1. HIGHLIGHTS FROM
The 2013 Global
Innovation 1000 Study
NAVIGATING THE DIGITAL FUTURE
Download the full strategy+business article and view infographics,
our past studies, and more at www.booz.com/innovation1000.

2. THE 2013 GLOBAL INNOVATION 1000 STUDY SNAPSHOT
Booz & Company’s ninth annual study of innovation trends and spending shows
that R&D investment at the public companies that were the 1,000 biggest spenders
globally reached the highest level ever this year, US$638 billion. However, after two
years of more than 9 percent growth post-recession, this year’s spending growth of
5.8 percent is a return to the long-term trend.
Apple, Google, and 3M have been at the top of the global “Most Innovative
Companies” ranking for the last three years, but this year Samsung has overtaken 3M
to claim the third spot. Amazon has also made a significant move, leaping six spots
into fourth place this year. Tesla joins the list for the first time, and Facebook makes a
return after a year’s hiatus, while Toyota and P&G have fallen farther down the list.
This year, we also surveyed the use of digital tools at 350 companies around the
world. On average, we found that 8.1 percent of R&D spending is being allocated
to digital enablers, from familiar project management software to the newest
crowdsourcing and collaborative design tools. The tried-and-true productivity
enablers are must-haves in the innovator’s digital tool kit. But many companies have
started to also use digital enablers to develop market and customer insights. The
benefits are measurable: The heaviest users of digital tools are 77 percent more likely
to report that their companies financially outperform the competition.
CHANGES IN THE 10 MOST INNOVATIVE COMPANIES
2010
2011
2012
2013
1st
Apple
Apple
Apple
Apple
2nd
Google
Google
Google
Google
3rd
3M
3M
3M
Samsung
4th
GE
GE
Samsung
Amazon
5th
Toyota
Microsoft
GE
3M
6th
Microsoft
IBM
Microsoft
GE
7th
P&G
Samsung
Toyota
Microsoft
8th
IBM
P&G
P&G
9th
Samsung
Toyota
IBM
10th
Intel
Facebook
Amazon
Tie
IBM
Tesla
Facebook
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3. KEY FINDINGS OF THE 2013 GLOBAL INNOVATION
1000 STUDY
R&D Spending [read more]
• R&D spending among the top 1,000 spenders globally reached an all-time
high of $638 billion in 2013, an increase of 5.8 percent from 2012, compared to 9 percent-plus growth in the two previous years.
• China’s R&D spending increase of 35.8 percent this year was the highest
of any region, but it is the second lowest increase for China over the past
five years, likely a reflection of the country’s slowing economic expansion.
• R&D spending was once again highest in dollar terms at North American
companies ($248 billion, an 8.6 percent increase over last year). And
Europe’s R&D spending ($189 billion, a 4.5 percent increase from 2012)
continues to be the second-highest.
• The computing and electronics industry spent the most on R&D in dollar
terms ($170 billion); the software and Internet sector saw the highest percentage increase in spending (22.1 percent, or $9.3 billion).
Performance Drivers [read more]
• For the ninth year in a row, we have found no correlation between how
much companies spend on R&D and their financial performance.
• How companies spend their innovation dollars is much more important.
Our studies have consistently shown that innovation investments in select
capabilities, tools, talent, and culture which are tightly aligned with a
business’s strategy are what drive sustained success.
Navigating the Digital Future [read more]
• Respondents to our survey say their companies are using a mix of digital
tools: tried-and-true productivity enablers and newer market and customer
insight enablers. The right mix, which many are still struggling to find,
depends on a company’s industry, capabilities, and innovation model.
• On average, our survey respondents say their companies spend 8.1 percent of their R&D budgets on digital enablers.
• Less than half of respondents say they use digital enablers to a significant
extent, but those that do are 77 percent more likely to report that they
financially outperform competitors than are those who use them to a low
or moderate extent.
Digital enabler: electronic tool, or process supported by an electronic tool,
that improves speed, cost, quality and/or complexity. Examples relating to
innovation: visual simulation, rapid prototyping/3D printing, computer-aided
design, customer relationship management system.
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4. Key Finding: R&D SPENDING HAS REACHED ITS HIGHEST
LEVEL EVER, BUT SPENDING GROWTH HAS SLOWED
COMPARED TO THE PREVIOUS TWO YEARS
GLOBAL INNOVATION 1000 R&D SPENDING
BILLIONS
$638
$603
11-year
CAGR = 5.5%
$521
$495
$353
2002
$369
$355
2003
1-year
growth
rate
0.6%
2004
3.7%
2005
6.2%
$450
$417
$391
2006
6.5%
$550
$503
2007
7.9%
2008
10.0%
2009
5.4%
2010
-3.5%
2011
9.3%
2012
9.6%
2013
5.8%
• R&D spending by the Global Innovation 1000 companies reached $638 billion in 2013—the highest
level ever. This represents nearly half of all private and public sector R&D spending in the world.
• After two consecutive years of high growth, this year’s growth rate of 5.8 percent (an increase of
$35 billion over 2012) is a return to the long-term growth trend.
“R&D spending is at
an all-time high, but
the return to the longterm growth trend of 5
to 6 percent per year
indicates sustainable
investment and
reflects overall
stability in the
market.”
—Barry Jaruzelski
Senior Partner, Booz & Company
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5. Key Finding: THE COMPUTING AND ELECTRONICS INDUSTRY
SPENT THE MOST ON R&D, BUT THE SOFTWARE AND INTERNET
INDUSTRY SAW THE GREATEST INCREASE IN SPENDING
2013 R&D SPENDING BY INDUSTRY
2%
3%
Aerospace and Defense
2%
Telecom
Other
4%
Consumer
27%
6%
Computing and
Electronics
Software and Internet
8%
Chemicals and Energy
$638
BILLION
10%
• The three highest-spending
industries in 2013 were
computing and electronics,
healthcare, and automotive, the
same as in 2012.
• Healthcare as well as computing
and electronics companies are
together responsible for almost
half of the R&D spending of the
Global Innovation 1000.
Industrials
22%
16%
Healthcare
Automotive
“The 22 percent boost in R&D spending in software
and Internet may be a sign that the tide is turning
in favor of technologies that run our increasingly
digitized world. In fact, software and Internet added
the greatest number of companies to this year’s
Global Innovation 1000 list.”
—Richard Holman
Partner, Booz & Company
CHANGE IN R&D SPENDING BY INDUSTRY
2012-2013; BILLIONS
$7.4
$3.4
$3.4
$2.6
$0.8
• Fully 74 percent of the $35
billion spending increase this
year came from the software
and Internet (up $9.3 billion),
healthcare (up $9.2 billion),
and automotive (up $7.4 billion)
sectors.
• Computing and electronics,
though the largest R&D
spender, increased its spending
by only $3.4 billion, making up
just 10 percent of the overall
spending increase.
$0.6
$0.1
$34.8
$-2.0
$9.2
Represents 74% of
growth in R&D spending
$9.3
Software
and
Internet
Healthcare
Automotive
Industrials
Computing
and
Electronics
Telecom
Increases
Decreases
Consumer
Other
Aerospace
and
Defense
Chemicals
and
Energy
Total
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6. Key Finding: R&D SPENDING WAS STILL CONCENTRATED
AT COMPANIES HEADQUARTED IN NORTH AMERICA AND
EUROPE, BUT GROWTH WAS ONCE AGAIN HIGHEST IN CHINA
2013 R&D SPENDING BY HEADQUARTER REGION
• Companies headquartered in North America and
Europe continue to make up more than two-thirds
of the R&D spending of the Global Innovation 1000.
$638
BILLION
3.2%
6.9%
21.3%
29.6%
39.0%
• China-based companies, though spending only 3.2
percent of all Global Innovation 1000 funds, have
been increasing R&D budgets far more rapidly
than those in North America or Europe. Chinese
companies’ share of global spending has risen
from 0.4 percent to 3.2 percent of the total between
2008 and 2013—a sevenfold rise.
China
Rest of World
Japan
Europe
North America
• China-based companies increased their share of
revenue among the Global Innovation 1000 from
5.8 percent to 8.7 percent between 2008 and 2013,
a slower rise than their share of R&D spending, but
still a significant one.
CHANGE IN R&D SPENDING BY REGION
2012–2013
China
40
35.8%
Rest of
World
35
North
America
30
Europe
25
20
Japan
17.5%
15
10
5
“Over the past year, only
Japan reduced its total
R&D spending, the first
time any major country
has decreased its yearover-year spending
since the 2008 crash.
Even Europe increased
its R&D investment,
despite being mired in
recession.”
—John Loehr
Partner, Booz & Company
8.6%
Weighted
Average
5.8%
4.5%
0
-5
-3.6%
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Booz & Company

7. Key Finding: FOR THE FOURTH YEAR, THE MOST
INNOVATIVE COMPANIES WEREN’T THE TOP SPENDERS
10 MOST INNOVATIVE COMPANIES IN 2013
Rank
Company
Industry
R&D Spending
(Billions)
Computing and Electronics
$3.4
Software and Internet
$6.8
Samsung
Computing and Electronics
$10.4
Amazon
Software and Internet
$4.6
3M
Industrials
$1.6
6th
GE
Industrials
$4.5
7th
Microsoft
Software and Internet
$9.8
8th
IBM
Computing and Electronics
$6.3
9th
Tesla
Automotive
$0.3
10th
Facebook
Software and Internet
$1.4
1st
Apple
2nd
Google
3rd
4th
5th
TOP 10 R&D SPENDERS IN 2013
Rank
Company
1st
Volkswagen
2nd
Samsung
3rd
Roche
4th
Intel
5th
Microsoft
6th
Industry
R&D Spending
(Billions)
Automotive
$11.4
Computing and Electronics
$10.2
Computing and Electronics
$10.1
Software and Internet
$9.8
Toyota
Automotive
$9.8
7th
Novartis
Healthcare
$9.3
8th
Merck
Healthcare
$8.2
9th
Pfizer
Healthcare
$7.9
10th
Johnson &
Johnson
Healthcare
—Barry Jaruzelski
Senior Partner, Booz & Company
$10.4
Healthcare
“For the ninth straight year, our
research has demonstrated that
there is no correlation between
how much you spend and how
well you perform over the long
term. It has been proven time and
time again that you can’t buy your
way to the top. When it comes to
innovation, how you spend is much
more important than how much
you spend.”
$7.7
• Healthcare companies have consistently been on the top spenders list but have never made it on
the most innovative list.
• Only two companies, Samsung and Microsoft, have been on both the most innovative and the
top spenders lists all four years.
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8. Key Finding: IT’S NOT WHAT YOU SPEND, IT’S HOW YOU
SPEND IT
FINANCIAL PERFORMANCE OF THE 10 MOST INNOVATIVE COMPANIES* VS. TOP 10 R&D
SPENDERS
Lowest
Possible
Score: 0%
Normalized
Performance
of Industry
Peers: 50%
54%
10 Most Innovative Companies
Revenue Growth
(5-yr. CAGR)
Top 10 R&D Spenders
EBITDA as % of
Revenue
(5-yr. Avg.)
45%
71%
10 Most Innovative Companies
69%
Top 10 R&D Spenders
66%
10 Most Innovative Companies
Market Cap Growth
(5-yr. CAGR)
Top 10 R&D Spenders
Highest
Possible
Score: 100%
45%
“Not only do the largest spenders fail to
perform better than the most innovative
companies, they also lag behind the
average of their industry peers on the
Global Innovation 1000 list on both
revenue growth and market cap growth.”
—John Loehr
Partner, Booz & Company
* Only 8 of the 10 Most Innovative Companies were included in this analysis. Tesla and Facebook were removed as they did not have market cap ata spanning back
d
5 years.
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9. Key Finding: COMPANIES ARE USING A MIX OF TRIED-ANDTRUE DIGITAL PRODUCTIVITY ENABLERS AND NEWER
MARKET AND CUSTOMER INSIGHT ENABLERS
THE DIGITAL TOOL LANDSCAPE
CUSTOMER INSIGHT
IDEATION
DEVELOPMENT
LAUNCH
Most Effective Tools
Customer immersion labs
Emerging, high-potential
way to simulate user
experiences
Rapid prototyping
(e.g, 3D printing)
Simulation tools
Co-design tools
Enhanced product lifecycle
management systems
Computer-aided design
Cutting-edge but
nascent tool monitors
engagement patterns
Interaction simulation
Project management
Big data tools
Visual simulation
Application development
Usage sensors
Customer profiling
Collaborative environments
Visualization and
engagement tools
Automated product
usage tools
Monitoring tools
Digital focus groups
E-commerce tracking
Vision narratives
Crowdsourcing
Social voting
Mashup tools
Automated marketing
platforms
Enterprise resource planning
Applications that
combine data aren’t
widely used, or useful
Community engagement
platforms
Idea capture tools
Customer sentiment
analysis
Customer relationship
management
Often used to research
the market, with
limited effectiveness
Automated feedback systems
Product sales simulation tools
Discussion platforms
Social media dashboards
Patent scanning
Least Effective
TYPE OF TOOL
Market and Customer Insight Enabler
Productivity Enabler
CIRCLE SIZE =
SCALE
Percent of
respondents
70%
using each tool
15%
• Our survey results show that productivity enablers, used primarily in the development phase of
innovation, have reached maturity; most are widely used and effective.
• In other phases, particularly the front end of the innovation process, companies are
experimenting with new market and customer insight enablers that have transformative potential.
But most tools aren’t widely used yet, and companies find their effectiveness varies wildly.
• Among the most effective tools is 3D printing for rapid prototyping in the ideation phase of the
innovation process.
“There are many digital enablers out there. Productivity enablers have become must-haves
in any innovator’s digital tool kit. More and more companies are starting to use newer market
and customer insight enablers to create better and more inventive products. The right mix of
tools will depend on a company’s industry, capabilities, and innovation model.”
—Barry Jaruzelski
Senior Partner, Booz Company
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10. Key Finding: DIGITAL ENABLERS APPEAR TO BOOST
PERFORMANCE WHEN USED SIGNIFICANTLY
USAGE OF DIGITAL ENABLERS AND FINANCIAL PERFORMANCE
+77%
PERCENTAGE
SAYING THEY
OUTPERFORM
COMPETITORS
“With all the talk out there about digital
enablers, more companies should be making
significant use of them. It’s good news for
innovation that some companies have found the
tools that contribute to higher performance—
the rest should follow their lead.”
53%
30%
—Richard Holman
Partner, Booz Company
Low or Moderate
Usage of
Digital Enablers
Significant
Usage of
Digital Enablers
• Companies from our survey allocated an average of 8.1 percent of their RD budgets to digital
tools, which when extrapolated to the Global Innovation 1000 companies adds up to $52 billion
of spending in 2013.
• Less than half of respondents say their companies use digital enablers to a significant extent,
but those that do are 77 percent more likely to report that they financially outperform competitors
than are those that use enablers to a low or moderate extent.
• Only 49 percent of respondents say their companies are spending on digital enablers that they
rated as highly effective.
ESTIMATED RD SPENDING ON DIGITAL ENABLERS BY INDUSTRY
15.0%
12.0%
HEIGHT =
Percent of
RD Budget
10.0%
7.9% 7.2%
7.1%
6.9%
AREA =
Amount Spent
(Billions)
$7.7
2.6
Software Aerospace
and
and
Internet
Defense
$13.8
Healthcare
8.6%
6.3%
1.7
$2.9
$4.7
Consumer Chemicals Industrials
and
Energy
$1
$6.5
Telecom Automotive
5.7%
$9.7
Computing and
Electronics
AVERAGE
8.1%
$0.9
Other
• By industry, the percentage of RD budgets spent on digital enablers by our respondents varied,
as did the types of enablers used.
• Aerospace and defense respondents, relied heavily on CAD software and visual simulation, whereas
respondents from the software and Internet sector made extensive use of social media—suitable
choices given the high development costs and levels of complexity of the aerospace and defense
industry and the business-to-consumer business model of the software and Internet sector.
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11. ABOUT THE AUTHORS
“We’ve proven time and again that the amount you spend on RD doesn’t
matter; how you spend it does. This year, we’ve seen that spending on
digital enablers matters.”
Barry Jaruzelski
barry.jaruzelski@booz.com
Barry Jaruzelski is a senior partner with Booz Company in Florham Park, N.J., and the global leader of the firm’s engineered products and services practice. He created the Global Innovation 1000 study in 2005, and continues to lead the
research. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core
innovation processes.
“Digital enablers are everywhere. Some have been around for a while,
others are new. To stay competitive, you’ll have to invest in both. Your best
competitors already have.”
Richard Holman
richard.holman@booz.com
Richard Holman is a partner with Booz Company based in Florham Park, N.J. As a senior leader of the firm’s innovation
practice, he works with clients in highly engineered products sectors such as aerospace, industrials, high tech, and healthcare on innovation capability building, new product development efficiency and effectiveness, and product management.
“The front end of innovation is changing very quickly. Leading companies
are using – and building – powerful digital tools to discover and validate
what customers think, do, and need. Companies looking for an edge will
need to invest in these to better identify and meet market demands.”
John Loehr
john.loehr@booz.com
John Loehr is a partner with Booz Company based in Chicago, and is the global leader of the firm’s innovation practice.
He works with automotive, industrial, and technology companies to help them build competitive innovation capabilities and
to resolve critical decisions in their product and market strategies.
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12. ABOUT THE GLOBAL INNOVATION 1000
As we have in each of the past eight editions of the Global Innovation 1000, this year Booz Company identified the 1,000
public companies around the world that spent the most on RD during the last fiscal year, as of June 30, 2013. To be included,
companies had to make their RD 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. The
Global Innovation 1000 companies collectively account for just under half of the entire world’s RD spending.
Methodology
In order to gain a more accurate and complete picture of innovation spending, Booz Company made some adjustments to the
data collection process this year. In past years, both capitalized and amortized RD expenditures were excluded. This year, for
companies with capitalized RD expenditures, we included the most recent fiscal year’s amortization of those costs in calculating
the total RD investment, while continuing to exclude any non-amortized capitalized costs.
For each of the top 1,000 companies, we obtained from Bloomberg and Capital IQ the key financial metrics for 2008 through 2013,
including sales, gross profit, operating profit, net profit, historical RD expenditures, and market capitalization. All sales and RD
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.
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, the RD spending levels and financial performance metrics of each company were indexed against the average
values in its own industry.
Booz Company conducted a separate online survey of nearly 400 innovation leaders at 350 companies around the world to
explore how their companies employ various digital enablers.
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ABOUT BOOZ COMPANY
Booz Company (booz.com) is a leading global management consulting firm focused on serving and shaping the
senior agenda of the world’s leading institutions. Drawing on the talents and insights of more than 3,000 people in
57 offices around the world, we help our clients achieve essential advantage by working with them to identify and
build the differentiating capabilities they need to outperform.
Download the full strategy+business article and view infographics,
our past studies, and more at www.booz.com/innovation1000.