Every year since 2005, Booz & Company has conducted the Global Innovation 1000 study, which investigates the relationship between what companies spend on R&D and their overall financial performance—and every year, the firm reinforces the conclusion that there is no correlation between the two. Over the years, Booz & Company has expanded the scope of the study to include critical issues such as the importance of customer-driven innovation and the recession's effect on R&D spending. At the Consulting Summit in New York on Oct. 24, John Loehr, Global Leader of Booz & Company's Innovation Practice and co-author of the innovation study, will present the just released and proprietary findings of the study in his presentation: "Inside the Numbers: The 2013 Booz & Company Global Innovation 1000 Study." Loehr sat down with Consulting One on One to discuss his upcoming presentation.
Consulting: What are the key historical trends you've uncovered since launching the study nine years ago?
Loehr: One thing we've noticed, for sure, is that it is clear that innovation was protected during the downturn. Innovation spend has been growing faster than GDP spend. A lot of people had feared that during the recession, it would be one of the first things to go, and I'm happy to report that that's not true at all. That's one of the main findings as far as trend lines go. There's no question that the world as whole recognizes the pre-eminent role of innovation in terms of driving global prosperity and corporate profitability.
Consulting: Would you say companies are spending innovation dollars wisely?
Loehr: I think it's really all over the map. The very first finding we had nine years ago and we re-validate it every year but it still always works. Once you get above the bottom 10 to 20 percent of spend in your industry—with spend measured as R&D as a percentage of sales, if you cut it nothing you're not going to do very well—but once you get into the top 80 percent, there's really no correlation between the amount you spend on innovation and the results your achieve. I mean that is measured by standard metrics, such as shareholder return or profitability. Once you're in the game with your innovation spending, it's all about how effectively you organize and executive your innovation. You can look at that two ways: It's random, it's serendipity, and it's black magic and some of that may be true, but we believe there are certain key aspects of managing and using your innovation spend to help you be successful. That's the core of our work—helping companies recognize that and improve on that.
Consulting: Where is the majority of the innovation spend occurring?
Loehr:
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