Identifying Innovative Companies

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Are creative geniuses like Steve Jobs or Jeff Bezos just born that way, or did they develop those skills by pursuing a wide variety of different activities? And what are the sorts of things that innovative companies do that other less-creative companies don't do?

Those are just a couple of the questions that were addressed at a recent Harvard Business Review webinar with professors Clayton Christensen and Hal Gregersen. The two academics have spent the past six years studying great entrepreneurs in order to better understand creativity and innovation. Ultimately, they interviewed 100 leading entrepreneurs and more than 5,000 executives in order to figure out how innovators "differ from other executives and entrepreneurs." Their findings might surprise you.

Innovators are not just born that way
Perhaps the most remarkable insight from their research is that "innovative entrepreneurship is not a genetic predisposition, it is an active endeavor." In other words, we can learn how to become more creative and innovative, and are not constrained by our genes. Christensen and Gregersen provide research that shows that one-third of our creative ability comes from genetics, and the rest comes from learning. With this in mind, they argue that "Apple's (NAS: AAPL) slogan, 'Think Different,' is inspiring but incomplete ... innovators must act different to think different."

Connecting things
So how can you learn to be innovative? And how do you "act different"?

Christensen and Gregersen identify five ways that CEOs and executives can get better at innovation:

  1. Associating -- A great illustration of this is Steve Jobs' famous line, "Creativity is connecting things."
  2. Questioning -- They quote Peter Drucker: "The important and difficult job is never to find the right answers, it is to find the right question."
  3. Observing -- The professors note that Scott Cook came up with Quicken by watching his wife handle their finances.
  4. Experimenting -- All of the creative entrepreneurs they studied were always experimenting.
  5. Networking -- Aim to visit other countries and talk with people in other fields.

All of the innovative entrepreneurs they studied "acquired and honed their innovation skills precisely this way." And ordinary people will also make progress in this are, too, if they work on these skills.

Here is a sample of innovative entrepreneurs from their study:

Entrepreneur

Company

Marc Benioffsalesforce.com (NYS: CRM)
Jeff BezosAmazon.com (NAS: AMZN)
Michael DellDell (NAS: DELL)
Mike LazaridisResearch In Motion (NAS: RIMM)
David Neeleman (former CEO)JetBlue (NAS: JBLU)
Scott CookIntuit (NAS: INTU)

Source: Harvard Business Review.

At the most innovative companies, they found, the CEO and his executive team do not outsource innovation and creative work to other departments. Rather, "they do it themselves."

This is important for investors to grasp when they are looking for great innovators like Amazon.com or Apple. According to Christensen and Gregersen's research, innovative entrepreneurs spend 50% more time developing the five skills above than do CEOs who don't have a track record for innovation. In fact, Christensen underlined the difference between innovators and non-innovators by saying, "The single greatest inhibitor to innovation was senior leaders who delegate innovation to others."

Putting a ding in the universe
It's gratifying for ordinary individuals and investors to know that innovation is not limited to a handful of visionaries like Bezos or Jobs. Innovation can be learned. And you can identify innovative companies by closely examining the ones that are led by leadership teams dedicated to driving the creative-innovation process. Apparently, there are quite a few companies out there aiming to "put a ding in the universe" -- and it may be possible for investors to spot the ones who can actually do it successfully.

To learn more about one such innovative company that is changing the face of contemporary business, check out this new free report, entitled "The Only Stock You Need To Profit From the NEW Technology Revolution." You can access it entirely free by clicking here.

At the time this article was published John Reeves owns shares of Apple. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of salesforce.com, Amazon.com, Apple, and Dell, as well as creating a bull call spread position in Apple. A separate service has recommended shorting salesforce.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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