harnessing innovation r&d in a global growth economy
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Harnessing innovationR&D in a global growth economy
An Economist Intelligence Unit white papersponsored by Agilent Technologies
© The Economist Intelligence Unit 2004 1
Harnessing innovation
R & D in a global growth economy
Harnessing innovation: R&D in the global growth
economy is an Economist Intelligence Unit white
paper, sponsored by Agilent Technologies.
The Economist Intelligence Unit bears sole
responsibility for the content of this report. The
Economist Intelligence Unit’s editorial team executed
the online survey, conducted the interviews and wrote
the report. The findings and views expressed in this
report do not necessarily reflect the views of the
sponsor. John du Pre Gauntt was the author of the
report.
Our research drew on two main initiatives:
● We conducted a global online survey in
March/April 2004 of 188 senior executives on the
topic of R&D strategies and best practice.
● To supplement the survey results, we also
conducted in-depth interviews with senior
executives at a number of R&D-oriented
companies.
Our thanks are due to all survey respondents and
interviewees for their time and insights.
May 2004
Preface
2 © The Economist Intelligence Unit 2004
Harnessing innovation
R & D in a global growth economy
Developing new products, services and
business models is the fuel that fires
corporate growth, in good times and bad.
Even over the past three years, a period of
ruthless cost-cutting, innovation has proceeded
apace. According to a survey of almost 200 senior
executives conducted especially for this Economist
Intelligence Unit white paper, sponsored by Agilent
Technologies, almost 50% of current corporate sales
are accounted for by products that are less than three
years old.
“Innovation is a continuous process that you can’t
stop and restart easily”, says Dr Frank Niederlaender,
Director of R&D strategy for BMW in Germany. “We
don’t cut back on R&D even in difficult economic times
because innovative features and design are the main
reasons why people buy premium cars.”
Continuous the process may be, but unchanging it
is not. The evidence of the survey shows that research
and development (R&D) models have shifted, away
from the supply-side approach of big firms funding
ambitious projects that create large barriers to entry
and towards a demand-driven approach focused more
on speed and need. A more market-oriented approach
to R&D is taking root and driving closer collaboration
between researchers, partners and customers.
The previous system of researchers developing a
prototype and then throwing it over the wall to
production, sales and marketing is no longer relevant.
“The idea of technology transfer really isn’t used
around here any more,” says Dr Paul Horn, senior vice-
president of IBM Research. “Our researchers stay with
a product all the way into the market”.
Top R&D executives are still being asked to research
innovations that create new markets several years out,
of course. But they are also being prodded to design
round-the-clock global organisations that can
innovate in swift and affordable response to current
market pressures. The survey results, and a series of
in-depth interviews conducted for this paper, suggest
three forces that will shape the world of R&D over the
coming years:
● Responsiveness to the market. The survey clearly
indicates that R&D is high up the hierarchy of
corporate priorities—asked to identify their overall
strategic priorities, respondents put product
development third, just behind cost-cutting and
strengthening customer relationships. But the
emphasis rests heavily on the D(evelopment) part
of the equation. Market pressures to keep up with
competitors’ innovations and to satisfy more
demanding customers are the two top drivers of
R&D activity, according to survey respondents. In
this environment, anything companies can do to
reduce the odds of failure as they embark on new
research projects is critical.
● Globalisation. Competition for talent, new
technologies and easier market access have
accelerated the process of R&D globalisation, with
countries such as India and China hosting
significant volumes of R&D activity for
multinationals. Cost is a driver of globalisation
too, but its significance can be overplayed as far as
R&D goes. Once infrastructure and coordination
costs for managing distributed R&D facilities are
included, the total savings are not as huge as
Executive Summary
© The Economist Intelligence Unit 2004 3
Harnessing innovation
R & D in a global growth economy
popular headlines suggest. Speed of development
is a more important benefit of the global research
economy.
● Customer collaboration. A more market-oriented
approach to R&D is driving R&D leaders to work
more closely with customers as they develop new
products and services. But there are challenges in
this approach. While collaboration is key for
creating demand-driven innovations, survey
participants also noted that maintaining customer
involvement ranked as one of the leading
roadblocks to successful R&D projects.
This evolving innovation landscape promise a more
effective R&D process, one that sharpens the
decision-making process as firms choose where to
allocate their R&D spend and that increases the
chances of launching commercially viable new
products. It may also encourage an even more
pronounced division of labour in the world of
research, with governments, universities and start-up
companies focusing on “blue-sky” research projects
and companies working on more incremental
development activities. The old adage, that genius is
99% perspiration and 1% inspiration, looks truer than
ever of corporate R&D.
Of the following priorities, indicate the three that are most important to your company's current strategy
(% respondents)
Cost cutting 50
Improving customer relationships 46
R&D/product development 45
Entering new markets 44
Brand-building 38
Entering new alliance partnerships 25
Outsourcing non-core processes 24
Improving compliance and risk management 12
Mergers & acquisitions 10
Source: Economist Intelligence Unit survey, March-April 2004
4 © The Economist Intelligence Unit 2004
Harnessing innovation
R & D in a global growth economy
In a world of dwindling natural resources, there
is no shortage of human ingenuity—just ask the
overworked US Patent and Trademark Office. It
registered over 350,000 patent applications in
2003, while granting over 180,000 patents for
inventions deemed “new, useful and not obvious”.
But there is often a yawning gap of time,
investment, and energy between an initial bout of
inspiration and a product’s eventual entry into a
market. This level of uncertainty and risk unnerves
executives, who know that new products are the
competitive lifeblood of their companies and that the
marketplace is increasingly unforgiving of delay and
deficiencies in product development.
Asked to identify the drivers of R&D activity, the
survey respondents rated the most significant forces
as more demanding customers, market pressure to
keep up with competitors, the development of new
technologies and shorter product life cycles. With
the stakes so high—traditional R&D budgets amount
to 5-10% of companies’ annual sales and market—
it’s little wonder organisations are obsessed with
getting the choice of research direction to pursue
right.
Finessing the front endTheir answer is to move R&D planning and projects
closer to the market than has traditionally been the
case. Although many companies retain a central R&D
unit to take a longer-term research perspective, R&D
funds now tend to get distributed across a mix of
business unit and basic research programmes that
resemble stock portfolios in terms of their timescale,
risks, and expected returns. “In the business units, the
typical lifecycle for innovation is to look forward about
18-36 months depending on the particular
technology, while the central R&D labs take a view of
three, five or seven years out to concentrate on what is
going to radically change the price or performance of a
technical area,” says John Eaton, vice-president for
corporate development at Agilent Technologies, a
solution provider for the communications, electronics
From inspiration to income
What percentage of your company’s current sales is represented by products less than three years old?
(% respondents)
1-10% 21
11-15% 8
16-20% 10
21-25% 14
Over 25% 48
Source: Economist Intelligence Unit survey, March-April 2004
© The Economist Intelligence Unit 2004 5
Harnessing innovation
R & D in a global growth economy
and life sciences industries.
In similar vein, most R&D planning exercises try to
combine both top-down and bottom-up strategies. In
IBM’s case, for instance, there is an annual review of
strategic research areas called the Global Technology
Outlook, a document that helps synchronise the
objectives of IBM Research and corporate
management from a product, marketing and strategy
standpoint. According to Dr Horn, the Global
Technology Outlook is not a shopping list of R&D
projects so much as an attempt to answer where IT is
going: which areas are likely to be commoditised;
which areas should remain high-margin; and where
IBM needs to compete based upon the market
opportunity and the resources it can bring to bear.
Based upon the key priorities identified in the Global
Technology Outlook, a bottom-up process is launched
to translate those insights into research programmes
and specific projects.
Other companies plan their R&D initiatives through
a more bottom-up approach. Agilent creates a
statement of business goals and then pushes decision-
making responsibility for research programmes and
projects as far down the organisation as possible.
However, sometimes the company overrides this
process and deliberately allocates more investment
dollars at the top in a particular technology area.
When the camera phone market launched in Asia,
for example, the company decided to accelerate
investment in optical sensors with the aim of
commercialising its technology via this market, a
decision that probably would have not been made
under a classic “bottom-up” model. “If the decision to
invest in optical sensors had been left solely to the
business units, it might not have been seen as a big
enough opportunity to justify R&D funding. So even
though the general model of innovation is a bottom-
up approach, there are exceptions where a top-down
strategy may be more desirable”, says Mr Eaton.
Top-down or bottom-up, the decision to place an
R&D bet is fundamentally a business or strategy
question rather than a design problem. According to
James Andrew, head of the Boston Consulting Group’s
Innovation and Commercialisation Area, the task for
R&D managers is to see beyond scientific or
engineering milestones in order to understand just
how a given innovation might play out in the market.
So while firms generally retain a preference for
innovating and developing products in-house, they
also recognise the value of external input. Some
companies have formal structures to capture
innovation by external companies. Most source new
In general, what do you believe are the forces driving R&D today?
Please rate each on a scale of 1 to 4, where 1=significant force and 4=not a force
(% respondents)
1 2 3 4
More demanding customers, driving the need for innovative products 57 30 10 3
Market pressure to keep up with competitors’ innovation 53 30 14 3
Development of new technologies 37 42 17 5
Shorter product life cycles 27 37 28 8
Rapid commoditisation of many products 25 40 29 6
Interest in co-developing products from customers 12 35 39 15
Pressure from senior managers to boost innovation 7 37 43 13
Access to 24/7 global R&D processes 7 34 39 20
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.Source: Economist Intelligence Unit survey, March-April 2004
6 © The Economist Intelligence Unit 2004
Harnessing innovation
R & D in a global growth economy
In 2002, BMW became the first non-North American company
to receive the prestigious Outstanding Corporate Innovator
(OCI) award given by the Product Management Development
Association (PDMA). According to Dr Frank Niederlaender,
Director of R&D Strategy, the award acknowledged BMW’s
distinct system for capturing new ideas and turning them
into R&D projects.
The mandate for screening R&D proposals falls largely
upon innovation councils that are organised according to
various automotive sub-systems. Innovation councils are the
main home for new ideas with the council manager ranking
relevant proposals in their specific area of responsibility.
Each year, the innovation council manager works through
their idea list with members of corporate strategy and
branding. The goal is not only to understand the engineering
or performance improvement promised by a given proposal,
but to ensure that the idea is congruent with BMW’s larger
strategic and branding goals. After the ideas are assessed and
ranked, they enter into the regular R&D budgeting process.
While this happens inside of the company, other teams are
hard at work on the outside. For example, BMW sent a
research team to live in the US for several months just to
observe the American driving experience and typical habits.
The team’s charter was to translate their observations into
specific ideas to be analysed by central R&D in Germany.
Once ideas are funded as projects, the next decision
involves where to base the R&D effort. Aside from its central
R&D labs in Munich, BMW maintains several overseas
development facilities. Dr Niederlaender remarks that
locating certain R&D operations overseas helps BMW to
understand target markets better as well as helping it source
new ideas.
A second and increasingly important reason for sourcing
outside expertise is that areas of innovation often lie at
points of convergence with other industries. An example
would be infotainment, a large growth area for carmakers but
not one readily associated with the automobile industry. The
primary innovative challenge is how to make sure that a DVD
player or other entertainment device works seamlessly with
the rest of the automotive systems. If it can’t integrate
tightly with the entire unit, it won’t make the cut. “Inside a
car, the main activity is driving”, says Dr Niederlaender.
“Everything else must support and enhance that experience.
Otherwise, it is a distraction, not an innovation.”
BMW’s innovation engine
How does your company usually come up with new product ideas?
Please rate each on a scale of 1 to 4, where 1=a very common method and 4=a very uncommon method
(% respondents)
1 2 3 4
In response to market research indicating customer demand 29 41 20 9
In response to competitors’ new products 27 38 26 9
In collaboration with customers 26 42 25 6
In collaboration with partners 23 38 25 14
By experimentation within R&D labs 21 25 25 29
By encouraging all employees to come forward with product ideas 17 40 33 11
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.Source: Econ-omist Intelligence Unit survey, March-April 2004
© The Economist Intelligence Unit 2004 7
Harnessing innovation
R & D in a global growth economy
ideas from outside company walls as well as within
them. Asked how their companies came up with new
product ideas, experimentation within R&D labs
trailed in behind market research into customer
demand, reaction to competitors’ innovation and
collaboration with customers and partners.
In this market-oriented environment, the technical
challenges of coming up with new products are less of
a pre-occupation. The top two roadblocks to successful
R&D at respondents’ companies (time/cost overruns,
competing priorities) are challenges of internal
organisation. The next two (market research,
gathering end-user input) beg questions of how a
company interacts with its customers, suppliers and
other stakeholders. The least significant roadblocks
(over-engineering, designing for production)
constitute the nuts-and-bolts issues often associated
with product development. If companies get their
internal processes and orientation to the market right,
the survey suggests, the actual engineering will tend
to work itself out.
Global trends and local realities
One answer to the organisational challenges that
companies face is to internationalise R&D operations.
From Bangalore to Beijing, R&D organisations are
splitting up research and design work, distributing it
around the globe, and re-assembling the results.
Around half of the survey group manage R&D
multinationally, either through global teams that work
on pieces of the same problem or via regional R&D
resources that support several national markets.
Some parts of the R&D process are likelier to be
done remotely than others, of course. There are times
when a company intends to change its basic R&D
direction. Fundamental shifts in research direction
rarely occur without high level buy-in from corporate
management. Hence, those decisions are less likely to
occur far from the home office.
But there are also areas of R&D that concentrate on
extending an existing product line’s functionality, or
producing it at lower cost, or stripping out certain
What are the roadblocks to successful R&D at your company?
(% respondents)
Time and cost overruns 60
Competing development priorities 53
Poor upfront market research 52
Failure to gather sufficient or relevant end-user input 44
Poor inter-departmental communications 39
Over engineering 24
Lack of design-for-manufacture 20
Source: Economist Intelligence Unit survey, March-April 2004
8 © The Economist Intelligence Unit 2004
Harnessing innovation
R & D in a global growth economy
features to reposition it for another market. These
projects tend to be done in a lower-cost country than
in the originating country.
Production engineering is another area that lends
itself to offshoring. Given the fact that many mass
production facilities are located in developing
countries, it makes sense to conduct process R&D
(how to produce the same unit more cheaply or more
units for the same price) close to the facility where the
units are being made.
Unlike some other business processes, however,
low wages are not the main catalyst for the
“If you want something done right, you have to do it
yourself” is a philosophy that has guided a host of innovative
companies right over the cliff. Past success often blinkers
firms to what the market might demand and encourages
them to focus on logical extensions of what they’ve already
done. This is the hallmark of closed innovation.
On the other hand, open innovation advocates that there
are too many good ideas generated by people who don’t
work for you to ignore. Even the most talented companies
have to take external knowledge and ideas into account
when they embark on innovation. Nokia, a Finnish
telecommunications giant, has an increasingly external
orientation through Innovent, an innovation team that
combines seed-level VC investment with hands-on
development to help early-stage companies evolve into
innovation partners for Nokia. Stephanie Keller-Bottom,
director of Innovent, notes that one of Innovent’s key tasks
is to access people inside Nokia who are working on a
particular problem and show them the tangible benefits of
working with a given start-up’s technology.
At any given time, Ms. Keller-Bottom expects to see at
least 30-40% of the Innovent portfolio engaging in some
type of innovation transfer with the Nokia mother ship. These
actions could be delivery of a prototype, running a pilot, or
entering some kind of co-development licensing agreement.
“To demonstrate the value of open innovation, one simply
cannot come into a large company armed with just
concepts”, says Ms Keller-Bottom. “You have to come into
the company with a tangible demonstration of value.”
Why go through the trouble of trying to convince a
hardened corporate engineer of the merits of an external
innovation? “Many of these technologies may not yet be
perfect and an incumbent might say, ‘gee, it’s not perfect
and in a year we’ll have something better’”, says Ms Keller-
Bottom. “But the reality is that if you don’t get an innovation
out working in the market fast and let it begin to evolve with
the market, somebody else is going to do it and it is generally
a start-up that one of your competitors is about to acquire.”
Open or closed?
If you have research and development activities in time zones around the world, how do you coordinate that activity?
(% respondents)
Research and development is coordinated on a regional basis (eg, EMEA, the Americas) 30
Research and development is managed globally, with round-the-clock teams who work consecutively on the same projects 30
Research and development is carried out separately in each country 25
Other 16
Source: Economist Intelligence Unit survey, March-April 2004
© The Economist Intelligence Unit 2004 9
Harnessing innovation
R & D in a global growth economy
Some two-thirds of the US economy now depends on
providing services ranging from haircuts to Initial Public
Offerings (IPO). Similar trends hold in other advanced
economies. If the service economy has become such a
powerful economic force, why hasn’t more service-oriented
R&D been conducted? Is there a difference between how a
company innovates to produce a better silicon chip and how
it innovates around the process of filing an insurance claim?
Such problems are receiving increased analysis and
investment. In the case of R&D giant IBM, over half of the
company’s revenue is derived from services. Getting IBM
Research into the services business has meant putting
researchers in direct contact with customers to help solve a
problem before a commercial solution exists, a practice
dubbed “rent-a-researcher” by the media when it first began.
Currently, there are around 13 “micro-practices” within
the R&D group where research is proceeding on projects that
IBM hopes will blossom one day into stand-alone service
businesses. “The present and future challenge for this type of
R&D is innovating to provide the same level of differentiation
for a service as we do for a product”, says Dr Paul Horn, senior
vice-president of IBM Research. One example would be the
field of text analytics, where software analyses both the
structure and meaning of a section of text. Combining this
software with media consulting from IBM Global Services, a
major record label discovered that the level and nature of
conversation in Internet chat rooms spiked about two weeks
before a hit record was released.
What about lousy service?
globalisation of R&D. Although there are clear
economic reasons for locating certain R&D work in
lower-cost countries, relocating R&D resources solely
because of labour costs is a losing proposition. “There
is no such thing as low-cost intellectual property”,
declares IBM’s Dr Horn. Aside from the travel,
coordination and communications expense, the labour
rate itself is climbing as recipient countries become
more sophisticated economies. The current rule of
thumb among India’s IT professionals is to expect a
15% pay rise every year. Such narrowing becomes even
more pronounced once top management cost is
included.
More important to the globalisation trend is the
ability to innovate around the clock. But it is no small
task to manage this process. According to Fred Weber,
chief technology officer for AMD, a leading
semiconductor manufacturer, companies must avoid
the pitfalls of compartmentalisation. “Whenever
possible, we try to ensure that a remote site does not
build up its own little fiefdom of products that it is
making. Rather we aim to develop an integrated global
engineering force. So we might split projects across
multiple locations.”
AMD’s latest Opteron processor resulted from teams
working simultaneously in Texas, California, Singapore
and Dresden in Germany, for example. But the
challenges posed by this structure can be formidable,
acknowledges Mr Weber. “When you see somebody
everyday and you have lunch with them, you
understand them a lot better than when you talk on
the phone to them once a week and see them once a
year.” Cultural differences further exacerbate this lack
of face-to-face contact.
10 © The Economist Intelligence Unit 2004
Harnessing innovation
R & D in a global growth economy
Customer collaboration
If constructive interaction with colleagues is vital,
collaboration with customers is also seen as
increasingly critical. No matter where they sit in a
value chain, differentiation boils down to how firms
optimise three types of knowledge: domain knowledge
of a particular topic area; process knowledge for
innovating better, faster and cheaper than the
competition; and customer knowledge of what the
end-user demands or is about to demand. Very few
firms can claim world-class expertise in all three areas,
hence the drive to collaborate with customers at the
concept and prototyping stages.
It hasn’t always been so. Henry Ford once quipped
that if he had listened to his customers, he would have
invented a faster horse. In 1997, Professor Clayton
Christiansen jolted numerous boardrooms by arguing
in The Innovator’s Dilemma that listening too much to
customer input is a recipe for disaster. Somewhere
between Mssrs Ford and Christiansen’s circumspect
views and sugar-coated management treatises about
becoming intimate with customers, R&D executives
must balance often conflicting priorities.
One of the strongest arguments for collaboration is
that an initial buy-in via a large customer can be
crucial to jump-start an innovation. “The value behind
involving customers is that there is strong validation
of a technology’s potential early in the process”, says
Gordon Aspin, chief operating officer for TTPCom, an
independent technology developer for mobile devices.
Such validation is easier to come by when there is a
simple direct relationship between the innovator and
the direct customer. But it is often the case that the
innovator must get feedback from the customer’s
customer.
Take semiconductors, which used be seen as pieces
of plumbing that could be mixed and matched to
create a given system. But now that more advanced
functions such as graphics and audio have been
integrated into single chips, it has become much more
difficult to separate chip design from the eventual
system design and it has become much more critical to
validate a particular innovation earlier in the process
because it affects everything else downstream.
The telecoms industry is another case in point.
When Japan’s Sharp corporation won the contract to
supply handsets for Vodafone Live!, they used internal
software from TTPCom. Early in the process, TTPCom
engineers had to interact with Vodafone’s technical
staff even though the UK carrier was officially a
customer of Sharp. “Sometimes this causes a bit of
tension”, admits Mr Aspin. “But since it’s more
important to everyone concerned that the product
works, there is more flexibility on the part of the
terminal manufacturers that we are connected with
the end customer.”
Successful R&D collaboration with customers
carries other challenges. While obvious concerns for
the protection of intellectual property (IP) come to
If you are collaborating with customers on R&D, what benefits do you expect as a result?
Please rank from 1 (most important) to 4 (least important)
Rank Points
Better products 1 499
Stronger validation of the product in the market 2 493
Stronger relationship 3 448
Quicker time-to-market 4 335
Source: Economist Intelligence Unit survey, March-April 2004
© The Economist Intelligence Unit 2004 11
Harnessing innovation
R & D in a global growth economy
mind, one of the greatest challenges is maintaining a
sense of urgency after the initial collaboration deals
have been struck. Survey participants rated the
problems of keeping both the customer and their own
top management engaged in the innovation process as
one of their biggest headaches.
Another key obstacle to successful collaboration is
striking the right balance between innovating to help
a customer overcome a problem versus the need for
the innovator to create something that can be sold on
to other customers. “There has to be a balance struck
between the needs of a customer to have a solution
carefully tailored to their requirements and our need
to ensure that the core technology remains compatible
with various platforms so that we can sell it across
multiple customers”, says Mr Aspin. Often this balance
is struck through a risk-sharing agreement, under
which the specific implementation of a technology is
owned by the customer while the innovator is able to
replicate the generic solution.
Company size is a critical variable in determining
the ability of companies to orientate their innovation
efforts around customer requirements. If firms are too
small, they cannot innovate at a systems-level, where
some of the most value is added. But if they grow too
large, their need to feed the earnings machine each
quarter often compels them to create solutions for the
widest possible market. Responding to specific
customer requests for innovative, tailored solutions
becomes that much harder.
Matching the marketMuch of R&D folklore is built on stories of unexpected
discoveries and maverick inventors. It remains the case
that between inspiration and income lies uncharted
territory where luck and sheer bull-headedness can be
as critical as formal knowledge and access to capital.
But successful R&D in the 21st century is not only
judged by what companies discover but how they do so,
whether applying themselves to customer problems,
compressing innovation timescales through
globalisation or allocating research budgets through
systematic prioritisation of ideas.
Romantics need not despair, however. Market-
driven R&D does not mean a future trend towards
mental “sweatshops”, where global firms steadily
extract innovation as if it were some sort of mineral.
“The thing to remember is that customer environments
change as often as ours do,” says Mr Eaton at Agilent.
“They experience changes in cost, performance and
skill needs for their markets. So their problems are
constantly evolving.” For that bit of continuity, R&D
practitioners can only be grateful. There will never be
a shortage of work.
What are the biggest challenges you face in collaborating with your customers on R&D?
Please rank from 1 (most challenging) to 5 (least challenging)
Rank Points
Sustaining customer participation throughout the innovation lifecycle 1 605
Customer input is too narrowly focused 2 596
Convincing top management on both sides about the value of collaboration 3 595
Intellectual property rights 4 447
Compensating alpha or beta customers for participating while keeping future profit potential 5 437
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
Source: Economist Intelligence Unit survey, March-April 2004
Appendix: Survey results
A total of 188 executives worldwide participated in our survey, which took place in March-April 2004.
Our thanks are due to all respondents for their time and insights.
Please note that not all answers add up to 100, because of rounding or because respondents could give multiple
answers to some questions.
12 © The Economist Intelligence Unit 2004
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
Demographics
What were your organisation's global revenues in US dollars in 2003?
(% respondents)
$250m or less 46
$250m-$500m 8
$500m-$1bn 7
$1bn-$3bn 8
$3bn-$8bn 12
$8bn or more 20
In which region are you personally based?
(% respondents)
Western Europe 34
Asia-Pacific 32
North America 27
Middle East and Africa 7
© The Economist Intelligence Unit 2004 13
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
Which of the following best describes your title?
(% respondents)
Manager 37
CEO/COO/President/Managing director 17
SVP/VP/Senior executive 17
CIO/Technology director/Chief knowledge officer 8
CFO/Treasurer/Comptroller 6
Board member 5
Other 10
What are your main functional roles?
(% respondents)
Business development 45
General management 34
Marketing and sales 31
Strategy and planning 33
IT 14
R&D 14
Finance 14
Operations and production 14
Customer service 13
Supply-chain management 10
Human resources 7
Risk 5
Legal 2
14 © The Economist Intelligence Unit 2004
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
What is your primary industry?
(% respondents)
IT and computer services 28
Automotive 25
Telecoms 15
Entertainment, media and publishing 9
Aerospace and defence 5
Electronic and electrical equipment 5
Energy 3
Materials science (eg, nanotechnology, smart materials) 1
Other 9
R&D in the global growth economy
What percentage of your company’s current sales is represented by products less than three years old?
(% respondents)
1-10% 21
11-15% 8
16-20% 10
21-25% 14
Over 25% 48
© The Economist Intelligence Unit 2004 15
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
How long, on average, does it take your company to develop a product, from conception to commercial launch
(% respondents)
Under 3 months 5
3-6 months 11
6-9 months 14
9-12 months 23
12-18 months 16
18-24 months 15
Over 24 months 17
Of the following priorities, indicate the three that are most important to your company's current strategy?
(% respondents)
Cost cutting 50
Improving customer relationships 46
R&D/product development 45
Entering new markets 44
Brand-building 38
Entering new alliance partnerships 25
Outsourcing non-core processes 24
Improving compliance and risk management 12
Mergers & acquisitions 10
How much is invested annually by your company in R&D as a percentage of sales?
(% respondents)
1-5% 41
6-10% 25
11-15% 15
16-20% 8
Over 20% 12
16 © The Economist Intelligence Unit 2004
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
In general, what do you believe are the forces driving R&D today?
Please rate each on a scale of 1 to 4, where 1=significant force and 4=not a force
(% respondents)
1 2 3 4
More demanding customers, driving the need for innovative products 57 30 10 3
Market pressure to keep up with competitors’ innovation 53 30 14 3
Development of new technologies 37 42 17 5
Shorter product life cycles 27 38 28 8
Rapid commoditisation of many products 25 40 29 6
Interest in co-developing products from customers 12 35 39 15
Pressure from senior managers to boost innovation 7 37 43 13
Access to 24/7 global R&D processes 7 34 39 20
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
What is your company’s preferred method for innovating and producing new products?
(% respondents)
Innovate and develop products in-house 53
Work with partners to co-develop products 26
Buy or license existing technology and customise it 11
Acquire new innovative capabilities through joint-venture or investment in a target market 6
Sponsor universities or institutions to undertake research 2
Other 2
© The Economist Intelligence Unit 2004 17
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
In which industries do you believe corporations will make the greatest R&D strides over the coming three years? Choose up to threeindustries
(% respondents)
Materials science (eg, nanotechnology, smart materials) 54
IT and computer services 51
Telecommunications 45
Electronic and electrical equipment 29
Automotive 28
Energy 25
Aerospace and defence 23
How does your company usually come up with new product ideas?
Please rate each on a scale of 1 to 4, where 1=a very common method and 4=a very uncommon method
(% respondents)
1 2 3 4
In response to market research indicating customer demand 29 41 20 9
In response to competitors’ new products 27 38 26 9
In collaboration with customers 26 42 25 6
In collaboration with partners 23 38 25 14
By experimentation within R&D labs 21 25 25 29
By encouraging all employees to come forward with product ideas 17 40 33 11
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
If you have research and development activities in time zones around the world, how do you coordinate that activity?
(% respondents)
Research and development is coordinated on a regional basis (eg, EMEA, the Americas) 30
Research and development is managed globally, with round-the-clock teams who work consecutively on the same projects 30
Research and development is carried out separately in each country 25
Other 16
18 © The Economist Intelligence Unit 2004
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
What are the roadblocks to successful R&D at your company?
(% respondents)
Time and cost overruns 60
Competing development priorities 53
Poor upfront market research 52
Failure to gather sufficient or relevant end-user input 44
Poor inter-departmental communications 39
Over engineering 24
Lack of design-for-manufacture 20
What are the criteria against which new product development processes are measured?
Please rank each factor from 1 (most important) to 4 (least important) as it applies to your company’s product innovation goals
Rank Points
Quality 1 516
Cost 2 491
Uniqueness 3 433
Time-to-market 4 433
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
If you collaborate with customers on R&D, at what stage do they become involved?
(% respondents)
Concept 46
Prototype 26
Testing 18
Pre-commercial launch 9
© The Economist Intelligence Unit 2004 19
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
If you are collaborating with customers on R&D, what benefits do you expect as a result?
Please rank from 1 (most important) to 4 (least important)
Rank Points
Better products 1 499
Stronger validation of the product in the market 2 493
Stronger relationship 3 448
Quicker time-to-market 4 335
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
What are the biggest challenges you face in collaborating with your customers on R&D?
Please rank from 1 (most challenging) to 5 (least challenging)
Rank Points
Sustaining customer participation throughout the innovation lifecycle 1 605
Customer input is too narrowly focused 2 596
Convincing top management on both sides about the value of collaboration 3 595
Intellectual property rights 4 447
Compensating alpha or beta customers for participating while keeping future profit potential 5 437
Respondents were asked to rank each answer in order. For each respondent, one point was assigned to the bottom ranked answer, two points to the next rank up, and so on.
20 © The Economist Intelligence Unit 2004
Appendix: Survey results
Harnessing innovation
R & D in a global growth economy
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