Corporate innovation has been attracting more and more investment over recent years. Does that investment make sense? What are impactful corporate innovation strategies? What is mere innovation theatre? How can the success of innovation efforts be measured? What is the long-term impact of innovativeness on shareholder value?

We set out to lay the groundwork to answer the above questions in our latest study “The power of diversification – How innovation drives shareholder value”.

Diversification captures a company’s adaptability in the face of changing customer preferences. The increase in diversification of revenue segments over time can therefore be considered a good measure of innovativeness of a company as it reflects the creation and commercialisation of new business models and products addressing new markets and customer needs.

We analysed levels of revenue diversification measured by the introduction of new revenue segments in the annual reports of 1,838 listed companies in the US and in Europe together with their stock market performance for the 10-year period between 2010 and 2019.

What we found was that innovative companies vastly outperform their competitors both in the short and long term in terms of total shareholder returns. For more details, download the full study below.