Strategy&: Top innovative R&D spending companies

While Volkswagen is again ranked #1 of the top 20 R&D spending companies, the German automotive firm does not rank as a top 10 most innovative company. The two lists that are compiled by Strategy& show very different top 10’s, indicating that high spending not necessarily translates to best-practice innovation. Only three top spending companies made the top 10 most innovative list, of which only Samsung is found in both top 5’s.

In its recently launched ‘Global Innovation 1000 Study’, consulting firm Strategy& concludes that although R&D spending has reached an all-time high of $647 billion in 2014, the growth percentage has declined over the past four years, to the second lowest growth rate in the past decade, a mere 1.4%.

According to Strategy&, this declining growth rate is a ‘big company phenomenon’ as the top 100 innovation spenders accounted for less than 1% of the total 2014 increase in R&D spending, a number that in 2013 was as high as 45%. Although the growth number dropped significantly among the big companies, they still account for a large percentage of total R&D spending. The top 20 R&D spending companies, as identified by the Strategy& in its report, still accounted for more than 25% of the total R&D spending in 2014.

The top 20 list, a list compiled by the consulting firm on an annual basis, shows that the two biggest spenders of 2013 have held their positions. Volkswagen is still ranked #1 with a spending of $13.5 billion, which is an increase of 18.9% compared to 2013. Samsung is again found on #2, as it increased its spending with 28% to $13.4 billion. Roche dropped two places to #5, giving both Intel and Microsoft the possibility to move up a place, respectively to #3 and #4. The top 20 list stayed fairly consistent compared to 2013, with Amazon (#14), Ford (#15), and Cisco (#20) the most notable newcomers.

Comparing the top 10 of the R&D spending list to the top 10 Most Innovative companies reveals an interesting observation. The #1 in R&D spending, Volkswagen is not found in the top 10 most innovative list, while Samsung, #2 in spending, is ranked the fourth most innovative company. The list is led by Apple (#1), Google (#2) and Amazon (#3). Comparison of the two lists shows that the most innovative companies do not necessarily spend the most money, and vice versa. The only companies found in both rankings are Samsung, Microsoft and Google.

Innovation capabilities
A reason for the disparity could be found in the fact that companies are improving their innovation skills. Around 76% of 500 innovation leaders say that are better at innovation today than a decade ago. Barry Jaruzelski, Senior Partner at Strategy& and a co-author of the report, explains: “Companies say they’re better at innovating today than they were a decade ago. It seems that companies can now do more with less, allowing them to moderate spending growth while still achieving results.”