I have been meaning to post about a pretty good survey by Booze (Global Innovation 1000). The study has a lot of useful data for benchmarks. The overall message is very important:
As our annual Global Innovation 1000 study, now in its sixth year, has consistently demonstrated, the success of these companies is not a matter of how much these companies spend on research and development, but rather how they spend it.”
Here is the data supporting the hypothesis:
For the second year in a row, Apple led the top 10, followed by Google and 3M. This year, Facebook was named one of the world’s most innovative companies, entering the list at number 10. In a comparison of the firms voted the 10 most innovative versus the top 10 global R&D spenders, Booz & Company found that the most innovative firms outperformed the top 10 R&D spenders across three key financial metrics over a 5-year period — revenue growth, EBITDA as a percentage of revenue and market cap growth.
I guess being a consulting house, Booze would like to teach organizations how to spend their cash… But still, it is an important message. We need a culture that supports innovation and strategic alignment of innovation with goals (duh!).
Every company among the Innovation 1000 follows one of three innovation strategies — need seeker, market reader, or technology driver. While no one or another of these strategies offers superior results, companies within each strategic category perform at very different levels. And, no matter a firm’s innovation strategy — culture is key to innovation success, and its impact on performance is measurable. Specifically, the 44 percent of companies who reported that their innovation strategies are clearly aligned with their business goals —and that their cultures strongly support those innovation goals — delivered 33 percent higher enterprise value growth and 17 percent higher profit growth on five-year measures than those lacking such tight alignment.
Here is some interesting commentary from 24/7 Wall ST:
The overlap of these “innovators” with the firms that spent the most money on R&D last year is small.
The difference between the two lists is that the largest spenders mostly invest dollars to stay in the places they already hold in the business world. Pharma companies need to replace drugs that are about to come off patent, or already have. Old world tech companies like Microsoft and Intel need to keep pace with firms that have new successful hardware and software products that challenge their sales. Auto companies are in a race to make their cars and light trucks safer and more useful to consumers.
May be it is just the industry companies are in and the maturity of the market place:
It is easy to believe that the companies growing the fastest and with the most attractive products to consumers and businesses are the most innovative. This will not last for those firms. Eventually all companies spend R&D money to hold their positions within their industries. It is just a matter of the age of the each company’s products and the state of new competition, which is always entering the market — often aimed at the innovators with sharply growing sales.
So, do we believe that all the current innovators will remain innovative for the foreseeable future? Probably not:
But Apple, Facebook, and Google are only a few years away from the need to spend R&D money to hold their own rather than advance rapidly within their own industries. Almost no one believes it about Apple, but eventually there will come a time when its revenue growth is no longer in the high double digits. Google’s products like
I guess every on believes that Apple will be an exception! Even without Steve Jobs?