The demise of Borders and other firms whose business model has collapsed in the face of innovation is one side of the story. On the obverse, according to NACD Director's Daily (25 July), the Economic Times (July 24) quotes a new Ernst & Young study, which has found that "domestic companies are innovating in an unprecedented manner to beat competition and remain relevant to their target customer base" after the recent economic downturn.

Ram Sarvepalli, E&Y's India leader for risk advisory services, notes that this is markedly different from how companies responded in the past two recessions. He states, "The study confirms that, today, businesses look before they leap. They don't just seek opportunities, but focus on making sure they have the capabilities and innovative strengths to make a real impact in their chosen markets."

E&Y's survey of non-executive directors and operational heads was conducted between this past December and February among 733 companies in 15 countries.

Meanwhile, this past week, Forbes magazine published its list of the 100 most innovative companies. If you read the methodology text closely, you will appreciate that the list is really of companies with a reputation for innovation. As described by Clayton M. Christensen, along with colleagues Jeff Dyer, a professor at Brigham Young University, Hal B Gregersen, a professor of leadership at INSEAD and Michael McConnell, a senior advisor at HOLT, a division of Credit Suisse in Forbes magazine, (20 July):

Imagine leading your company so differently that investors bid up its stock price by 50% because they expect innovations—incremental and disruptive—far into the future. Significant market premiums typify the most innovative companies. You can, in fact, quantify that predictive extra kick in something we call an “innovation premium,” a metric we worked out with Michael McConnell, a senior advisor at HOLT, a Credit Suisse unit. It is defined as the proportion of a company’s market value that cannot be accounted for from cash flows of its current products in its current markets. Put another way, it’s the premium the stock market gives a company because investors expect it to launch new offerings and enter new markets that will generate even bigger income streams. We use the innovation premium to rank the world’s most innovative companies.