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October 11, 2005
R&D spending doesn't always pay off--Booze Allen.
A new survey out by business consultant Booze Allen Hamilton says that big companies that spend more on research and development than their peers don't necessarily get a higher payoff in terms of revenues of profits. After surveying 1000 companies over 6 years, Booze Allen concluded that while some minimum of R&D spending is necessary, simply piling on the R&D dollars doesn't generate the kind of innovation you would expect.
This was also my finding in the Get Creative cover back in August 1. It is clear that more and more companies are now discovering that their innovation process is inefficient. Most are still doing innovation by pumping up their R&D labs to come up with new high tech tricks which are then turned into products (usually with a million features) that are sold AT customers. Design is brought in toward the end of this traditional innovation process to put a friendly, pretty face on the product.
But a few companies are turning the innovation process around by first using design to learn about consumer wants and unmet needs and then moving back up the innovation funnel to get the R&D labs to come up with products and services that connect with customer desires and emotions. This can really boost innovation productivity and cut down on R&D costs. Dumping NIH--not invented here--R&D also saves money. There is a world of ideas out there--in Europe, Asia and among thousands of retired scientists and engineers that can and should be tapped by companies. They cost less than home-grown R&D and even if they cost more, they should be part of any corporation's innovation arsenal. But clearly, the Booze Allen survey shows that most CEOs and top execs still don't get it.
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The Global_Innovation_1000_2006 is nothing but pap. Part of the reason is that companies include costs in their "R&D Expenditure" that have nothing to do with either research or development. I know of at least two companies who include product engineering in "R&D". This activity adds nothing to the corporation's library of intellectual propert; and is development not of new technologies, but the application of existing knowledge.
The claim that "investment" in (real) R&D does not pay back is obvious, accounting-driven, nearsighted distortion.
Posted by: Bob Phillips at December 22, 2006 04:11 PM