Innovation Overload

June 3, 2014

There is no question that innovation has become an overused buzz word.  Search the NY Times and you’ll see that there are 15,900 results for the term innovation in the past 12 months. Google produces 131 million results for the word, and a book search at Amazon produces 64,238 results. Innovation could technically be applied to anything that is simply new, and because it so commonly is, we are inundated with claims of innovation everywhere we turn.  However, there is an underlying assumption that a true innovation will not just be new but transformative, invoking positive change to our lives.

Innovation matters. It is paramount to the continual growth and evolution of the world we live in.  Innovations like the plow, steam engine, production line and computer, have spurred major economic and societal advancements. Medical innovations like antibiotics and vaccines have made our lives healthier and happier.  Innovations like the telegraph, cable and the world wide web have connected lives throughout the world.  These are a few of the many ways innovation has spurred human progress.

Innovation matters tremendously in business. Research indicates that innovators have a competitive edge in the marketplace, and we have seen a competitive edge manifest itself in superior financial results and stock performance1. This probably isn’t a surprising conclusion and may explain the cultural obsession with innovation. But the truth of the matter is, it isn’t that easy. Innovation isn’t something easily obtained, and being innovative takes a lot more than simply proclaiming oneself as such. True innovation is actually quite rare, which is why, like many rarities, it can be quite valuable.

To be an innovative company, innovation must be a key attribute of the culture. Innovative companies typically exhibit innovation throughout their business, for example, customer service, employee relations, or innovative product development.  One key attribute often shared by innovative companies is a focus on the customer and using innovation to enhance the customer’s value or experience. Increasing value to customers clearly benefits the consumer, but it often also produces greater profits. Some companies occasionally exhibit innovative behavior, most notably with groundbreaking products, but if innovation isn’t a key cultural characteristic, then such companies struggle to be truly innovative.

We’ve gained a bit of experience about innovative companies by managing the Guinness Atkinson Global Innovators Fund for the past 15 years.  A lot of thought has been put into our approach to identify innovation and innovative companies, which we share in our recent research report, Innovation Matters. We are also proud of the Fund’s recent ranking as the number one fund in the Global Large-Cap Growth Lipper category for the 1, 3, 5 and 10 year time periods ending this quarter (3/31/14) based on fund total returns; a claim no other equity fund can make for the same period.

 Lipper Rankings for the category
Global Large-Cap Growth

Time Period (as of 3/31/14) Rank
1 year 1 of 100
3 year 1 of 75
5 year 1 of 71
10 year 1 of 42

Rankings for the periods shown above are based on Fund total returns.

 

Dr. Ian Mortimer, CFA & Matthew Page, CFA
Guinness Atkinson Global Innovators Team

 

1 For more information, read our Innovation Matters whitepaper.

 

Past Performance does not guarantee future results.

Mutual fund investing involves risk and loss of principal is possible. Investments in foreign securities involve greater volatility, political, economic and currency risks and differences in accounting methods. These risks are greater for emerging markets countries.  Non-diversified funds concentrate assets in fewer holdings than diversified funds. Therefore, non-diversified funds are more exposed to individual stock volatility than diversified funds. The Fund also invests in smaller companies, which will involve additional risks such as limited liquidity and greater volatility. The Fund may invest in derivatives which involves risks different from, and in certain cases, greater than the risks presented by traditional investments.

Lipper Analytical Services, Inc. is an independent mutual fund research and rating service. Each Lipper average represents a universe of Funds with similar investment objectives. Rankings for the periods shown are based on Fund total returns with dividends and distributions reinvested and do not reflect sales charges.

 

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