Monday, October 31, 2011
According to a study by Booz & Co., more than two-thirds of large companies increased their investment in innovation last year, making up much of the ground lost to draconian cuts many made over the past three years. Based on percent of sales Roche headed the list (21.2%), followed by Merck (18.7%), Novartis (17.1%), Pfizer (13.9%) and Microsoft (14%).
That said, another interesting finding of the study was that not all of the big innovators are big spenders; some of the most successful at developing new products and services invested significantly less in R&D. For example, 3M spent just 6.4% of sales, Apple 2.7%, and GE 2.6%.
What accounts for the difference? Industry factors play a role; you would expect big pharma to spend the most on R&D given the timetables and hurdles required to discover, test, and secure FDA approval for new drugs. But industry differences alone don’t explain the variations, according to Booz; other factors are also at work, including focus (Apple), discipline (GE) and culture (3M).
This is yet another reason why healthy internal dynamics are so important. The more resources a company can dedicate to business-building efforts like R&D and marketing, the better. But those organizations that have management alignment around their vision, mission and strategy, that have firm convictions about their brands and what they stand for, and that maintain internal discipline are able to leverage their investments as force multipliers.
“To those that have, more will be given.” That proverb may be depressing to those who “have not”, bit it’s really more of a clarion call. The more any company can get its internal house in order, the more all of its efforts will begin to click.