Booz & Company

October 22, 2013

Navigating the Digital Future
The 2013 Global Innovation 1000 Study
Introduction
R&D Spending Trends Analysis
Digital Enablers across the Innovation Value Chain

Booz & Company

Booz & Compa...
In 2013, Booz & Company is publishing its 9th Global Innovation
1000 study focusing on the impact of Digital Enablers
Prev...
Over the years, our study has become a recognized contributor to
better understanding what drives innovation success
Selec...
This year’s study, in addition to our annual R&D spend analysis,
focuses on “digital enablers” across the innovation value...
Introduction
R&D Spending Trends Analysis
Digital Enablers across the Innovation Value Chain

Booz & Company

Booz & Compa...
Executive Summary – 2013 R&D Spending Trends
 After two consecutive years of 9%+ growth, global R&D spending returned to ...
R&D spending grew 5.8% in 2013, to its highest level ever—but
this is a slower growth rate than the two prior years of 9%+...
The three industries that spend the most on R&D continue to be
Computing & Electronics, Healthcare, and Automotive
2012 R&...
Nearly three-quarters of the $35B spending growth in 2013 came
from the Software & Internet, Healthcare, and Automotive se...
The Software & Internet industry increased its R&D spending at a
higher rate than any other industry
Change in R&D Spendin...
China continues to increase its R&D spending at a higher rate than
Rest of World (ROW), North America, Europe, and Japan
C...
China has steadily gained revenue share among the Innovation
1000 companies – but is gaining R&D share at an even faster r...
Given strong R&D spending increase combined with very modest
revenue increase, R&D intensity has increased significantly
R...
Overall R&D spending grew at a higher rate than revenue and
increased R&D intensity
Indexed to 1998

R&D, Revenue, and Int...
Google (#12) & Sony (#20) are new Top 20 R&D spenders in 2013
2012 Top 20 R&D Spending Ranking

Increase or decrease withi...
Tesla Motors is a new entrant among the 10 Most Innovative
Companies, Facebook rejoined the list
10 Most Innovative Compan...
Samsung rose in the rankings for the fourth straight year,
displacing 3M as the 3rd most innovative
Change in the 10 Most ...
As in previous years, there are significant differences between the
10 Most Innovative Companies and the Top 10 R&D spende...
Consistent with prior years’ findings, the 10 Most Innovative
Companies outperform the Top 10 Spenders
10 Most Innovative ...
Introduction
R&D Spending Trends Analysis
Digital Enablers across the Innovation Value Chain

Booz & Company

Booz & Compa...
Executive Summary – Survey Findings
 Overall, companies spend an average of 8.1% of their R&D budget on digital enablers;...
Companies use a wide variety of digital Productivity and Market &
Customer Insight enablers across the innovation value ch...
Among all industries Software & Internet companies spend the
highest proportion of their R&D budgets on digital enablers
S...
Companies using digital enablers significantly are 77% more likely
to report that they outperform competitors than moderat...
In 2007 we defined three distinct innovation strategies which we
further explored in subsequent studies
Three Innovation S...
In 2011 we found that Need Seekers possess the highest level of
strategic alignment and cultural support
Innovation Strate...
In 2012 we found that the innovation models use idea generation
tools and mechanisms at the front end that support their s...
In 2013 we found that Need Seekers claimed the highest usage of
digital enablers, with 62% of respondents using them signi...
While priorities differ slightly by innovation strategy, companies
demonstrate a high level of agreement on most used digi...
For the complete study and additional
information on the annual
Booz & Company
Global Innovation 1000 Study

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Booz&Co Global Innovation 1000 Study 2013

  1. 1. Booz & Company October 22, 2013 Navigating the Digital Future The 2013 Global Innovation 1000 Study
  2. 2. Introduction R&D Spending Trends Analysis Digital Enablers across the Innovation Value Chain Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 1
  3. 3. In 2013, Booz & Company is publishing its 9th Global Innovation 1000 study focusing on the impact of Digital Enablers Previous Global Innovation 1000 Studies 2013: Navigating the Digital Future 2005: Money Isn't Everything 2006: Smart Spenders 2007: The Customer Connection 2009: Profits Down, Spending Steady 2010: How Top Innovators Keep Winning 2011: Why Culture is Key Booz & Company 2008: Beyond Borders 2012: Making Ideas Work Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 2
  4. 4. Over the years, our study has become a recognized contributor to better understanding what drives innovation success Selected Media Coverage Highlights  Covered by ABCNews and MSNBC television  Featured on NPR radio in US and BBC Radio in UK  Cited in over 180 publications across 27 countries  Called “The most comprehensive assessment of the relationship between R&D investment and corporate performance” by The Economist Representative Publications Booz & Company Furthering the Innovation Dialogue 2005  Initiated study to better understand how organizations can maximize their return on innovation investment  Found no statistical relationship between R&D spending and success 2006  Defined “High Leverage Innovators” who produced better results per R&D dollar than industry peers  Awarded “2006 Special Achievement Award for Advancing Innovation” by Innovate Forum 2007  Identified and defined three innovation strategies (i.e. need seekers, market readers, and tech drivers)  Examined the connection between performance and and alignment of corporate and innovation strategies 2008  Identified characteristics of global innovation networks (i.e. R&D footprint) that correlated with higher performance  Awarded “Best of Visions” award from PDMA 2009  Reported impact of 2008-09 global recession on R&D spending 2010  Identified the critical capabilities required for successful innovation and their relationship to corporate performance 2011  Examined the links between business strategy, innovation strategy and culture 2012  Examined the early stages of innovation, i.e. generating ideas and converting them into actionable projects Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 3
  5. 5. This year’s study, in addition to our annual R&D spend analysis, focuses on “digital enablers” across the innovation value chain 2013 Global Innovation 1000 Study Digital Enablers across the Innovation Value Chain R&D Spending Trends  Analysis of R&D spending  Understanding application of digital enablers  Annual R&D spending across the 1000 largest R&D spenders globally (publicly-traded firms)  Usage of large set of digital enablers across the innovation value chain  R&D spending by region and industry (absolute spending, growth and proportion of total)  Effectiveness of digital enablers and impact on performance  R&D intensity (spending as percent of revenue)  R&D spending on digital enablers  Top 20 R&D spenders globally  Success factors for leveraging digital enablers  10 Most Innovative Companies  Usage of digital enablers by innovation strategy  Methodology  Methodology  Spending determined based on companies‘ annual reports from their most recent fiscal year, as of June 30, 2013  “Most Innovative Companies” determined based on web-based survey of nearly 400 senior managers and R&D professionals Booz & Company  Web-based survey of nearly 400 senior managers and R&D professionals to understand impact of digital enablers on innovation results (productivity, innovations outcomes, etc.)  Interviews with clients and a subset of survey respondents Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 4
  6. 6. Introduction R&D Spending Trends Analysis Digital Enablers across the Innovation Value Chain Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 5
  7. 7. Executive Summary – 2013 R&D Spending Trends  After two consecutive years of 9%+ growth, global R&D spending returned to the long-term growth trend and grew at 5.8% in 2013 to the highest total ever, $638 billion  The top three industries by R&D spending continue to be Computing & Electronics, Health, and Auto  The Software & Internet, Health, and Auto sectors accounted for 74% of the overall growth in spending; Chemicals & Energy decreased its R&D expenditures  Spending in North America grew at an above average rate of 8.6% while Europe grew at a below average rate of 4.5%; Japan reduced its R&D spending by 3.6%  China increased R&D spending at the highest rate, 35.8%, but deceleration of R&D growth in China compared to previous years is significant (5-year annualized growth rate of ~ 64%)  Tesla Motors and Facebook are new entrants on the 10 Most Innovative Companies list, and Samsung rose in the ranking for the fourth straight year, reaching third place  For the fourth year in a row, the 10 Most Innovative Companies outperformed the Top 10 R&D spenders across key financial metrics – revenue growth, EBITDA margin, and market cap growth Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 6
  8. 8. R&D spending grew 5.8% in 2013, to its highest level ever—but this is a slower growth rate than the two prior years of 9%+ growth Global Innovation 1000 R&D Spending 2002–2013; $ Billions $638 $603 11-year CAGR 5.53% = 5.5% $495 $450 $353 $355 $369 2002 2003 2004 1-year CAGR 0.6% 3.7% 2007 2009 $550 $503 $417 $391 2005 6.2% $521 2006 6.5% 7.9% 10.0% 2008 5.4% 2010 -3.5% 2011 9.3% 2012 9.6% 2013 5.8% Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 7
  9. 9. The three industries that spend the most on R&D continue to be Computing & Electronics, Healthcare, and Automotive 2012 R&D Spending by Industry 2013 R&D Spending by Industry $603 Billions $638 Billions Telecom Other Consumer Aerospace 2% 3% & Defense 4% 2% Software & Internet 7% Computing & Electronics 28% Other Computing & Electronics 27% Software & Internet 8% Chemicals & Energy 7% Industrials Aerospace Telecom & Defense Consumer 2% 3% Chemicals 3% 2% & Energy 6% 10% Industrials 10% 22% 21% 16% 16% Healthcare Automotive Healthcare Automotive Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 8
  10. 10. Nearly three-quarters of the $35B spending growth in 2013 came from the Software & Internet, Healthcare, and Automotive sectors Change in R&D Spending ($ Billions) 38 36 34 32 Decreases Change in 2012-2013 R&D Spending by Industry While Computing & Electronics is the largest spender, Software & Internet experienced the largest absolute spending increase 0.8 0.7 Increases 0.1 -2.0 34.8 2.6 3.4 30 28 3.4 26 Chemicals & Energy was the only sector to decrease its R&D spending this year 24 7.4 22 20 18 16 14 Represents 74% of growth in R&D spending 9.2 12 10 8 6 9.3 4 2 0 Software & Internet Healthcare Automotive Industrials Computing & Electronics Telecom Consumer Other Aerospace & Defense Chemicals & Energy Total Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 9
  11. 11. The Software & Internet industry increased its R&D spending at a higher rate than any other industry Change in R&D Spending by Industry 2012–2013 25 22.1% 21.1% 20 15 10 7.8% 7.1% Weighted Average 6.9% 5.4% 5 5.8% 3.7% 2.0% 0.5% 0 -5 -4.8% Software & Internet Telecom Automotive Healthcare Other Industrials Consumer Computing Aerospace Chemicals & & & Electronics Defense Energy Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 10
  12. 12. China continues to increase its R&D spending at a higher rate than Rest of World (ROW), North America, Europe, and Japan Change in R&D Spending by Region 1-Year Growth Rate (%) 2012–2013 40 R&D Spending by Region 2008 - 2013 45 2013 R&D Spending ($ Billions) 40 248,469.3 35.8% 35 189,136.9 30 135,681.4 35 China 43,949.9 25 20 20 20,526.2 17.5% North America 15 15 Weighted Average 8.6% 10 4.5% 5 5.8% 0 ROW 10 5 Europe 0 -5 -3.6% Japan -5 China ROW North America Europe Japan 0 5 10 15 65 5-Year CAGR (%) Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 11
  13. 13. China has steadily gained revenue share among the Innovation 1000 companies – but is gaining R&D share at an even faster rate Revenue and R&D Spending by Region: 2008-2013 0.4% 4.9% 5.8% China’s R&D share has nearly increased by 8X since 2008 21.5% 1.4% 2.1% 2.5% 5.2% 3.3% 9.2% 5.3% 4.6% 9.9% 6.1% 6.6% 6.2% 7.6% 3.2% 8.7% 6.9% 11.9% 10.8% 21.7% 10.2% 0.8% 22.6% 10.8% 19.9% 20.5% 29.7% 23.3% 23.3% 21.2% 20.1% 21.1% 31.9% 32.3% 36.7% 34.4% 30.2% 35.3% 21.3% 19.1% 34.2% 32.9% China 29.7% 30.0% ROW 34.3% Japan Europe North America 43.5% 40.4% 29.1% R&D Revenue 2008 2008 31.0% R&D Revenue 2009 2009 38.5% 38.3% 29.0% R&D Revenue 2010 2010 39.0% 37.9% 27.4% R&D Revenue 2011 2011 27.3% R&D Revenue 2012 2012 27.1% R&D Revenue 2013 2013 Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 12
  14. 14. Given strong R&D spending increase combined with very modest revenue increase, R&D intensity has increased significantly R&D Spending and Revenue CAGR1) R&D Intensity2) 2008-2013 2008-2013 Intensity (%) CAGR (%) 3.80 3.73% 20 Revenue CAGR R&D Spending CAGR 15 15% 3.60% 3.60 10% 10 8% 6% 5% 3.52% 7% 3.42% 5% 5 2008 2009 3.43% 3.42% 3.40 0.2% 0 -4% -5 3.20 -10 -11% -15 08-09 09-10 10-11 11-12 12-13 3.00 2010 2011 2012 2013 1) Innovation 2013 yearly R&D spending comparison for the 911 companies for which R&D spending available for 2012 and 2013 2) R&D intensity is the share of revenue spent on R&D Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 13
  15. 15. Overall R&D spending grew at a higher rate than revenue and increased R&D intensity Indexed to 1998 R&D, Revenue, and Intensity Indexed to 1998 3.2 R&D Spending 3.0 2.8 Revenue 2.6 2.4 2.2 2.0 1.8 1.6 1.35 1.4 1.2 1.19 1.05 1.00 1.22 1.23 1.22 1.20 1.23 1.14 1.12 1.13 1.11 1.16 1.13 1.18 R&D Spending as % of Revenue 1.0 0.8 0.6 0.4 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 14
  16. 16. Google (#12) & Sony (#20) are new Top 20 R&D spenders in 2013 2012 Top 20 R&D Spending Ranking Increase or decrease within Top 20 ranking compared to 2012 2013 Top 20 R&D Spending Ranking* Rank Company Geography Industry 2012 R&D spending ($B) Rank Company Geography Industry 2013 R&D spending ($B) 1 Toyota Motor Corp Japan Auto 9.9 1 Volkswagen Europe Auto 11.4 2 Novartis AG Europe Health 9.6 2 Samsung ROW Computing & Electronics 10.4 3 Roche Holding AG Europe Health 9.4 3 Roche Holding AG Europe Health 10.2 4 Pfizer Inc N. America Health 9.1 4 Intel Corp North America Computing & Electronics 10.1 5 Microsoft Corp N. America Software & Internet 9.0 5 Microsoft Corp North America Software & Internet 9.8 6 Samsung ROW Computing & Electronics 9.0 6 Toyota Motor Corp Japan Auto 9.8 7 Merck & Co Inc N. America Health 8.5 7 Novartis AG Europe Health 9.3 8 Intel Corp N. America Computing & Electronics 8.4 8 Merck & Co Inc North America Health 8.2 9 General Motors Co N. America Auto 8.1 9 Pfizer Inc North America Health 7.9 10 Nokia OYJ Europe Computing & Electronics 7.8 10 Johnson & Johnson North America Health 7.7 11 Volkswagen AG Europe Auto 7.7 11 General Motors Co North America Auto 7.4 12 Johnson & Johnson N. America Health 7.5 12 Google Inc North America Software & Internet 6.8 13 Sanofi Europe Health 6.7 13 Honda Motor Co Japan Auto 6.8 14 Panasonic Corp Japan Computing & Electronics 6.6 14 Daimler AG Europe Auto 6.6 15 Honda Motor Co Japan Auto 6.6 15 Sanofi Europe Health 6.3 16 GlaxoSmithKline Europe Health 6.3 16 IBM North America Computing &Electronics 6.3 17 IBM N. America Computing & Electronics 6.3 17 GlaxoSmithKline Europe Health 6.3 18 Cisco Systems Inc N. America Computing & Electronics 5.8 18 Nokia OYJ Europe Computing & Electronics 6.1 19 Daimler AG Europe Auto 5.8 19 Panasonic Corp Japan Computing & Electronics 6.1 20 AstraZeneca PLC Europe Health 5.5 20 Sony Corp Japan Computing & Electronics 5.7 NEW NEW Cisco Systems Inc moved to #24 Total $153.6 AstraZeneca PLC moved to #26 Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx *Note: The methodology for calculating R&D spending changed this year, so some rankings are a result of methodology change rather than actual spending change. Total $159.2 15
  17. 17. Tesla Motors is a new entrant among the 10 Most Innovative Companies, Facebook rejoined the list 10 Most Innovative Companies 2013 Rank Company 2013 R&D Spending ($M) Overall Spending Rank Industry Spending Rank 2013 Revenue ($M) Spending as % of Revenue (Intensity) 1 Apple Inc $3,381 43 14 $156,508 2.2% 2 Google Inc $6,793 12 2 $50,175 13.5% 3 Samsung $10,447 2 1 $178,621 5.8% 4 Amazon.com Inc $4,564 30 4 $61,093 7.5% 5 3M Corp $1,634 85 7 $29,904 5.5% 6 General Electric Co $4,520 31 2 $144,796 3.1% 7 Microsoft Corp $9,811 5 1 $73,723 13.3% 8 Intl Business Machines Corp $6,302 16 3 $104,507 6.0% 9 Tesla Motors Inc NEW $274 377 45 $413 66.3% 10 Facebook Inc NEW $1,399 101 7 $5,089 27.5% Procter & Gamble moved to 13th; Toyota moved to 16th Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx Increase or decrease within “Most Innovative” ranking compared to 2012 16
  18. 18. Samsung rose in the rankings for the fourth straight year, displacing 3M as the 3rd most innovative Change in the 10 Most Innovative Companies Ranking 2010-2013 2010 2011 2012 2013 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 17
  19. 19. As in previous years, there are significant differences between the 10 Most Innovative Companies and the Top 10 R&D spenders 2013 Top 10 R&D Spending Ranking 2013 10 Most Innovative Companies Rank Company 2013 R&D Spending ($B) Spending Rank R&D/ Revenue (Intensity) Industry Rank Company 2013 R&D Spending ($B) Region R&D/ Revenue (Intensity) Industry 1 Apple Inc $3.4 43 2.2% Computing & Electronics 1 Volkswagen $11.4 Europe 4.6% Auto 2 Google Inc $6.8 12 13.5% Software & Internet 2 Samsung $10.4 ROW 5.8% Computing & Electronics 3 Samsung $10.4 2 5.8% Computing & Electronics 3 Roche Holding AG $10.2 Europe 21.0% Health 4 Amazon.com Inc $4.6 30 7.5% Software & Internet 4 Intel Corp $10.1 N. America 19.0% Computing & Electronics 5 3M Corp $1.6 85 5.5% Industrials 5 Microsoft Corp $9.8 N. America 13.3% Software & Internet 6 General Electric Co $4.5 31 3.1% Industrials 6 Toyota Motor Corp $9.8 Japan 3.7% Auto 7 Microsoft Corp $9.8 5 13.3% Software & Internet 7 Novartis AG $9.3 Europe 16.5% Health 8 IBM $6.3 16 6.0% Computing & Electronics 8 Merck & Co Inc $8.2 N. America 17.3% Health 9 Tesla Motors Inc $0.3 377 66.3% Auto 9 Pfizer Inc $7.9 N. America 13.3% Health 10 Facebook Inc $1.4 101 27.5% Software & Internet 10 Johnson & Johnson $7.7 N. America 11.4% Health Total R&D Spending $49.1B Total R&D Spending $94.8B Companies appearing on both lists Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 18
  20. 20. Consistent with prior years’ findings, the 10 Most Innovative Companies outperform the Top 10 Spenders 10 Most Innovative Companies* vs. Top 10 R&D Spenders 10 Most Innovative Companies Highest Possible Score:  Among the Most Innovative Companies, all but GE, Microsoft, and Google outperformed their industries on market cap growth 100% 71% 69% Normalized Performance of Industry 50% Peers: Insights Top 10 R&D Spenders  The high market cap growth of the Most Innovative Companies was driven by high performance from Samsung, Apple, and Amazon 66% 54% 45% 45%  Apple, Samsung, and Amazon also saw the greatest revenue growth among the Most Innovative Companies  The Top 10 Spenders lag their industry peers on revenue and market cap growth Lowest Possible Score: 0% Revenue Growth (5-yr. CAGR) EBITDA as a % of Revenue (5-yr. Avg.) Market Cap Growth (5yr. CAGR)  Among the Top 10 Spenders, only Volkswagen and Samsung outperformed their industries on all three financial measures Sources: Bloomberg data; Capital IQ data; Booz & Company Innovation 1000 articles in strategy + business; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx *Only 8 of the 10 Most Innovative Companies were included in this analysis. Tesla and Facebook were removed as they did not have Market Cap data spanning back 5 years. 19
  21. 21. Introduction R&D Spending Trends Analysis Digital Enablers across the Innovation Value Chain Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 20
  22. 22. Executive Summary – Survey Findings  Overall, companies spend an average of 8.1% of their R&D budget on digital enablers; the Software & Internet, Aerospace & Defense, and Health industries spend the highest proportions  These tools fall into two categories: “Productivity Enablers“ and “Market and Customer Insight Enablers” – Productivity Enablers are commonly used, must-have enablers to establish baseline productivity – Market and Customer Insight Enablers are emerging enablers focused on understanding market and customer needs  Our survey results show that usage and effectiveness of these tools aren’t correlated– some heavily used Productivity Enablers simply aren’t very effective, while several less used Market and Customer Insights Enablers turn out to be highly effective  Only ~26% of digital enablers are used significantly and also considered strongly effective by survey respondents  However, companies using enablers significantly are ~77% more likely to report that they outperform competitors than companies using them moderately  We found significant differences in terms of usage based on companies’ overall innovation strategy with Need Seekers claiming highest usage frequency of digital enablers Sources: Bloomberg data; Capital IQ data; Booz & Company Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 21
  23. 23. Companies use a wide variety of digital Productivity and Market & Customer Insight enablers across the innovation value chain Market and Customer Insight Enablers Emerging enablers focused on understanding market and customer needs Productivity Enablers Commonly used, musthave enablers to establish baseline productivity Sources: Booz & Company Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 22
  24. 24. Among all industries Software & Internet companies spend the highest proportion of their R&D budgets on digital enablers Spending on digital enablers, in % of R&D spending and in $B1) Average weighted by # of responses per % spend category2) 15.0% 12.0% 10.0% 7.7 7.2% 7.1% 6.9% 2.6 5.7% 13.8 0.9 9.7 Computing & Electronics 6.5 Auto 1.0 Telecom 4.7 Industrials 2.9 Chemicals & Energy Consumer Health Aerospace & Defense Software & Internet 1.7 Average 8.1% 6.3% Other 7.9% 8.6% Total Spending 1) Calculated by applying the Average of % Spending (as determined by survey respondents) on the left to the overall industry R&D spending (as calculated from Bloomberg and Capital IQ data) 2) % spend categories: <5%, 6-10%, 11-20%, 21-30%, 31-40%, 41-50%, and >50% Sources: Bloomberg data; Capital IQ data; Booz & Company Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 23
  25. 25. Companies using digital enablers significantly are 77% more likely to report that they outperform competitors than moderate users Respondents with perceived overall financial outperformance relative to competitors (in %) +77% 53% 30% Moderate usage of digital enablers Minimal Usage Significant usage of digital enablers 1 2 3 4 5 Significant Usage “Used Moderately” = 1, 2, or 3 “Used Significantly” = 4 or 5 Sources: Booz & Company Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 24
  26. 26. In 2007 we defined three distinct innovation strategies which we further explored in subsequent studies Three Innovation Strategies Example Companies Need Seekers – Consistently strive to be first movers; Proactively engage customers to determine needs and shape new innovations; Determine new innovations market back from market need identification Market Readers – Adopt a 2nd mover strategy; Focus on driving value through incremental change; New innovations determined market back; although not as proactively as Need Seekers Technology Drivers – Drive innovation via technological achievement; Leverage technology for both incremental and breakthrough change. The least proactive of the three strategies in directly contacting customers Sources: Booz & Company Innovation 1000 articles in strategy + business Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 25
  27. 27. In 2011 we found that Need Seekers possess the highest level of strategic alignment and cultural support Innovation Strategy Alignment with Business Strategy % of Respondents Innovation Strategy Supported by Company Culture % of Respondents 100% 100% 7.9% 8.4% Strongly 6.9% Highly Aligned 14.0% Supports 30.3% 80% 80% 41.2% 31.2% 32.9% 34.2% 28.5% 60% 60% 33.7% 50.9% 40% 40% 37.7% 34.7% 20% 33.8% 38.8% 20% 19.8% 3.6% 3.0% 4.4% Need Seeker Market Reader Technology Driver 21.3% 17.1% 15.2% 0% 15.8% Not Aligned 3.6% 0% 0.6% 17.5% 6.9% 6.1% Market Reader Does not Technology Driver Support Need Seeker Sources: Booz & Company 2011 Global Innovation 1000 survey Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 26
  28. 28. In 2012 we found that the innovation models use idea generation tools and mechanisms at the front end that support their strategies “Which of the following tools and mechanisms, if any, does your organization use to generate new ideas?” (1) Indexed average value across all survey respondents End-User Insight Tools     1.17 Idea Work-OutEnd User Insight Tools Sessions Social Network Data Mining End User / Customer Focus Groups Direct Customer Observation 0.92 0.96 Market Insight Sppt  Feedback from Sales & Customer Tools  Traditional Market Research  Seed Funding for Exploratory Research  Periodic Meetings of Technical Technology Foresight Tools Community  Technology Road Mapping  External Technology & Idea Scouting  Cross B.U. Communities of Practice Market Readers over-index on tools/mechanisms that provide market insights and demand leads 0.91 Market Insight Tools Technology Foresight Tools Need Seekers over-index on tools/mechanisms that provide deep end-user insights 1.16 0.91 0.85 0.90 (1) Responses reflect the indexed value of the likelihood that respondents are choosing a value higher or lower compared to the average across all responses. An index value of “1” represents the indexed average of responses 1.21 Technology Drivers over-index on tools/ mechanisms that guide where/ how they can push the tech frontier Sources: Booz & Company 2012 Global Innovation 1000 survey Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 27
  29. 29. In 2013 we found that Need Seekers claimed the highest usage of digital enablers, with 62% of respondents using them significantly Respondents using digital enablers significantly in innovation processes and product development cycles in %, N = 381 62% 48% 25% Need Seekers Technology Drivers Market Readers Sources: Booz & Company 2013 Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 28
  30. 30. While priorities differ slightly by innovation strategy, companies demonstrate a high level of agreement on most used digital enablers Most Used Enablers by Innovation Strategy Color Key: Productivity enabler Market and customer insight enabler Market Readers Monitoring tools Idea capture tools All Three Social media management dashboards Need Seekers Visualization and engagement tools Big data tools Customer profiling Co-design tools Project management Crowdsourcing Collaborative environments CRM systems ERP platforms Simulation tools Tech Drivers Enhanced PLM systems Discussion platforms Rapid prototyping Sources: Booz & Company 2013 Global Innovation 1000 survey; Booz & Company analysis Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 29
  31. 31. For the complete study and additional information on the annual Booz & Company Global Innovation 1000 Study The 2013 Global Innovation 1000 Study: Navigating the Digital Future Please Visit: www.booz.com/innovation1000 (official release on October 22nd) For media or other inquiries, please contact Katrina Grochocki +1-212-551-6415 +1-908-642-3766 Booz & Company Booz & Company's 2013 Global Innovation 1000 Study_Navigating the Digital Future_Fact Pack.pptx 30

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