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Corporate investment in innovation is up, but is confidence in new ideas?

Posting in Technology

Now in its 8th year, the annual Global Innovation 1000 study from management consulting firm Booz & Company offers a detailed landscape of corporate research and development efforts. The 2012 edition also focuses on the front-end of the innovation process and reveals both highly surprising and predictable insights.

Booz analyzed the 1,000 public companies that led the world in R&D spending in 2011. Such investments reached an all-time high of US$603 billion during the year; that's up from $550 billion the year before, an increase of 9.6 percent. It also marks the second consecutive year of growth, after R&D spending dropped 3.5 percent during the Great Recession's peak (between 2008-2009). In addition, Booz surveyed 700 leaders at corporations around the globe to determine a list of the world's "Most Innovative" companies.

Some key findings:

  • Seventy-five percent of companies in the Global Innovation 1000 increased their innovation spending, up from 68 percent in 2010.
  • Amazon joined the top 10 “Most Innovative” companies list. Facebook dropped off as a result.
  • Samsung rose in rank on the "Most Innovative" list, up to fourth place from seventh place last year. Samsung has been rising for three consecutive years.
  • Apple, Google, and 3M are in first, second, and third place, respectively, as "Most Innovative," a triumvirate that holds for the third consecutive year. Note that they are not the top three R&D spenders: the top R&D spenders were Toyota, Novartis, and Roche.
  • North American companies grew their R&D spending by 9.7 percent—just above the global average of 9.6 percent.
  • India- and China-based companies raised R&D investment at the highest rate overall across regions (27 percent on average), but its R&D spending base is relatively small.
  • Nearly half of those executives surveyed said their companies were only "average" or "marginally effective" at generating new ideas and converting them into potential future products.
  • The 25%  of surveyed companies that reported being “highly effective” at both idea generation and conversion outperformed their peers on three important financial measures—revenue, increased market capitalization, and EBITDA (earnings before interest, taxes, depreciation, and amortization) as a percentage of revenue.
  • "Direct observation of customers"--a traditional tactic--was ranked as the number one means for generating new ideas by 42 percent of all respondents.

The entire report is available as a PDF online. And here's a video from Booz summarizing key points in the survey:

Image: Marina Noordegraaf/Flickr

— By on October 31, 2012, 1:22 PM PST

Reena Jana

Contributing Editor

Contributing Editor Reena Jana has written for the New York Times, Wired, Harvard Business Review online, Fast Company, Architectural Record, Artforum, Time Out New York, Harper's Bazaar, and GQ. Previously, she was the innovation department editor at BusinessWeek. She holds degrees from Columbia University and Barnard College. Follow her on Twitter. Disclosure