Written By: Mustafa Arshad

new r and dnew innovativ

     

Volkswagen spent 11 billion dollars on R&D in 2013. In October of last year, that would have been enough to buy Twitter. It seems intuitive and self evident, that a company spending more than its competitors on R&D would be deemed “Innovative” and perform better than its industry rivals; but the numbers tell a different story.

 

 

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For the past 9 years, Booz & Company have been looking at the Top R&D spenders; and four years ago, they started comparing these companies to “The most innovative” companies as determined by the respondents of their annual survey. In 2013, only 2 of the companies from the R&D list made it to the innovation list. At a glance, this comparison seems silly because we are comparing a list of quantitative data (R&D) with qualitative data (Innovative). Who’s to say the respondents of these surveys aren’t just picking the companies the successful they hear about on the news? This is a very real possibility considering the name brand power of some of the companies in the “Innovative” list, Apple, Google, Amazon, etc.

 

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  But there’s more, it seems that these companies cannot keep up with others in their industry as well, let alone the most innovative ones. This is undoubtedly the most peculiar part of this study. Why would the Top R&D spenders be being out performed by their lesser-spending peers? Perhaps the fruits of Volkswagen’s labor will blossom in not 5, but 10-15 years. It’s also important to note that these figures show over all R&D spending, they do not show R&D as a ratio of revenue (R&D intensity). For example, Tesla is too small a company to be anywhere the R&D list, but their R&D intensity is at 66.3%, which is worlds higher than other top innovators like Apple at 2%. Lastly, we need to take a hard look at the companies in these lists. The top “Innovative” list has no healthcare companies, whereas the bottom 40% of the “R&D” list represent the biggest names in healthcare. Is it possible that we’ll be pulling out our hair 10 years from now for not investing in Pfizer before they released their instant baldness cure?

 

Written By: Mustafa Arshad

 

 

Note: (other charts in the full Booze&Co study R&D intensity but do not compare them to the top “Innovators”)

http://www.booz.com/global/home/what-we-think/reports-white-papers/article-display/2013-global-innovation-1000-study#prettyPhoto

 

 

 

 

 

 

 

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