R&D Spending versus Rate of Innovation

According to Booz & Company’s annual Innovation report there are three approaches to innovation:

Need seekers (think Apple): These are companies that actively and directly engage current and potential customers to shape new products and services based on superior end-user understanding, and strive to be the first to market with those new offerings.

Market readers (think Samsung): These companies watch their customers and competitors carefully, focusing largely on creating value through incremental change and by capitalizing on proven market trends.

Tech drivers (think Google): This category includes companies that follow the direction suggested by their technological capabilities, leveraging their investment in research and development to drive both breakthrough innovation and incremental change, often seeking to solve the unarticulated needs of their customers via new technology.

As with companies mentioned above, each of these three strategies can produce superior financial results and there are always individual companies outperform others within each strategic group. The success in each category depends closely to company’s culture and mindset.

One highlight of the report is that R&D spending and rate of innovation do not necessarily correlate which is illustrated in the chart below:

 

 

 

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