Innovation from rising R&D

By Hu Yuanyuan (China Daily) Updated: 2012-11-19 09:19

Booz & Co also surveyed nearly 700 innovation leaders from companies worldwide to determine which they see as the most innovative companies in the world.

Apple, Google and 3M topped the list for the third consecutive year. The most innovative companies are seldom the biggest spenders, the study confirmed.

When compared with the 10 companies that spent the most on R&D, the top 10 most innovative companies outperformed across key financial metrics, including revenue growth, market cap growth and profit as a percentage of revenue.

"Consistent with our study findings from previous years, there is no long-term correlation between the amount spent on innovation and an organization's overall financial success," said Veldhoen. "What really matters is not the amount spent but how those R&D funds are invested in talent, process and tools."

The three industries with the greatest R&D investment were computing and electronics, health and autos, the survey showed.

In addition to the R&D spending data trend analysis, this year's study also examined the early stages of innovation, specifically looking at the tools, processes and mechanisms companies use to generate ideas and how they take those ideas to market.

Nearly half of those surveyed said their organizations were just average or marginally effective at generating new ideas and converting them into potential future products.

Meanwhile, the 25 percent of companies that reported being "highly effective" at both idea generation and conversion outperformed their peers in three important financial measures - revenue, market cap growth and earnings before interest, taxes, depreciation and amortization as a percentage of revenue.

Although innovation tools such as social network data mining, crowd sourcing and seed funding have been much hyped in recent years, companies themselves reported a much greater focus on traditional idea-generation tools.

The most common mechanism for developing new ideas, by a substantial margin, was direct observation of customers, which was ranked number one by 42 percent of all respondents. Traditional market research was ranked second, with 31 percent of respondents ranking it among their top five mechanisms.

huyuanyuan@chinadaily.com.cn