Innovation Spending Increases
News from Yahoo: 73% of Global Companies Will Increase Spending on Innovation in 2005 according to Boston Consulting Group study.
The findings are based on responses from more than 500 senior executives in 47 countries and all major industries. Most respondents defined innovation in terms of creating new products, services, or processes -- or, as one CEO said, "turning ideas into profits."
On average, executives said that their companies plan to boost spending on innovation by 15 percent in 2005. In addition, more than 90 percent said that generating growth through innovation has become essential for success in their industry.
Yet fewer than half of the executives surveyed said that they were satisfied with the returns on their investments to date.
"It's a positive sign that companies continue to invest heavily in innovation," said Jim Andrew, a Senior Vice President at BCG, a global management consulting firm. "The problem is that if the returns continue to disappoint, senior executives may begin to rethink their plans. Unless companies improve their approach to innovation, increased investment may in fact lead to increased disappointment."
Other notable highlights from the BCG research include the following: * Consumer Products and Tech Lead in Innovation Spending; Telecommunications Lags -- The consumer products and technology industries had the highest percentage of respondents reporting plans to increase innovation spending in 2005, at 80 percent and 79 percent respectively. Telecommunications had the lowest, with 61 percent. * Operations in Asia-Pacific Will See Most Increases in Innovation Spending -- The Asia-Pacific region led with 78 percent of companies planning increases, although North America (73 percent) and Europe (70 percent) were close behind. * Globalization and Innovation -- More than 60 percent of the respondents said that globalization is having a major impact on the way their company approaches innovation. However, only 35 percent reported plans to increase R&D investments in China, India, or other "low-cost" locations in 2005. Notably, presidents and CEOs were even less likely than other executives to anticipate increased R&D investment in "low-cost" locations -- only 25 percent of the presidents and CEOs said that their company planned to do so. * Despite Investments' Importance, Innovation Spending Disappoints Most Executives -- While 67 percent of executives ranked innovation as one of their company's top three strategic priorities for 2005, only 49 percent said that they were satisfied with the financial return on their investments to date. Respondents ranked as the three biggest problems in innovation: moving quickly from idea generation to initial sales; leveraging suppliers for new ideas; and appropriately balancing risks, timeframes, and returns. * CEOs and Innovation Spending -- Presidents and CEOs, however, reported being satisfied with the return on their investments in innovation more frequently than did other executives (57 percent vs. 49 percent overall); they were also more likely to anticipate increased innovation spending in 2005 (80 percent vs. 73 percent). * Executives Rank Apple as Most Innovative Company -- Executives ranked Apple, 3M, GE, Microsoft, and Sony as the "most innovative" companies. Apple rose to the top spot from No. 5 last year.
"Spending even more on innovation represents one of the biggest strategic bets many companies will make in 2005," said Mr. Andrew. "The big question is how to make improvements so that it actually pays off?"
About The Boston Consulting Group
The Boston Consulting Group is a global management consulting firm. It was founded in 1963 and now has 60 offices in 37 countries. Its primary focus is corporate and business strategy, including operational and systems strategy. It has served companies in all major industries and developed countries and also has offices and clients in several developing countries. Please visit its Web site at http://www.bcg.com, which contains a subscription service for its publications.
The complete report on findings will be distributed to participants in early 2005.
Comments