strategy+business Winter 2013 : Page 41

Caterpillar uses collaboration tools to connect teams around the world. “We truly can do R&D 24/7,” says CTO Gwenne Henricks. Exhibit 3: Estimated R&D Spending on Digital Enablers by Industry Of the US$638 billion that companies in this year’s Global Innovation 1000 spent on R&D, about $52 billion was allocated to procuring, deploying, and supporting digital enablers. Software and Internet companies invested the largest percentage of their total R&D budget on these tools. feature innovation 15.0% 12.0% HEIGHT = Percentage of R&D Budget 10.0% AREA = Amount Spent (US$ Billions) 7.9% 7.2% 7.1% 6.9% 6.3% 5.7% AVERAGE 8.1 % 8.6% $7.7 $2.6 $13.8 $1.7 $2.9 $4.7 $1 $6.5 $9.7 $0.9 Aerospace Software and Internet and Defense Healthcare Consumer Chemicals and Energy Industrials Telecom Auto Computing and Electronics Other Source: Bloomberg data, Capital IQ, Booz & Company on these tools—less than 6 percent. However, that still adds up to a signifi cant amount, given their high over-all R&D spend ( see Exhibit 3 ). Naturally, companies in different industries tend to use the tools that can help create their unique prod-ucts and services. The aerospace and defense industry, for example, relies heavily on CAD software, visual simulation, and customer immersion labs. These are not among the most-used digital tools in other in-dustries. With the industry’s high development costs and levels of complexity—building submarines, for instance—it is understandable that aerospace and defense companies would fi nd these tools more use-ful than, say, social media dashboards. Companies in the software and Internet sector, however, make ex-tensive use of social media, as well as monitoring and location detection of customer behavior and product usage—also no surprise, given that their B2C business models rely on customers who are highly likely to be online and mobile. We also observed distinct differences in the level of usage (or adoption) of digital enablers by innovation strategy model. Since 2007, we have segmented compa-nies into three distinct strategic groups—Need Seekers, Market Readers, and Technology Drivers. Need Seek-ers, the most prevalent model in the innovation hub that is Silicon Valley, engage customers directly to gen-erate new ideas, then develop original products and ser-vices and get them to market fi rst. Market Readers are fast followers. They typically generate ideas by closely monitoring their markets, customers, and competitors, focusing largely on creating value through incremen-tal innovations to current products. And Technology Drivers depend heavily on their internal technological expertise to develop new products and services, driving both breakthrough innovation and incremental change, 41

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