For the 10th year, Strategy& analyzed R&D investment at the 1,000 biggest-spending public companies in the world. In addition, we interviewed and surveyed more than 500 innovation leaders to get their perspectives on changes in innovation at their companies over the last decade and what they expect in the 10 years to come.
2014 Global Innovation 1000: Proven paths to innovation success
1. by Barry Jaruzelski, Volcker Staack, and Brad Goehle
2014 Global Innovation 1000
Proven paths to innovation
success
2. R&D spending at highest level ever
R&D spending reached a record US$647 billion in 2014
Global Innovation 1000 R&D spending US$ billions
9-year CAGR = 5.5%
$400 $409 $447
$501 $538 $508
$560
$614 $638 $647
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year-on-Year
Growth Rate
2.2% 9.3% 12.2% 7.3% -5.6% 10.3% 9.7% 3.8% 1.4%
Note: Historical data referenced in the 2014 and future studies will not always align with previously published figures for the 2005 through 2012 studies
because of a methodology change implemented in 2013 that was applied to prior year data in 2014.
Sources: Bloomberg data; Capital IQ data; Strategy& Company analysis
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3. Chinese innovation spending is up
Over the past 10 years, Chinese
companies’ share of total R&D
spending has grown by a factor
of 15
…In the past year alone, innovation
spending in China increased 46%
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4. Not all industries are spending more
Only half of the industries increased their R&D spending
in 2014
Percentage change in R&D spending by industry 2013-14
12
10
8
6
4
2
0
-2
-4
-6
-8
16.5%
Software
and
Internet
2.1%
Auto
-0.5%
Aerospace
and
defense
-1.2%
Health
4.2%
4.1%
Industrials
Chemicals
and
energy
3.2%
-7.5%
Telecom Other
-1.8%
Consumer
-1.8%
Computing
and
electronics
Software & Internet companies increased spend more than
anyone else: 16.5%
Sources: Bloomberg data; Capital IQ data; Strategy& analysis
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5. Most Innovative vs. Top Spenders
For the 5th year in a row, we found little overlap between
the 10 Most Innovative companies and Top 10 R&D Spenders
The 10 Most Innovative Companies 2014
Company Industry 2014 R&D
spending1)
Apple Computing and
electronics
4.5
Google Software and Internet 8.0
Amazon Software and Internet 6.6
Samsung Computing and
electronics
13.4
Tesla Auto 0.2
3M Industrials 1.7
General
Industrials 4.8
Electric
Microsoft Software and Internet 10.4
IBM Computing and
electronics
6.2
Procter &
Gamble
Consumer 2.0
The Top 10 R&D Spenders 2014
Company Industry 2014 R&D
spending1)
Volkswagen Auto 13.5
Samsung Computing and
electronics
13.4
Intel Computing and
electronics
10.6
Microsoft Software and Internet 10.4
Roche Health 10.0
Novartis Health 9.9
Toyota Auto 9.1
Johnson &
Health 8.2
Johnson
Google Software and Internet 8.0
Merck & Co. Health 7.5
NEW
Increase or decrease within top 10 ranking 1) In US$ billion. Sources: Bloomberg data; Capital IQ data; Strategy& analysis compared to 2013
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6. The Most Innovative outperform
Once again we found that the 10 Most Innovative companies
outperformed the Top 10 R&D Spenders
Performance of the 10 Most Innovative Companies vs. Top 10 R&D Spenders, 2014
51%
33%
Market cap growth
(5-yr. CAGR)
100%
50%
71%
65%
EBITDA as a
% of revenue
(5-yr. avg.)
0%
47% 46%
Revenue growth
(5-yr. CAGR)
Highest
possible score:
Normalized
performance of
industry peers:
Lowest
possible score:
10 Most Innovative Companies Top 10 R&D Spenders
Showing that when it comes to innovation, it's not what you
spend, but how you spend it that matters
Sources: Bloomberg data; Capital IQ data; Strategy& Company analysis
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