JEDDAH — After growing almost 10 percent for the second consecutive year, total R&D investment among the world’s top innovation spenders continues to grow robustly, according to the 2012 Global Innovation 1000 study released Tuesday by global management consulting firm Booz & Company.



The study examined the 1,000 public companies that spent the most on research and development in 2011 and found that innovation spending reached an all-time high of $603 billion during the year, up from $550 billion in 2010. This is an increase of 9.6 percent over 2010 and is the second consecutive year of growth. This rebound comes after spending dropped 3.5 percent between 2008 and 2009 during the height of the recession.



“Saudi Arabia’s Saudi Basic Industries Corp. (SABIC) is the only company headquartered in the GCC to make it into the Global Innovation 1000 list since 2008,” said Chadi Moujaes, Partner with Booz & Company. “This year, SABIC ranked 416th out of the 1,000-strong list of innovative companies and is one of the world’s top spenders in R&D, outperforming many of its competitors. Moreover, the company’s ranking this year is an improvement over last year’s 471 position. Total R&D spend by SABIC in 2011 was $219 million, a 26 percent increase from $174 million in 2010.”



Overall, chemical and energy companies in the Global Innovation 1000 list maintained their R&D spend during the course of the year. Likewise, SABIC’s R&D intensity remained at 0.43 percent for a second consecutive year.

Booz & Company also surveyed nearly 700 innovation leaders from companies worldwide to determine which companies those leaders see as the most innovative companies in the world. Apple, Google, and 3M topped the list for the third consecutive year.



The most innovative companies are seldom the biggest spenders, the study confirms. When compared to the 10 companies that spent the most on R&D, the Top 10 most innovative companies outperformed across key financial metrics, including revenue growth, market cap growth, and profit as a percentage of revenue.



“Consistent with our study findings from previous years, there is no long-term correlation between the amount spent on innovation and an organization’s overall financial success,” said Barry Jaruzelski, senior partner at Booz & Company and global leader of the Engineered Products & Services practice. He also noted that “what really matters is not the amount spent, but how those R&D funds are invested in talent, process, and tools.”



“R&D spending does not ensure increased financial gains, nor does it guarantee innovation success,” added John Loehr, Partner at Booz & Company and global leader of the firm’s Innovation practice. “Case in point: Apple, Google, and 3M ranked 53rd, 26th, and 86th, respectively, in R&D spending among the Global Innovation 1000 companies.”



Other key findings from this year’s Global Innovation 1000 study:

• The three industries with the greatest R&D investment were computing and electronics, health, and automotive (28 percent, 21 percent, and 16 percent of the total Global Innovation 1000 spend, respectively).


• Two-thirds of the $53bn increase in R&D spending between 2010 and 2011 came from the computing and electronics, automotive, and industrials sectors.


• 75 percent of companies increased their R&D spending from the previous year in 2011, up from 68 percent in 2010.


• This year Amazon joined the top 10 “Most Innovative” companies pushing out Facebook. For the third straight year Samsung rose in rank on the list (to fourth place, up from seventh place last year), and Apple, Google, and 3M took the top three positions, respectively, also for the third consecutive year.


• Regionally, companies based in North America grew their R&D spending by 9.7 percent — just above the global average of 9.6 percent — while Europe and Japan grew theirs at below-average rates of 5.4 percent and 2.4 percent, respectively.


• India- and China-based firms again increased R&D investment at the highest rate overall across regions (27 percent on average), although from a small R&D spending base.

“In addition to the R&D spending data trend analysis, this year’s study also examined the early stages of innovation, specifically looking at the tools, processes, and mechanisms companies use to generate ideas and how they take those ideas to market”, said Rasheed El Tayeb, Principal with Booz & Company.



Nearly half of those surveyed said their organizations were just average or marginally effective at generating new ideas and converting them into potential future products. — SG