strategy+business — Winter 2013
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As it has in each of the past eight editions of the Global Innovation 1000 study, this year Booz & Company identified the 1,000 public companies around the world that spent the most on R&D during the last fiscal year, as of June 30, 2013. To be included, companies had to make their R&D spending numbers public. Subsidiaries that were more than 50 percent owned by a single corporate parent during the period were excluded if their financial results were included in the parent company's financials.

In order to gain a more accurate and complete picture of innovation spending, we made some adjustments to our data collection process. In past years, both capitalized and amortized R&D expenditures were excluded.

This year, for companies with capitalized R&D expenditures, we included the most recent fiscal year's amortization of those costs in calculating the total R&D investment, while continuing to exclude any nonamortized capitalized costs.

For each of the top 1,000 companies, we obtained the key financial metrics for 2008 through 2013, including sales, gross profit, operating profit, net profit, historical R&D expenditures, and market capitalization. All sales and R&D expenditure figures in foreign currencies were translated into U.S. dollars according to an average of the exchange rate over the relevant period; for data on share prices, we used the exchange rate on the last day of the period. In addition, figures for total shareholder return were gathered and adjusted to reflect each company's total shareholder return in its local market.

All companies were coded into one of nine industry sectors (or "other") according to Bloomberg's industry designations, and into one of five regional designations, as determined by their reported headquarters locations. To enable meaningful comparisons across industries, we indexed the R&D spending levels and financial performance metrics of each company against the average values in its own industry.

To understand how companies apply digital enablers across the innovation chain, we conducted an online survey of nearly 400 senior managers and R&D professionals from more than 350 different companies around the globe. The companies participating represented more than US$162 billion in R&D spending, or 25 percent of this year's total Global Innovation 1000 R&D spending, all nine of the industry sectors, and all five geographic regions.

We asked respondents to describe their company's use of digital tools at each stage of the innovation process, the tools' effectiveness, how much they spent on them, and the factors that enable them to succeed, as well as their perception of their company's financial performance. Using a variety of statistical methods, we also identified the digital enablers most prevalent among companies following each of the three innovation strategy models (Need Seeker, Technology Driver, or Market Reader). Company names and responses were kept confidential unless permission to use them was explicitly granted. Finally, to gain further insight, we interviewed executives who work with digital tools as part of their role in their company's innovation practice.