated with innovative companies.

The results were used to calculate an Innovation Culture score for each of the companies. We then mapped that to the firm’s S&P CapitalIQ revenue for the last five years.

The results? Software and platform companies — companies such as Google, Facebook and Amazon — lead the charge. Their senior executives explicitly credit experimentation for their success. Google’s Eric Schmidt says Google creates more “at bats per unit of time,” than any other company. I believe that’s a baseball metaphor that implies that the more times a batter faces the bowler (or pitcher as they call them), the more chances the batter has to score a run.

The interesting thing about this metaphor is that in baseball, the very best batters hit only 30% of the balls they face. The best in the world succeed only 30% of the time. This echoes my last blog, in which I said that companies need to take those risks, knowing that they will pay off eventually … but that you need to get through the 6 out of 10 failures first.

At Amazon, Jeff Bezos is reported as saying their success is because of “how many experiments we do per year, per month, per week, per day.”

Of course, culture is only one factor in innovation. We also have to consider the competitive landscape, barriers to entry and how disrupted the industry is. There is also a correlation between innovation success and the number of patents awarded to a company, and R&D spend.

Culture plays an important role, though.

Click/tap on image to enlarge

This diagram shows that companies with higher innovation culture scores in their industries outperformed their peers in revenue growth in the years 2015-2020.

These Innovation Leaders demonstrate a “growth gap” of 47% over the industry as a whole. If we extrapolate that to 2023, that’s a whopping 115%.

In addition to the software and platform firms listed above, banks are going “digital first”. Barclays has a strong emphasis on innovation and it shows in their results.

The full report makes for interesting reading. You can download it here. I’d love to hear about how your organization is driving an innovation culture, and what you think the barriers are.