Every economic downturn comes with the same refrain: The world, we’re told, is losing its creative capacity, hurting our chances for a speedy recovery. Yet inevitably, when worries about innovation erosion surface, some company rises up with a great new product, technology, or service to prove the naysayers wrong. And all too often, observers simply fail to pay attention to the many companies that make successful innovation part of their regular practice — indeed, their operating model — in ways that don’t necessarily make big headlines. Those companies are the quiet stars of our annual Global Innovation 1000 study of R&D spending. As our study has consistently shown over the past eight years, there is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance (see box below); instead, what matters is how companies use that money and other resources, as well as the quality of their talent, processes, and decision making. Those are the things that determine their ability to execute their innovation agendas. In 2011, corporate spending among the Global Innovation 1000 increased 9.6 percent over the previous year to $603bn, slightly faster than the 9.3% gain in 2010 from the 2009 spending level. But because corporate revenues grew by a robust 13% last year— even faster than the year before — to a staggering $17.6 trillion R&D intensity, or the percentage of sales that companies spend on innovation, actually declined to traditional pre-recession levels. The top 100 companies accounted for 50% of the growth in R&D spending, and now represent 62% of the total spent on R&D by the Global Innovation 1000. Overall, three-quarters of companies increased their spending, up from 68% in 2010, whereas just 19% spent less. Together, the computing and electronics, healthcare, and auto sectors once again accounted for the majority of overall spending — 65% in 2011. (See Exhibit C.) Every region where Global Innovation 1000 companies are headquartered increased spending in 2011, although the results varied considerably. (See Exhibit E.) The biggest absolute gains were in North America. Europe, however, increased spending by just 5.4%, somewhat below its 6.8% average increase, likely a result of the region’s continued economic woes. Of course, some companies get more bang for their innovation investment buck than others. Over the past few years, we have carefully analyzed the innovation strategies, capabilities, and cultural factors that enable some companies to consistently achieve superior financial results. This year,…
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The Global Innovation 1000: Making ideas work
Dec 10, 2012 • Barry Jaruzelski
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