This week, right in the middle of reporting season, Business Review Weekly released its list of the 50 Most Innovative Companies for 2015.
Fittingly, the crown was taken out by a company called Planet Innovation which does product development. But runner up was accounting firm MYOB Group Ltd (ASX: MYO), scoring the key bragging rights over arch-rival XERO FPO NZ (ASX: XRO).
Xero, which is a solely cloud focused provider, dropped to nineteenth place after being number one last year. But is the company really at risk of losing ground to MYOB in the innovation stakes?
Both companies are investing huge amounts of money in their respective cloud products. MYOB claims to have invested over $100 million in research and development over the last three years, while Xero poured NZ$67.5 million into Product Design and Development alone in the 12 months to 31 March 2015.
When it comes to putting that money to use BRW says that many of MYOB's innovations come from customer suggestions. The development of these suggestions gives customers what they really want and adds value. Xero has a similar user community feedback channel where it appears to do essentially the same thing.
Perhaps one direct innovation MYOB has over Xero is the company's 'smart bills' application. The tool enables invoices to be photographed, with details then automatically added to a new bill. However Xero already includes photos as a part of its invoice and receipt functionality and partners with an app called Receipt-Bank which does the data integration from photos.
Outside of their own development, both MYOB and Xero are aggressively building partnerships with other companies through agreements or acquisitions. The approach allows integration of additional services which streamlines processes for customers, saving time and again adding value.
For example, Xero and MYOB have both strategically acquired payroll companies in different markets in the last 12 months, while Xero also recently announced a partnership with foreign currency firm Ozforex Group Ltd (ASX:OFX).
So while MYOB may have worked hard to narrow the gap between itself and Xero over the last 12 months in the cloud service space, in my view the two companies should be much more evenly ranked when it comes to innovation.
