9
years. Spending on R&D was also found to be unrelated to growth in sales or profits. Moreover, the top 10 most innovative companies are rarely the top 10 spenders
on R&D (Viki 2016).
Which main aspects separate the most innovative companies from less innovative ones?
More innovative companies show:
• Close alignment between innovation and business strategy
• Company-wide cultural support for innovation
• Close involvement by leadership with innovation programs
• Deep understanding of insights from end-users
This trend was again observed in 2018 (Table 1.1), when only two out of the five
most innovative companies, namely, Amazon and Alphabet, also ranked among the
five top R&D spenders.
Analyzing R&D intensity – a metric defined as the ratio between R&D expenditure and total revenue – sheds light on the effectiveness of innovation efforts.
Dramatic differences can be verified even among the most innovative companies.
Although Amazon, Alphabet, Microsoft, and Tesla show a large R&D intensity,
within a 12–15% range, in the case of the most innovative company of 2018 – Apple –
its R&D intensity only reached 5%. Furthermore, in the case of Nokia, despite a high
R&D intensity in 2018 (21%), it ranked lower than 20th in terms of innovation.
5
It might be a little unfair to compare firms across diverse industries and R&D
intensity landscapes. Regardless, such comparison sheds light on the actual nature of
the relationship existing between R&D efforts and the ability to translate them into
products and/or services that are actually adopted by users and therefore create value.
5 https://www.strategyzer.com/blog/innovation-vefrsus-rd-spending
[verified
on
October
11
th , 2019].
Table 1.1 Top R&D spenders and innovative companies (http://www.strategyand.pwc.com/
innovation1000 [verified on October 11
th
, 2019]) in 2018
Most innovative companies
Top R&D spenders
Rank
Company
Rank
R&D spending (US $ billion)
1
Apple
1
Amazon (22.6)
2
Amazon
2
Alphabet (16.2)
3
Alphabet
3
Volkswagen (15.8)
4
Microsoft
4
Samsung (15.3)
5
Tesla
5
Intel (13.1)
6
Samsung
6
Microsoft (12.3)
7
Facebook
7
Apple (11.6)
8
General Electric
8
Roche (10.8)
9
Intel
9
Johnson & Johnson (10.6)
10
Netflix
10
Merck (10.2)
1 The Quest for Innovation: Addressing User Needs and Value Creation
years. Spending on R&D was also found to be unrelated to growth in sales or profits. Moreover, the top 10 most innovative companies are rarely the top 10 spenders
on R&D (Viki 2016).
Which main aspects separate the most innovative companies from less innovative ones?
More innovative companies show:
• Close alignment between innovation and business strategy
• Company-wide cultural support for innovation
• Close involvement by leadership with innovation programs
• Deep understanding of insights from end-users
This trend was again observed in 2018 (Table 1.1), when only two out of the five
most innovative companies, namely, Amazon and Alphabet, also ranked among the
five top R&D spenders.
Analyzing R&D intensity – a metric defined as the ratio between R&D expenditure and total revenue – sheds light on the effectiveness of innovation efforts.
Dramatic differences can be verified even among the most innovative companies.
Although Amazon, Alphabet, Microsoft, and Tesla show a large R&D intensity,
within a 12–15% range, in the case of the most innovative company of 2018 – Apple –
its R&D intensity only reached 5%. Furthermore, in the case of Nokia, despite a high
R&D intensity in 2018 (21%), it ranked lower than 20th in terms of innovation.
5
It might be a little unfair to compare firms across diverse industries and R&D
intensity landscapes. Regardless, such comparison sheds light on the actual nature of
the relationship existing between R&D efforts and the ability to translate them into
products and/or services that are actually adopted by users and therefore create value.
5 https://www.strategyzer.com/blog/innovation-vefrsus-rd-spending
[verified
on
October
11
th , 2019].
Table 1.1 Top R&D spenders and innovative companies (http://www.strategyand.pwc.com/
innovation1000 [verified on October 11
th
, 2019]) in 2018
Most innovative companies
Top R&D spenders
Rank
Company
Rank
R&D spending (US $ billion)
1
Apple
1
Amazon (22.6)
2
Amazon
2
Alphabet (16.2)
3
Alphabet
3
Volkswagen (15.8)
4
Microsoft
4
Samsung (15.3)
5
Tesla
5
Intel (13.1)
6
Samsung
6
Microsoft (12.3)
7
7
Apple (11.6)
8
General Electric
8
Roche (10.8)
9
Intel
9
Johnson & Johnson (10.6)
10
Netflix
10
Merck (10.2)
1 The Quest for Innovation: Addressing User Needs and Value Creation