Companies Keep Spending on R&D with Eye on Upturn
Reading Dana Mattioli‘s article in the Wall Street Journal today about R&D spending. She cites a recent Booz & Co study of 1,000 of the world’s biggest R&D spenders – the study finds that most companies have stuck with their innovation programs despite the recession — and many are boosting spending to compete more effectively in the upturn.
Mattioli’s article is a nice summary, but the Booz report itself (written by Barry Jaruzelski and Kevin Dehoff)is highly recommended reading for anyone involved in innovation.
I like the tone and content of many of the executive quotes in the report like:
- “Innovation is what drives our competitive position in all three of our markets — automotive, professional, and consumer — and therefore we can’t back off,” says Robert Lardon, corporate VP for at Harman International Industries.
- Adalio Sanchez, GM of IBM’s System X server business, echoes that point of view: “I would argue that the recession is a catalyst for increased innovation.”
Booz cites three primary reasons companies are so reluctant to cut innovation spending when times are extremely tough.
- Innovation has become a core component of overall corporate strategy. Given the fierce nature of business competition in recent years, a reduction in innovation efforts would be akin to unilateral disarmament in wartime.
- Companies in most sectors are typically committed to product development cycles that extend for many years — well beyond the length of an average recession. If they are suppliers, they have often already contracted to help develop their customers’ next new model; if they sell to consumers, missing an innovation cycle can mean being put out of the game entirely.
- Many companies see the recession as an opportunity to build their advantage over their competitors
— especially weaker ones that may have to skimp on R&D for financial reasons. If the stronger companies can maintain the pace of innovation, the thinking goes, they may be able to gain market share quickly once the upturn gets under way in earnest.
Judging from the data in the Booz study, the results of their survey, and their conversations with executives, innovation has become central to every company’s efforts to compete. And the degree of competition has been in no sense reduced by the downturn.
If anything, concludes the Booz report, it has been heightened, and most companies are fully aware of the need to be in position to profit from the coming upturn.
This includes, of course, keeping up a steady flow of PR to ensure a relentless brand presence, as well.
The Booz report: Profits Down, Spending Steady: The Global Innovation 1000
The book “