!nnovations excite me !

"Innovation does not have to have anything to do with technology." Says Vijay Govindarajan, a professor at Dartmouth College's Tuck School of Business and author of Ten Rules for Strategic Innovators: From Idea to Execution.

To discover which companies innovate best -- and why -- Business Week joined with The Boston Consulting Group to produce our the 25 most innovative companies.

1 Apple
2 Google
3 3M
4 Toyota
5 Microsoft
6 General Electric
7 Procter & Gamble
8 Nokia
9 Starbucks
10 IBM
11 Virgin
12 Samsung
13 Sony
14 Dell
15 IDEO


Some Innovations:
-To launch the iPod, Apple used no fewer than seven types of innovation. They included networking (a novel agreement among music companies to sell their songs online), business model (songs sold for a buck each online), and branding (how cool are those white ear buds and wires?). Consumers love the ease and feel of the iPod, but it is the simplicity of the iTunes software platform that turned a great MP3 player into a revenue-gushing phenomenon

-Toyota : The Japanese auto giant is best known for an obsessive focus on innovating its manufacturing processes. But thanks to the hot-selling Prius, Toyota is earning even more respect as a product innovator. It is also collaborating more closely with suppliers to generate innovation. Last year, Toyota launched its Value Innovation strategy. Rather than work with suppliers just to cut costs of individual parts, it is delving further back in the design process to find savings spanning entire vehicle systems.

-Procter & Gamble Co has transformed its traditional in-house research and development process into an open-source innovation strategy it calls "connect and develop." The new method? Embrace the collective brains of the world. Make it a goal that 50% of the company's new products come from outside P&G's labs.Tap networks of inventors, scientists, and suppliers for new products that can be developed in-house."The ideas tend to be bigger when you have someone sitting at the center looking at the company's growth goals."

-Starbucks recently started taking product development and other cross-company teams on "inspiration" field trips to view customers and trends.

-Each time BMW begins developing a car, the project team's members -- some 200 to 300 staffers from engineering, design, production, marketing, purchasing, and finance -- are relocated from their scattered locations to the auto maker's Research and Innovation Center, called FIZ, for up to three years. Such proximity helps speed up communications (and therefore car development) and encourages face-to-face meetings that prevent late-stage conflicts between, say, marketing and engineering.

-Infosys has a “voice of youth" program where each year the company selects nine top-performing young guns -- each under 30 -- to participate in its eight yearly senior management council meetings, presenting and discussing their ideas with the top leadership team.

-Nokia understood how illiterate people live in a world full of numbers and letters and came up with a new "iconic" menu that lets illiterate customers navigate contact lists made up of images. Other innovative ideas followed. By listening to customers in poorer countries, Nokia learned that phones had to be more durable, since they're often the most expensive item these customers will buy. To function in a tropical climate, it made the phones more moisture-resistant. It even used special screens that are more legible in bright sunlight


Obstacles in Innovation:
1.The No. 1 obstacle is slow development times. Fast-changing consumer demands, global outsourcing, and open-source software make speed to market paramount today. Yet companies often can't organize themselves to move faster.

2.A lack of coordination is the second-biggest barrier to innovation, according to the survey's findings. But collaboration requires much more than paying lip service to breaking down silos

3.One of the biggest mistakes companies may make is tying managers' incentives too directly to specific innovation metrics.

4.Getting good consumer insight is the fourth most cited obstacle to innovation in our survey. Blogs and online communities now make it easier to know what customers are thinking


Some observations:
-While 72% of the senior executives in the survey named innovation as one of their top three priorities, almost half said they were dissatisfied with the returns on their investments in that area.

-Today, innovation is about much more than new products. It is about reinventing business processes and building entirely new markets that meet untapped customer needs. Most important, as the Internet and globalization widen the pool of new ideas, it's about selecting and executing the right ideas and bringing them to market in record time.

-India and China are growing sources of innovation for companies, too.When asked where their company planned to increase R&D spending, 44% answered India, 44% said China, and 48% said Western Europe. Managers tended to look to the U.S. and Canada for idea generation, while a lower percentage looked to Europe for the same tasks. India and China, though, are still seen as centers for product development.