strategy+business Winter 2013 : Page 38

Exhibit E: Change in R&D Spending by Region, 2012–13 China-based companies maintained the fastest growth rate, though it has slowed significantly. Companies based in North America continue to outspend those based in Europe and Japan. 35.8% although the number of companies in the Global Innovation 1000 from North America keeps decreasing— by nine this year, and there has been a decrease of 100 since 2008. In a promising turn of events, European companies increased spending by 4.5 percent despite the region’s continu-1000 has risen from 10 to 75, and the total amount spent on R&D by Chinese companies on the list rose from $1.7 billion in 2008 to $20.5 billion in 2013. Yet China’s increase in innovation spending slowed consid-erably in 2013, to 35.8 percent—a little more than half of its five-year compound annualized growth rate of 63.9 percent. That’s a reflection of the country’s rate of economic expansion, which is down considerably from re-cent years. Indeed, no region can be expected to sustain such high growth rates over the long term. Although we’ve returned to the status quo in terms of overall R&D spending growth, certain companies, industries, and regions are clearly making waves this year. 17.5% WEIGHTED AVERAGE 5.8 % ing economic struggles. Spending in Japan, however, fell this year by 3.6 percent. The rest of the world, which includes India (but not China, which was counted separately this year), grew by an impressive 17.5 percent, although the group continues to make up a relatively small portion of the total Global Innovation 1000. China saw a net gain of 15 com-panies on the list this year. In fact, since 2008, the number of Chinese companies in the Global Innovation 8.6% 4.5% –3.6% China Rest of World North Europe America Japan Source: Bloomberg data, Capital IQ, Booz & Company strategy+business issue 73 feature innovation 38 (continued from page 37) nies based in Europe and Japan (as well as the Global Innovation 1000 average), growing by 8.6 percent, (continued from page 35) development. Chief technology officer Gwenne Hen-ricks says that the company “makes significant use of immersive visualization, where we can bring in custom-ers, service technicians, or assemblers from the assembly line and expose them to three-dimensional, real-time virtual depictions of new product designs. It’s here that we are able to capture their feedback [in terms of] us-ability, serviceability, manufacturability, and the like— all of those design aspects of our product that involve interactions with humans.” Automated product usage tools, or sensors, are used by just 14 percent of our respondents, but have proven quite effective for some companies. They enable companies to passively collect and analyze product or service usage data direct from the customer via auto-matic tracking technologies. One example is Salesforce .com, a leading cloud provider of customer relation-ship management services. Because all its products are cloud-based, the company has great visibility into how customers use them. That means that rather than de-veloping and releasing new versions of its products ev-ery two or three years, can update its products every quarter. Says Bill Blau, senior director of partner marketing and strategic alliances, “Every time someone logs in to something or clicks on some-thing, we can see what fields they’re using, what fields they aren’t using, how much data they’re putting in the system. We’re constantly getting that from more than 100,000 customers.” Other market and customer insight tools, such as software used to analyze big data and to profile custom-ers, are more commonly used and also rated highly in terms of effectiveness. One-third of our survey respon-dents say their companies are employing these tools to exploit their massive pools of structured and unstruc-tured data and gather insights into customers. For example, at healthcare giant Aetna, the com-pany’s ability to analyze that data provides it with enor-mous leverage in developing new products designed to cut the cost and improve the quality of healthcare. The company’s head of innovation, Michael Palmer, cites a striking example: Up to one-quarter of the U.S. popula-tion has metabolic syndrome, which, left untreated, is associated with a significantly increased risk of stroke, heart attack, and death. Aetna engaged in a data analy-sis exercise that determined which of the five compo-nent factors of metabolic syndrome had the greatest impact on future health risks and costs. This work led

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