Booz & Company has released its most recent Global Innovation 1000 survey. According to the survey, the R&D intensity (% of sales) of the largest 1000 R&D companies is on a ten year decline. Actual R&D spending is going up, just not as fast as sales. The divergence between sales and R&D spending is especially pronounced since 2004, mostly because sales shot up.
They also find that companies that have fewer, but larger R&D and product development centers have better economic performance.
Interestingly, Toyota, GM and Ford each spend more on R&D that either Microsoft or Pfizer.
But, as was found in earlier studies, the study also showed that higher R&D spending does not correlate with growth, profit or shareholder return. What matters is aligning innovation strategy with corporate strategy and leveraging knowledge of customers, supplier and partners globally. There is a need to invest a minimum in R&D, but the real payoff is in execution.
This highlights the persistent myth we have about innovation: that it comes from men and women in white coats running around in laboratories. The Booz & Co report shows that the payoff in terms of economic performance comes from learning from your customers, suppliers and other business partners. We have to stop thinking about innovation as linear process -- like an assembly line -- from basic research to final product. It is much more like a stew, where ingredients -- multiple technologies, capital, marketing plans, and business models -- are all mixed together to product the end result.
Also on my pet peeve: this is NOT an "innovation" survey. These are not the top 1000 innovative companies. It is an R&D survey; the companies are the top R&D spenders. The R&D survey informs us about the innovation process. But it does not survey innovation.
UPDATE: The Booz & Co webcast on the survey is now available at http://www.strategy-business.com/webinars/webinar/webinar-bb_global_1000
Leave a comment