Our oddball take on the world of innovative product development
Are companies still investing in innovation, recession notwithstanding?
While the idea is to continue innovating while controlling costs, how much can - and should - companies invest in "innovation," and in what form?
I've seen several survey results lately which indicate investment in innovation is slightly down, but not as much as you'd think given the recession. Organic growth and open innovation remain high on the corporate agenda, though not quite as high as last year. The fact that innovation is still a priority at all is good news. (Then again, I don't always believe surveys.)
Nonetheless, here's what they say:
1) Invention Machine informally polled its customers: “Given global economic concerns, what is your organization doing about innovation?” http://www.innovatingtowin.com/innovating_to_win/2008/11/economics-and-innovation-what-you-said.html
Almost half (47.4%) indicated that their companies are actually increasing innovation investment! 21.1% said their companies are maintaining current levels. About 16% are pulling back, the rest aren't sure what to do...Overall, not too bad.
2) McKinsey took a look at the metrics companies use to assess innovation. http://www.mckinseyquarterly.com/Strategy/Innovation/McKinsey_Global_Survey_Results_Assessing_innovation_metrics_2243
Among other things, their survey showed "slightly fewer senior executives either selecting [innovation] as the top priority or placing it among the top three than those who responded to a similar question last year - 65 percent now, compared with 70 percent in 2007. This drop may reflect the fact that the latest survey was in the field after the credit crunch and stock market turmoil had begun to reorder many companies’ priorities."
Additionally: "Just over half of all respondents say their companies are spending about the right amount on innovation, given its strategic importance. (Interestingly, 7 percent say their companies are spending too much.) When asked how annual innovation spending is determined, the largest number of respondents say that their organizations consider the available opportunities. Less than a third of the respondents’ companies track the relationship between spending on innovation and shareholder value (and nearly a quarter don’t know whether or not they do so). However, innovation is generally seen as a strong contributor to organic growth."
3) Goldense Group Inc.'s survey further defined the forms of innovation investment, as well as what innovation actually means to their companies. http://www.roundtable.com/membership/quick-insights/GGI_B_1
Only 5 percent of respondents identified themselves as pure “Innovators.” One-fifth reported that they were “Extenders,” late entrants who compete mainly on price. This leaves three-quarters of respondents in the middle ground of “Innovator-Extenders” or a “Balanced” portfolio containing innovative products as well as me-too offerings.
The research found that there continues to be an emphasis on innovation across industries. Eighty percent of respondents said that innovation would be “more” or “much more” important in the next five years than it was in the 1990s. Goldense Group Inc. researchers examined whether this perceived and continuing emphasis had yet manifested itself in the form of increased training and increased funding for resources to enhance or enable innovation. 47 percent of respondents reported that the “innovation course content” of company training was “more” or “much more” than it had been in 2000. By contrast, more than three-quarters (76%) of respondents reported that since 2000 there has been “more” or “much more” “investment in…innovation assets.”
For Goldense, the gap between training and investment in innovation reveals a strategic opportunity. “Organic innovation is what creates Wall Street value,” said Goldense.
The increased investments in innovation, concludes Goldense, most likely indicate a strategy based on Open Innovation – purchasing innovation or innovative assets from other parties, rather than developing the skills and abilities to innovate in-house.
(Note: this survey was completed before the economic crisis revealed itself.)
4) Innosight - Clay Christensen's group - is conducting a new survey with Forbes magazine even as we speak. If you want to participate, you'll receive a summarized version of the results.
http://www.surveymonkey.com/s.aspx?sm=IwApvktmhVFkdvTlgEJD0Q_3d_3d
Their 2007 report can be downloaded at http://www.innosight.com/documents/Innosight_Mastering_Transformation.pdf.
The new survey will examine how practitioners have made progress, where they are still struggling, and how the recent economic turmoil has affected innovation and transformation efforts.
5) And last but not least, Barry Jaruzelski, a partner at Booz & Co., discusses the findings of their fourth annual Global Innovation 1000 survey of the world's top spenders in corporate R&D, and why it's important to invest in new products during a recession. This is a Business Week podcast which I personally had trouble downloading, but it may be worthwhile listening to.
http://www.businessweek.com/mediacenter/podcasts/innovation/innovation_11_11_08.htm
I've seen several survey results lately which indicate investment in innovation is slightly down, but not as much as you'd think given the recession. Organic growth and open innovation remain high on the corporate agenda, though not quite as high as last year. The fact that innovation is still a priority at all is good news. (Then again, I don't always believe surveys.)
Nonetheless, here's what they say:
1) Invention Machine informally polled its customers: “Given global economic concerns, what is your organization doing about innovation?” http://www.innovatingtowin.com/innovating_to_win/2008/11/economics-and-innovation-what-you-said.html
Almost half (47.4%) indicated that their companies are actually increasing innovation investment! 21.1% said their companies are maintaining current levels. About 16% are pulling back, the rest aren't sure what to do...Overall, not too bad.
2) McKinsey took a look at the metrics companies use to assess innovation. http://www.mckinseyquarterly.com/Strategy/Innovation/McKinsey_Global_Survey_Results_Assessing_innovation_metrics_2243
Among other things, their survey showed "slightly fewer senior executives either selecting [innovation] as the top priority or placing it among the top three than those who responded to a similar question last year - 65 percent now, compared with 70 percent in 2007. This drop may reflect the fact that the latest survey was in the field after the credit crunch and stock market turmoil had begun to reorder many companies’ priorities."
Additionally: "Just over half of all respondents say their companies are spending about the right amount on innovation, given its strategic importance. (Interestingly, 7 percent say their companies are spending too much.) When asked how annual innovation spending is determined, the largest number of respondents say that their organizations consider the available opportunities. Less than a third of the respondents’ companies track the relationship between spending on innovation and shareholder value (and nearly a quarter don’t know whether or not they do so). However, innovation is generally seen as a strong contributor to organic growth."
3) Goldense Group Inc.'s survey further defined the forms of innovation investment, as well as what innovation actually means to their companies. http://www.roundtable.com/membership/quick-insights/GGI_B_1
Only 5 percent of respondents identified themselves as pure “Innovators.” One-fifth reported that they were “Extenders,” late entrants who compete mainly on price. This leaves three-quarters of respondents in the middle ground of “Innovator-Extenders” or a “Balanced” portfolio containing innovative products as well as me-too offerings.
The research found that there continues to be an emphasis on innovation across industries. Eighty percent of respondents said that innovation would be “more” or “much more” important in the next five years than it was in the 1990s. Goldense Group Inc. researchers examined whether this perceived and continuing emphasis had yet manifested itself in the form of increased training and increased funding for resources to enhance or enable innovation. 47 percent of respondents reported that the “innovation course content” of company training was “more” or “much more” than it had been in 2000. By contrast, more than three-quarters (76%) of respondents reported that since 2000 there has been “more” or “much more” “investment in…innovation assets.”
For Goldense, the gap between training and investment in innovation reveals a strategic opportunity. “Organic innovation is what creates Wall Street value,” said Goldense.
The increased investments in innovation, concludes Goldense, most likely indicate a strategy based on Open Innovation – purchasing innovation or innovative assets from other parties, rather than developing the skills and abilities to innovate in-house.
(Note: this survey was completed before the economic crisis revealed itself.)
4) Innosight - Clay Christensen's group - is conducting a new survey with Forbes magazine even as we speak. If you want to participate, you'll receive a summarized version of the results.
http://www.surveymonkey.com/s.aspx?sm=IwApvktmhVFkdvTlgEJD0Q_3d_3d
Their 2007 report can be downloaded at http://www.innosight.com/documents/Innosight_Mastering_Transformation.pdf.
The new survey will examine how practitioners have made progress, where they are still struggling, and how the recent economic turmoil has affected innovation and transformation efforts.
5) And last but not least, Barry Jaruzelski, a partner at Booz & Co., discusses the findings of their fourth annual Global Innovation 1000 survey of the world's top spenders in corporate R&D, and why it's important to invest in new products during a recession. This is a Business Week podcast which I personally had trouble downloading, but it may be worthwhile listening to.
http://www.businessweek.com/mediacenter/podcasts/innovation/innovation_11_11_08.htm
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Comment by Jackie Cooper on January 4, 2009 at 3:25pm -
I just came across the full Booz & Co report, you don't need to download Business Week's podcast, but you do need to register to read the report. Here is the link: http://www.strategy-business.com/press/article/08405?pg=all&tid=230
Survey looks at how - and where - multinational companies are investing R&D dollars. Here is the gist of the findings:
As business becomes increasingly global, corporate innovation strategies are becoming more global as well: Multinational companies are spending a significant — and growing — share of their research and development money outside the countries in which they are headquartered. Booz & Company’s annual Global Innovation 1000 study found that in 2007, the top 80 U.S. corporate R&D spenders deployed an estimated US$80.1 billion of their $146 billion R&D funds overseas. The top 50 European companies spent $51.4 billion of their $117 billion total outside the continent. In Japan, the top 43 Japanese firms exported $40.4 billion of their total $71.6 billion to other countries.
At first glance, observers might think that this represents a loss of jobs, intellectual power, and influence for the home countries of these companies. But innovation spending seems to flow in both directions at once. Even as the companies based in the U.S. performed $80.1 billion worth of R&D in other countries, companies headquartered elsewhere poured $42.6 billion into R&D conducted in the U.S. (See Exhibit 1.) In fact, 40 percent of the money spent on R&D in the U.S. is spent by companies headquartered elsewhere. The total amount of R&D spending in the U.S. is 2.7 times as great as in Japan, whereas the spending generated by companies headquartered in the U.S. is only two times as great. Moreover, companies that invest wisely in a multinational innovation footprint are gaining far better returns on their R&D investment than companies that exclusively keep their laboratories at home — or that fragment them across a wide variety of locations.
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