Companies spend large amounts of money to create breakthrough products and services that might translate into customer satisfaction and higher sales. Research and Development spending is on the rise for major firms, but which ones are getting the most bang for their buck?
Booz & Company, a global consulting firm, recently released its annual Global Innovation 1000 report. The study reveals which companies are innovating the most in terms of spending and perception. It finds that in 2011, spending among the world’s largest 1,000 corporate R&D departments increased 9.6 percent over the previous year to $603 billion, a slight increase from the 9.3 percent pace in 2010. In comparison, innovation spending for the first three years following the dot-com meltdown in 2000 grew at an annual rate of 3.5 percent.
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Despite this strong growth, innovation spending as a percentage of sales actually declined one-tenth of 1 percent in 2011, due to the 1,000 firms generating a record $17.6 trillion of revenue. The top 100 companies accounted for 50 percent of the innovation spending growth and represent 62 percent of the total spent on R&D. Sectors such as electronics, healthcare and auto accounted for the majority of overall spending last year.
The list below ranks the top 10 innovators in terms of dollars:
The top R&D spender was Toyota, forking over $9.9 billion in 2011. Drug companies Novartis, Roche Holding and Pfizer coughed up $9.6 billion, $9.4 billion and $9.1 billion, respectively. Meanwhile, Microsoft and Samsung tied for fifth place with $9 billion in spending.
Throwing around billions can certainly generate ideas, but some companies have a higher standing among the marketplace than others. For the third consecutive year, Booz & Company also asked survey participants to name companies that they thought were the world’s most innovative. Tossing dollar amounts to side, Apple (NASDAQ:AAPL) ranked first for the third year in a row. The tech giant even grew its lead and was named one of the top three innovators by almost 80 percent of respondents, compared to 70 percent in 2010.
Booz & Company notes, “Apple’s unchallenged position comes in a year marked by the death of the company’s founder and chairman, Steve Jobs, and by the absence of any truly new product introductions.” Interestingly, Apple has doubled its R&D spending over the past three years to $2.4 billion, but it still only accounts for 2.2 percent of its sales, far better than the average of 6.5 percent for the computing and electronics sector.
“And despite being one of the 2011 industry sales leaders in 2011, with $108 billion in revenue, Apple’s absolute R&D spend ranks only 16th within its industry and 53rd overall within the Global Innovation 1000. In contrast, Apple’s longtime rival Microsoft was the top spender in the software and Internet sector, and was ranked by respondents as the sixth most innovative company.
The list below ranks the most innovative companies in terms of perception:
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