Remember about 16 years ago when Apple was close to bankruptcy, and Eastman Kodak broke $80 per share? These days, the tables have turned as the two companies have, in essence, traded places. And what did Apple have that Kodak was lacking that caused it to not only stay alive, but grow to become the most valuable technology company in the world? Innovation.
An important point regarding innovation is that it is not only apparent, but necessary in many places you don’t expect it . This leads to my list of boring but innovative companies that I have been buying recently: Raytheon, Chevron, Boeing, Exxon Mobile, E.I. du Pont, Procter & Gamble and Unilever.
Not surprisingly, all of these companies are part of the Reuters Top 100 Global Innovators for 2011, showing success in securing patents, overall volume of patents, degree of influence (i.e., how much other companies rely on their patents) and total quadrilateral patents (essentially patenting in key international markets). In terms of investing, these companies, along with the rest on the Reuters Top 100 Global Innovators of 2011, notched 12.9 percent in market cap gains (compared to Standard & Poor's 500 index's 7.2 percent).
So what do these companies have in common?
- They gain market share by offering a superior good or service rather than simply cutting costs and competing on price.
- They adapt their strategy, products and services for different environments, not the other way around.
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