Organizational InnovationWhat qualities are shared by the candy and beverage company Cadbury Schweppes, Indian automaker Tata Motors, Caterpillar, Apple, Adidas, Toyota, and Christian Dior? According to the Booz Allen Hamilton Global Innovation 1000, they are but a few of the world’s relationship-centric innovators. By nurturing highly decentralized and knowledge-driven cultures—regardless of whether you are the earth-moving equipment giant, the nimble conceptualizer of the iPod Nano, or the German purveyor of quality, yet fashion-conscious, sportswear—these smart spenders get a higher return on their research and development (R&D) investments than many of their highly innovative peers.

Although there is seldom a simple relationship between an organization’s overall R&D expenditure and its corporate performance, adaptive innovation consistently leverages strategic relationships to uncover new innovative practices as well as reinforcing metrics such as the number and quality of patents controlled.

When you innovate, it is critical not only to engage in a broad-based scanning of the competitors, market, and business drivers but also to extend that scan into the larger environment and collective social intelligence.

Take Apple, for example. Do you really believe that Steve Jobs was the first to think of recording audio on a memory stick? On the contrary, for close to a decade, Sony enjoyed enormous success with the Walkman. It was by far one of history’s most successful product launches, executions, and extensions of a consumer products company. But it took Steve Jobs, the Apple DNA, and its relentless focus on the customer experience to not only put the Walkman out of business but introduce a new market maker in the iPod. By understanding the limitations of the Walkman—compared with the expansive ability to deliver hundreds, if not thousands, of CDs, individual songs, and even more recently, television shows and entire movies on the iPod—Apple disrupted the value chain between content creation (the artists), content delivery (traditional music industry channels), and the enormous end user of audio and video content.

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