The Wall Street Journal reports that research and development spending at major companies declined last year for the first time in more than a decade, according to a survey by management consulting firm Booz & Co.
Given that the future depends on innovation, this is startling.
But should we worry?
Booz also found that heavy spending on R&D doesn't necessarily lead to recognition as a technology leader.
In a survey of more than 450 "innovation executives" from 400 companies representing $150 billion in annual R&D spending, Booz asked them to name the companies they considered "most innovative."
Apple last year spent about 3.1% of its sales on R&D, or about half the typical level for computer and electronic companies, said Barry Jaruzelski, a partner at Booz, and yet Apple's R&D appears to be far more effective than that of many rivals.
"It's much more about how you do it than how much you spend," Mr. Jaruzelski said.
Apple succeeds because it has a deep understanding of consumers, is focused in its projects "as opposed to trying to spread their bets," and attracts superior talent, he said.
Earlier studies show the same thing. Christoph-Friedrich von Braun, in his study “The Innovation War,” analyzed thirty Global 500 firms and found almost no correlation between increased R&D spending and improvement in profitability.
The sad truth is that traditional management is constitutionally ill-suited to foster path-breaking innovation. Traditional management is good at milking the cash cow of existing proprietary knowledge. Bold innovation is usually perceived as a threat to the existing structures and processes. Traditional management is fatally committed to the status quo. Throwing money at the problem of innovation doesn’t help. What is needed is a change of mindset.
What Apple, Google, 3M and companies practicing radical management have discovered is that continuous innovation must become the overriding pre-occupation of the whole organization, even at the cost of cannibalizing its own products and services. It involves a radically different way of thinking, speaking and acting in the workplace.
To learn more about radical management, read The Leader's Guide to Radical Management.