I have created the Innovation - Stock Performance Correlation Chart that demonstrates this correlation between the two variables:
What are some insights to be gained from this?
There is a very high probability between Positive Stock Performance and Total Innovations with the magic number of 70.
Eight of the Nine Innovators, or 89%, who had Total Innovations of about 70 or higher exhibited a Positive Stock Performance in 2006 (Apple had 69 innovations). The average Stock Performance gain of these eight Innovators was 34% in 2006. Only Yahoo! exhibited negative stock gains in 2006 out of this group.
On the other hand, there is a good probability between Negative or Even Stock Performance and Total Innovations that are less than 65.
Six of the Eleven Innovators, or 54%, who had Total Innovations less than 65 exhibited a Negative or Even Stock Performance in 2006. Clearly, the correlation between Negative Stock Performance and Total Innovations less than 65 is demonstrably weak.
We will check again in 2007 on whether this correlation holds, the magic Total Innovation number of 70 stays at 70, or new trends emerge.
I am not trying to imply that Stock Performance only depends on Total Innovations. As we know very well, Stock Performance depends heavily on Current Earnings, Future Outlook, Revenue and Earnings Growth besides other environmental factors. However, it is interesting to correlate Stock Performance with Total Innovations, and whether the Innovation Output of an Organization leads to current or future Stock Performance gains.
For instance, are Yahoo!'s 77 Innovations in 2006 helping Yahoo!’s Stock Performance in 2007? Did the pipeline of New Innovations introduced in 2006 is resulting in positive Stock Performance in 2007? What about IBM who had a whopping 187 new Innovations? IBM should clearly do well in 2007. Or would it?
Selected references:
Leading eBook on Creativity and Innovation in Business
Creativity and Innovation Best Practices
Creativity and Innovation Case Studies
The Innovation Index
Top 50 innovative companies in the world
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