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2014 Global Innovation 1000: Proven paths to innovation success

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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.

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2014 Global Innovation 1000: Proven paths to innovation success

  1. 1. by Barry Jaruzelski, Volcker Staack, and Brad Goehle 2014 Global Innovation 1000 Proven paths to innovation success
  2. 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 Strategy& read more on strategyand.pwc.com
  3. 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% Strategy& read more on strategyand.pwc.com
  4. 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 Strategy& read more on strategyand.pwc.com
  5. 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 Strategy& read more on strategyand.pwc.com
  6. 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 Strategy& read more on strategyand.pwc.com
  7. 7. Learn more See more of the findings from this year’s Global Innovation 1000 study, including videos, interactive graphics, and an in-depth look at how companies plan to shift their innovation strategies in the next 10 years: www.strategyand.pwc.com/innovation1000 Copyright and Definition © 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Disclaimer: This content is general information purposes only, and should not be used as a substitute for consultation with professional advisors. Strategy& read more on strategyand.pwc.com

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