Companies Increase Innovation Spending

If innovation were a short-lived business fad, then it wouldn’t survive the worst financial crisis since the Great Depression.  So how are companies responding to reduced sales and tighter budgets?  They’re cutting jobs and wages, but they’re still spending on innovation–according to the just-published “Innovation Climate Survey” by InnovationTools, and also according to a Wall Street Journal cover story from this past Monday (April 6, 2009).

The Innovation Climate Survey is based on interviews with 352 innovation practitioners; the first question was, “How has the climate for innovation changed in your organization since the economic downturn started?” Check out these responses:

Got significantly worse          8%

Got slightly worse          17.9%

No change           26.7%

Improved slightly              27.0%

Improved significantly            20.5%

That means that almost half of respondents reported that the climate for innovation had improved!

If history is any guide, then they’re doing the right thing.  The WSJ article points out that companies have “learned from past downturns that they must invest through tough times if they hope to compete when the economy improves.”  Successful innovations that were hatched during the Great Depression include Kraft macaroni and cheese and Kraft Miracle Whip; and don’t forget that the iPod was released in 2001, shortly after 9/11.  The WSJ reports that big U.S. companies spent almost as much on R&D in 4Q2008 as in 4Q2007, even though their revenue fell 7.7%. Microsoft spent 21% more in 4Q2008 although their revenue was flat.  3M has laid off 4700 workers in the last 15 months and will cut capital expenditures by 30% this year, but says its R&D spending will stay flat or even increase a bit.

The Innovation Climate Survey also asked practitioners what innovation strategies they were using:

Looking for creative ways to improve or extend your existing products (50.9%)

Looking for opportunities to improve collaboration (47.2%)

Increasing focus on changing customer needs (39.8%)

Focusing on service innovation (38.1%)

Focusing on process innovation (36.4%)

My research shows the critical role that collaboration plays in innovation (see my book GROUP GENIUS) so I’m excited to see that almost half of respondents are looking to collaboration as their innovation strategy. Innovation is the path to organic top-line growth, and the downturn presents opportunities for those companies that innovate successfully.  These recent survey results bode well for the future of U.S. companies.

(I also highly recommend the report “Innovation Strategies for the Global Recession” with quotations from top innovation researchers, and links to key blog posts and web sites.)

2 thoughts on “Companies Increase Innovation Spending

    1. You’re welcome!

      There is all sorts of research showing that people become more creative in the presence of constraints. In other words, complete freedom from constraint does not result in maximum creativity.

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