Asia’s most innovative

Asia’s growth story continues to turn heads with its booming national economies. But according to our analysis of high-performing companies around the world, Asian companies are also emerging as innovation powerhouses.

For the past three years, INSEAD has collaborated with Forbes Magazine and HOLT (a division of Credit Suisse) to compile our World’s Most Innovative Companies list. We rank companies on our list by their innovation premium — the difference between their current market capitalisation and a net present value of cash flows from existing businesses.

Based on our methodology, Asian companies claim 20 spots out of the top 100 on our list, compared to 43 from the United States and 36 from Europe. No doubt, urbanisation, industrialisation and demographics contribute to these companies’ extraordinary growth, but what makes them top innovators is their capacity to fully leverage three pillars of an innovative culture: People, Processes, and Philosophies (the 3Ps).

Highly innovative organisations build these 3Ps around five fundamental “discovery skills” that distinguish innovators from non-innovators. Innovators ask provocative questions that challenge the status quo. They observe the world like anthropologists to detect new ways of doing things. They network with people who don’t look or think like them to gain radically different perspectives. They experiment relentlessly to test new ideas and try out new experiences. Finally, these behaviours trigger new associations, which lead them to connect the unconnected and deliver disruptive ideas.

An organisation’s investment in and ability to foster these five discovery skills sets them apart in a fiercely competitive global environment. No surprise then that Asian companies on our list embed these five skills into their innovative cultures through key people practices, processes, and philosophies.

PEOPLE: Pony Ma

Mr Ma Huateng, or “Pony Ma”, is the visionary co-founder and Chief Executive of the Chinese Internet giant Tencent. Pony Ma exhibits the behaviours that mark other great innovators. He excels at challenging the status quo with his questions, actively engages in new experiences and diverse networks, and as a result, associates divergent ideas to generate new products.

In fact, Tencent’s original product, the QQ Messenger (then called OICQ), was born as Pony Ma immersed himself in Western technologies during a trip to the US. His willingness to expose himself to new environments and ideas, as well as the ability to combine his technological insights with the market dynamics playing out back home in China, led to Tencent’s initial breakout success. Pony Ma’s strong discovery-driven leadership style has guided his company beyond its first product to a nearly ubiquitous range of Internet offerings, including virtual goods, licensing, online games, search, social networking, peer-to-peer auctioning and online payments.

PROCESSES: Keyence

Keyence, a leading manufacturer of automation devices, expertly uses its 7,000 salespeople to drive insightful observations about how 50,000 customers use its products.

For example, Keyence sales executives at a customer’s noodle production lines observed that noodle quality was being compromised because of variable thickness. Through a finely tuned observation-to-feedback loop, the company immediately set out to modify its laser sensors to consistently gauge noodle thickness at 1/100th of a millimetre, thereby solving this troubling customer issue.

Thousands of observations like this gives Keyence the capacity to generate 25 per cent its revenue each year from products that outshine anything competitors can produce.

PHILOSOPHIES: Baidu

When Mr Robin Li founded Baidu over 13 years ago, he had no idea that search could be so profitable. By leaving a stable job at Infosee, he took a risk in starting Baidu with the hope to create a useful tool for budding Internet users across China.

Taking smart risks like this reflects a key philosophy that we noticed in the world’s most innovative companies.

Mr Li continues to take calculated risks time and time again, building Baidu into a US$54-billion (S$67-billion) company instead of taking billion-dollar offers from Google, Microsoft and Yahoo! because he believed in the company’s fundamental future potential.

Mr Li’s personal practice of this philosophy, along with his belief that every employee is responsible for innovation, helps Baidu successfully push into a wide range of additional Internet markets, including Baidu Knows (a Q&A service), Baidu Post Bar (message board) and Baidu Cyclopedia (online encyclopaedia).

In the past few years Asian companies have increasingly shown their Western peers that they deserve a seat at the innovation table.

By developing discovery-driven people, such as Tencent’s Ma, building company-wide processes that accelerate discovery skills like Keyence’s observation practices, and fostering philosophies of innovation like those of Baidu’s Li, we believe that Asian companies will continue to make impressive gains in the global innovation race.

ABOUT THE AUTHORS:

Hal Gregersen is The Abu Dhabi Commercial Bank Chaired Professor of Innovation and Leadership at INSEAD. Jeff Dyer is Professor of Strategy at Brigham Young University. Curtis Lefrandt is Vice-President, Product & Training at Innovator’s DNA.

* This is part of a weekly commentary series on Innovation that runs every Wednesday. To read the previous articles, go to tdy.sg/cominnovate.

ON THE LIST

* JAPAN stands at the top in the number of companies to make the list, not surprising given its hi-tech capabilities and sophisticated buyers. A total of 11 companies originate here, ranging from robots (Fanuc) and construction equipment (Kubota) to sensors (Keyence).

The others: Rakuten; Unicharm; Yahoo Japan; Smc; Nintendo; Secom; Kao; Daikin Industries

* CHINA comes next, with five companies. Internet behemoths Baidu and Tencent come as no surprise, but meatpacker and pork producer Henan Shuanghui is a testament that innovation can occur outside of the hi-tech world.

The others: Kweichow Moutai and China Oilfield Services.